Is TCS justified in bidding for Perot? Where Eagles should not dare....

Tata Consultancy Services has reportedly recommenced talks with Dell for its Perot IT business. One  needs to put matters in a proper perspective.

• India's $146-billion IT industry is already facing the impact of global slowdown. TCS would also be affected. 
• Perot Systems is a worldwide provider of information technology services and business solutions;  IT consulting to hospitals and government departments is reportedly its forte. Does TCS really need to strengthen these areas? In hospital care for example it is the times of reverse innovation. 

• Dell has managed to obtain not so satisfactory bids from  TCS, Cognizant and  Atos SE.

• In 2009,  Dell had  acquired Perot Systems in a transaction valued at approximately $3.9 billion.  Michael Dell, Chairman of the Board and Chief Executive Officer, Dell had then stated: “ We consider Perot Systems to be a premium asset with great people that enhances our opportunities for immediate and long-term growth. This significantly expands Dell’s enterprise-solutions capabilities and makes Perot Systems’ strengths available to even more customers around the world. " This dream stands adrift  and the premium asset appears to be at discount. 

 The expanded Dell  was supposed to be

• Providing a broader range of IT services and solutions and optimizing how they’re delivered;
• Extending the reach of Perot Systems’ capabilities, including in the most dynamic customer segments, around the world; and,
• Supplying leading Dell computer systems to even more Perot Systems customers.

The acquisition seems to have not delivered to Dell despite these expectations. 

Questions Investors in TCS  must ask: 

• TCS and Perot Systems do they  share key characteristics or products?
• Are the  services and structures in any manner complementary?
• Do they have mutually acceptable  relationship-based  work cultures?
•  Will there be any synergies?
• Is there complementarities in global commercial customer base between Perot and TCS?
• If Perot had revenue earning services and has a customer base, why should Dell divest?

Caution is the key.

Tailpiece:  "Eagles don't flock. You have to find them one at a time." - H. Ross Perot 

This blog recommends no investment or disnvestment. Views expressed are without any risk or responsibility.