NTT Data Has Found Trojan Horse in Perot Systems
Japan’s Nippon Telegraph and Telephone Data Corporation (ADR) (NYSE:NTT), a subsidiary of NTT Data Corp, said that it has bought three IT services companies from U.S.-based Dell Inc. for some $3.0 billion. The companies are grouped together as Perot Systems. If it were still a public company, Dell stock would be soaring today. If it achieves nothing else, the deal has the advantage of acquainting U.S. investors with NTT stock, which has gained 40.75% in the past year!
NTT stock will certainly benefit from NTT Data’s greater access to the U.S. healthcare IT, insurance, and financial services consulting sectors. (Source: “Japan’s NTT Data agrees to buy Dell’s IT services unit for $3.05B,” CNBC, March 28, 2016.)
Indeed, Dell will use the proceeds from the sale to support its $67.0-billion takeover of EMC Corporation. Because of that deal, Dell will be burdened by a debt of $49.5 billion. Former U.S. presidential candidate Ross Perot founded the units acquired by NTT. Dell bought the Ross Perot unit in 2009 for $3.9 billion. Based in Texas, the company specializes in IT consulting in particular to hospital and government sectors.
There was high demand for the Ross Perot unit. NTT was not alone in the race. U.S. Cognizant Technology Solutions, Atos, and Tata Consultancy Services were all interested. This only serves to highlight NTT’s coup. (Source: “NTT nears $3.5bn Perot Systems buyout, as Dell looks to slash EMC debt burden,” CBR, March 9, 2016.)
NTT Data has a market cap of 1,500 billion Japanese yen (equivalent to more than US$12.0 billion) started to gain value on Wall Street and in Tokyo since last February when the deal was first rumored.
NTT’s new Perot entities are located primarily in the U.S. This can only contribute to NTT’s bullish rise on Wall Street, setting record-highs as it expands its customer base outside of Japan, fulfilling a strategy the company adopted several years ago. The units in question are Dell Systems Corporate companies, Dell Technology & Solutions Limited, and Dell Services, all three subsidiaries of Dell stemming from Perot Systems, Dell’s recovery firm, in the last few years.
NTT Data will acquire 100% of each of these three companies and retain all 28,000 employees, working mainly in the United States and India. NTT gains the ability to offer worldwide pooled computing and other services, starting with the former Dell divisions’ already well-established network of customers. Medical institutions are among the main customers.
This is by no means is NTT’s first international foray—yet it might be the most important. NTT stock has already made several acquisitions outside of Japan (including Dimension Data in 2010). These operations have enabled it to offset the decline in fixed telephony revenues in Japan, which previously constituted the bulk of its revenue side of mobile services.