Dell to sell IT services subsidiary to NTT Data

So far, 2016 has been a transformative year for technology giant Dell. After confirming its acquisition of EMC Corp., Dell made headlines again with news of its plans to sell a subsidiary to NTT Data.

According to Ars Technica, Dell and NTT Data agreed on a price of just over $3 billion for the purchase of Perot Systems, a firm founded by Ross Perot. Dell originally bought the company toward the end of 2009 for $3.9 billion.

Preparing for the future: Mutually beneficial

Many reports paint the deal as mutually beneficial for both Dell and NTT, despite the fact that Dell is selling the firm at a loss of $800 million. Ars Technica pointed out that with the looming $67 billion acquisition of EMC, Dell is using the sale of its IT services unit to raise money.

At the same time, quickly expanding NTT Data will also leverage the deal to its advantage, helping to position itself for success in North American markets.

“NTT Data plans to use the acquisition to create a combined IT and BPO unit focused primarily on the health care and insurance industries, in addition to banking and financial services,” ZDNet contributor Natalie Gagliordi wrote.

In this way, Dell will have more capital freed up to complete the EMC merger, which would create the largest privately held technology company in the world. With EMC’s solutions and expertise within its service portfolio, Dell will be in a better position to further diversify its service offerings, expanding from its pigeonholed position in the PC market.

“That deal was also a move by Dell to shed the confines of its crumbling core PC business,” Gagliordi noted.

Dell will leverage the sale of its IT services unit to free up capital for the EMC merger and diversify its offerings.

Expanding market presence

However, Dell isn’t the only firm looking to grow its market presence. NTT has completed several mergers and acquisitions in the past few years, enabling it to more than double its market value in the last five years. NTT is reportedly planning to bring the 28,000 Dell Services employees into its fold, many of which work out of locations in North America and India.

NTT Data CEO John McCain noted that the acquisition of Dell’s IT services unit enables the firm to boost its competitiveness as well as its overall offerings.

“Dell Services is a very well-run business and we believe its employee base, long-standing client relationships and the mix of long-term project-based work will enhance our portfolio,” McCain said.