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April 12, 2005

Perot Systems CEO reveals European ambitions

Perot Systems president and CEO Peter Altabef said that the company is committed to retaining a long-term presence in Europe, despite the imminent loss of business from its flagship client in the region, UBS.

By CBR Staff Writer

Altabef told Global Computing Services that the Plano, Texas-based outsourcing vendor is also considering M&A activity as a way to build up its size in the region, including the possibility of acquiring a low-cost services vendor in Eastern Europe.

We are very committed to the European market, he said. There is real growth in the UK and Germany that is attractive to any IT services company. We are in Europe to stay.

Perot Systems doesn’t say how much of its $1.8bn annual revenue comes from Europe, but Altabef told us that around 1,400 of the company’s 15,000 employees are based in the region at operations in UK, Germany, Switzerland, Netherlands, Italy and Ireland. The company recently appointed John Tilley, the former UK managing director of Sema Group, as its new European chief.

Perot Systems’ largest single client is UBS, with whom it signed a major $1.5bn IT outsourcing deal in 1996. However, its main ten-year contract expires in January 2007, and Perot Systems will lose the majority of revenue from the account, which represented $73m or 16% of total sales during the fourth quarter of 2004.

The loss will be a blow to Perot Systems’ European operation, which also had a GBP 150m ($285m) contract with UK utility East Midlands Electricity terminated five years early in 1999 following the client’s acquisition by PowerGen.

But Altabef points out that these two losses will be partially offset by recent contract wins. Last December, the company won a 78-month, $203m deal as a subcontractor to BT Group to deliver an electronic patient record system to the UK National Health Service. In the same month, it also signed a $200m infrastructure management deal with Dutch publishing company Wolters Kluwer.

So how does Perot Systems manage to win these contracts against larger rivals when it is a relatively small player in Europe? Altabef said; We tend to lead with two things our domain-specific expertise and our global economies of scale. On the NHS deal, we were helped by our success in the North American healthcare market, where we are the largest IT services provider to hospitals.

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Altabef does not expect to replace the UBS contract with another mega-deal. He said: We only tend to sign one deal with a value of between $600m to $800m every two years. Our bread and butter is contracts with a value between $100m to $300m, and that market is very vibrant at the moment.

Perot Systems has an active M&A program according to Altabef, who said that the company has looked at possible targets in Russia and Eastern Europe. However, he added: We are very careful as the market is fairly hot at the moment and we don’t think that some of valuations are sustainable in the long-term.

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