By Stephen Phillips
Computer services firm, Perot Systems Corp announced a $700m, 10- year systems integration and management deal this week but saw its share price rooted to the floor – spurned by investors clamoring for internet stocks. Perot Systems will help Harvard Pilgrim Health Care which offers non-profit health services to 1.5 million customers in New England, to restructure its insurance claims department and improve its technology infrastructure.
But the deal left Wall Street unmoved. The share price barely flickered, rising 1.38% to close at $18.37, yesterday. The luster of Perot Systems stellar initial public offering last February has been remorselessly rubbed away as its share price has plunged more than 78% since ending its first day of trading at $85 from a $16 start price.
Yet the Dallas, Texas-based firm, valued in the market at $994m increased its net profit by 67% year-on-year to $16.91m in the second-quarter to June 30 – hitting Wall Street analysts’ expectations. And Wall Street investment bank, Hambrecht & Quist, and analyst, Barrington Research rate Perot Systems a buy and long-term buy respectively, signaling they think the firm operationally sound. Arguably, older IT services firms, like Perot Systems are encountering market slack as firms batten down the hatches to ride out the millennium date change, and of course, they face slower growth curves than nimble start-ups.
The company also frequently finds itself outgunned by its more illustrious counterparts, such as Electronic Data Systems Corp and IBM Global Services Corp, in the mid-market it majors in. And the expiry of lock-up clauses on employees’ stock options prompting many to dump their holdings for an instant windfall has driven Perot System’s share price down. But the firm’s incongruous stock market doldrums, which belie its operational health, owe more to pure investor dynamics. Traditional systems integrators and outsourcers dealing in the nuts and bolts of computer systems are stuck in the slow lane because they miss the current investor zeitgeist that craves internet stocks. In fact, Perot Systems probably only owes its spectacular market debut to lumpen day traders mistaking the firm for an internet stock, say analysts.
In the final analysis Perot Systems has the right skills to succeed operationally say company watchers, but perhaps not the flashy set of skills to appeal to today’s dot com-crazed investors.
