Dell Acquires Plural

Dell Computer Plural

Terms of the deal were not disclosed by the spokesman.

Other sources close to the company said Jeff Lynn, vice president and general manager of Americas for Dell Professional Services, and Plural President and CEO Neil Isford--former colleagues at IBM--have crafted a deal that gives the OEM much-needed services capabilities while bailing out the troubled Web integrator, which has been hit hard by the dot-com collapse and economic downturn.

Plural is a privately held technology consulting, application development and solutions integrator and was formerly known as Micro Modeling Associates.

Dell has long been rumored to be eyeing a buy in the technology services market. However, in the past few months, Dell has talked openly about making a series of small acquisitions in the services space, sources also said. The deal will get strong backing from Microsoft, which made a number of investments in Plural, including the establishment of the Wall Street Solution Lab with the Silicon Alley integrator.

One Wall Street analyst said he is unaware of the deal with Plural but not surprised. "Dell's posture on acquisitions has eased up a bit lately, leaving the door open for some small acquisitions," said Steve Fortuna, first vice president, Merrill Lynch, New York.

According to research firm Dataquest, the direct marketer of PCs, notebook and servers is under considerable financial pressure to add a services capability as profits from low-cost commodity hardware slows down. While hardware revenue is down more than 20 percent, technology services revenue is down between 10 percent and 13 percent, the analyst said.

"If Dell wants to play in the big leagues, they have to get into services," said James Cassell, a group vice president at Dataquest Research, a unit of Gartner. "When you have an economic downturn, if all you are is a hardware vendor, you get hit hard on your revenue line."

Cassell pointed out that services revenue represents a significant financial stream for Dell's competitors. Services, for example, currently make up about 40 percent of IBM's revenue, 20 percent of Hewlett-Packard's and 75 percent of Unisys'.

However, two sources claim the deal with Plural is a big risk for Dell because of the Web integrator's shaky position in the market. "The acquisition of this company will throw Dell's services strategy into question," said one source familiar with the deal. "Unfortunately, this will be a bad deal for Dell due to Plural's internal collapse, and will likely have a very negative impact on their services strategy."

Another source said Microsoft "will be thrilled to recover some of their investment."

Lynn is a former IBM exec who first went to Compaq before joining Dell. Isford, a 20-year veteran of IBM who helped set up the vendor's e-business services practices, was appointed CEO of Plural in December 2000.

Plural offers technology consulting, application development and solution integration services, and has practices in collaboration and content management, e-commerce and CRM, enterprise application development and integration and business intelligence.

AMY ROGERS contributed to this story.