##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2009
 or
 o
    
    Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from            to
 Commission File Number 1-14773
 PEROT SYSTEMS CORPORATION
  DELAWARE
    
    75-2230700(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification No.)
 
 
 þ o
 o o
   Large accelerated filer þ   
    Accelerated filer o
    Non-accelerated filer o
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



PagePART I: FINANCIAL INFORMATIONItem 1: Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008
    
    
    1Condensed Consolidated Income Statements for the three and nine months ended September 30, 2009 and 2008
    
    
    2Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2008
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3: Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4: Controls and Procedures
    
    
    22PART II: OTHER INFORMATIONItem 1: Legal Proceedings
    
    
    22Item 1A: Risk Factors
    
    
    23Item 6: Exhibits
    
    
    24SIGNATURES
    
    
    26EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



ITEM 1:
    
    FINANCIAL STATEMENTS (UNAUDITED)
  
 
 September 30, 2009
    
    
    December 31, 2008(Dollars in millions)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    380
    
    
    $
    234Short-term investments
    
    
    53
    
    
    
    36Accounts receivable, net
    
    
    397
    
    
    
    443Prepaid expenses and other
    
    
    111
    
    
    
    93Total current assets
    
    
    941
    
    
    
    806Property, equipment, and purchased software, net
    
    
    227
    
    
    
    221Goodwill
    
    
    734
    
    
    
    730Deferred contract costs, net
    
    
    122
    
    
    
    112Identifiable intangible assets, net
    
    
    42
    
    
    
    54Other non-current assets
    
    
    46
    
    
    
    55Total assets
    
    $
    2,112
    
    
    $
    1,978LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    57
    
    
    $
    54Deferred revenue
    
    
    63
    
    
    
    60Accrued compensation
    
    
    84
    
    
    
    98Income taxes payable
    
    
    
    
    
    
    11Accrued and other current liabilities
    
    
    113
    
    
    
    138Total current liabilities
    
    
    317
    
    
    
    361Long-term debt
    
    
    178
    
    
    
    181Non-current deferred revenue
    
    
    70
    
    
    
    80Other non-current liabilities
    
    
    62
    
    
    
    51Total liabilities
    
    
    627
    
    
    
    673Commitments and contingencies (Notes 1 and 12)Stockholders equity:Common stock
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    617
    
    
    
    587Retained earnings
    
    
    907
    
    
    
    815Treasury stock
    
    
    (26
    )
    
    
    (73
    )Accumulated other comprehensive income
    
    
    (14
    )
    
    
    (25
    )Total stockholders equity
    
    
    1,485
    
    
    
    1,305Total liabilities and stockholders equity
    
    $
    2,112
    
    
    $
    1,978
  1




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##### Table of Contents



Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in millions, except per share data)Revenue
    
    $
    629
    
    
    $
    711
    
    
    $
    1,878
    
    
    $
    2,096Direct cost of services
    
    
    507
    
    
    
    587
    
    
    
    1,513
    
    
    
    1,734Gross profit
    
    
    122
    
    
    
    124
    
    
    
    365
    
    
    
    362Selling, general and administrative expenses
    
    
    79
    
    
    
    76
    
    
    
    235
    
    
    
    223Operating income
    
    
    43
    
    
    
    48
    
    
    
    130
    
    
    
    139Interest income
    
    
    1
    
    
    
    2
    
    
    
    3
    
    
    
    5Interest expense
    
    
    (1
    )
    
    
    (2
    )
    
    
    (4
    )
    
    
    (7
    )Other income, net
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    3Income before taxes
    
    
    43
    
    
    
    48
    
    
    
    131
    
    
    
    140Provision for income taxes
    
    
    10
    
    
    
    18
    
    
    
    39
    
    
    
    52Net income
    
    $
    33
    
    
    $
    30
    
    
    $
    92
    
    
    $
    88Earnings per share of common stock:Basic
    
    $
    0.28
    
    
    $
    0.25
    
    
    $
    0.77
    
    
    $
    0.74Diluted
    
    $
    0.27
    
    
    $
    0.25
    
    
    $
    0.76
    
    
    $
    0.73Weighted average number of common shares outstanding (in thousands):Basic
    
    
    121,189
    
    
    
    120,151
    
    
    
    120,279
    
    
    
    119,750Diluted
    
    
    123,862
    
    
    
    122,576
    
    
    
    122,007
    
    
    
    121,712
  2




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Nine Months Ended September 30,2009
    
    
    2008(Dollars in millions)Cash flows from operating activities:Net income
    
    $
    92
    
    
    $
    88Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    84
    
    
    
    85Impairment of assets
    
    
    4
    
    
    
    3Stock-based compensation
    
    
    13
    
    
    
    13Change in deferred taxes
    
    
    20
    
    
    
    (1
    )Excess tax benefits from stock-based compensation arrangements
    
    
    2
    
    
    
    Other non-cash items
    
    
    2
    
    
    
    Changes in assets and liabilities (net of effects from acquisitions of businesses):Accounts receivable, net
    
    
    48
    
    
    
    (18
    )Prepaid expenses
    
    
    (10
    )
    
    
    (15
    )Deferred contract costs, net
    
    
    (34
    )
    
    
    (43
    )Accounts payable and accrued liabilities
    
    
    (23
    )
    
    
    (15
    )Accrued compensation
    
    
    (17
    )
    
    
    31Deferred revenue
    
    
    (6
    )
    
    
    19Income taxes
    
    
    (19
    )
    
    
    (3
    )Other current and non-current assets
    
    
    8
    
    
    
    (7
    )Other current and non-current liabilities
    
    
    (3
    )
    
    
    1Net cash provided by operating activities
    
    
    161
    
    
    
    138Cash flows from investing activities:Purchases of property, equipment and purchased software
    
    
    (53
    )
    
    
    (38
    )Acquisitions of businesses, net
    
    
    (4
    )
    
    
    (18
    )Purchases of short-term investments
    
    
    (79
    )
    
    
    (40
    )Net proceeds from sale of short-term investments
    
    
    62
    
    
    
    63Other
    
    
    1
    
    
    
    1Net cash used in investing activities
    
    
    (73
    )
    
    
    (32
    )Cash flows from financing activities:Repayments of debt
    
    
    (2
    )
    
    
    (34
    )Proceeds from issuance of common stock
    
    
    6
    
    
    
    8Proceeds from issuance of treasury stock
    
    
    54
    
    
    
    16Excess tax benefits from stock-based compensation arrangements
    
    
    (2
    )
    
    
    Purchases of treasury stock
    
    
    
    
    
    
    (24
    )Net cash provided by (used in) financing activities
    
    
    56
    
    
    
    (34
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    2
    
    
    
    (13
    )Net increase in cash and cash equivalents
    
    
    146
    
    
    
    59Cash and cash equivalents at beginning of period
    
    
    234
    
    
    
    187Cash and cash equivalents at end of period
    
    $
    380
    
    
    $
    246
  3




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1. General
  Recent Developments  Merger
   Adoption of significant accounting standards
    4




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2. Fair Value Measurements
  Financial assets and financial liabilities measured at fair value on a recurring basis
  
    
    Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
    
    Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or
indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for
identical or similar assets or liabilities in markets that are not active.
    
    Level 3: Unobservable inputs that reflect the reporting entitys own assumptions.
   Basis of Fair Value MeasurementsQuoted PricesIn Active
    
    SignificantMarkets for
    
    Other
    
    SignificantBalance at
    
    Identical
    
    Observable
    
    UnobservableSeptember 30,
    
    Items
    
    Inputs
    
    Inputs2009
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)(in millions)Cash equivalents  money market funds
    
    $
    227
    
    
    $
    227
    
    
    $
    
    
    
    $
    Cash equivalents  commercial paper
    
    $
    25
    
    
    $
    25
    
    
    $
    
    
    
    $
    Short-term investments
    
    $
    53
    
    
    $
    53
    
    
    $
    
    
    
    $
    Foreign currency derivative financialForward contracts
    
    $
    (10
    )
    
    $
    
    
    
    $
    (10
    )
    
    $
    Options
    
    $
    (2
    )
    
    $
    
    
    
    $
    (2
    )
    
    $
    
 5




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Fair value of credit facility
  3. Derivative Financial Instruments
     6




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As of September 30,2009
    
    
    2008(in millions)Derivative financial instruments designated as hedging instrumentsInterest rate swaps:Accrued and other current liabilities
    
    $
    
    
    
    $
    (2
    )Forward contracts:Other non-current assets
    
    
    1
    
    
    
    Accrued and other current liabilities
    
    
    (7
    )
    
    
    (4
    )Other non-current liabilities
    
    
    (3
    )
    
    
    (9
    )Option contracts:Accrued and other current liabilities
    
    
    (2
    )
    
    
    (5
    )Other non-current liabilities
    
    
    
    
    
    
    (1
    )Total derivative financial instruments designated as hedging instruments
    
    $
    (11
    )
    
    $
    (21
    )Total derivative financial instruments not designated as hedging instruments
    
    
    (1
    )
    
    
    Total derivative financial instruments
    
    $
    (12
    )
    
    $
    (21
    )
   Three months ended September 30,
    
    
    Nine months ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in millions)Interest rate swaps
    
    
    
    
    
    $
    
    
    
    $
    7
    
    
    $
    
    
    
    $
    6Forward contracts
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    13Option contracts
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    (1
    )
    
    
    6Total (gain) loss
in accumulated
other comprehensive
loss
    
    
    
    
    
    $
    (1
    )
    
    $
    9
    
    
    $
    (2
    )
    
    $
    25The (gain) or loss in fair value reclassified from accumulated other comprehensive loss into
earnings, net of tax (effective portion):Three months ended September 30,
    
    

Nine
months ended September 30,Income Statement
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(in millions)Interest rate swaps
    
    Interest expense
    
    $
    1
    
    
    $
    7
    
    
    $
    2
    
    
    $
    6Forward contracts
    
    Revenue
    
    
    
    
    
    
    1
    
    
    
    2
    
    
    
    1Option contracts
    
    Revenue
    
    
    1
    
    
    
    
    
    
    
    3
    
    
    
    Total (gain) loss
reclassified to
earnings
    
    
    
    
    
    $
    2
    
    
    $
    8
    
    
    $
    7
    
    
    $
    7
   7




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4. Goodwill
  Industry
    
    
    GovernmentSolutions
    
    
    Services
    
    
    Total(in millions)Balance as of December 31, 2008
    
    $
    431
    
    
    $
    299
    
    
    $
    730Net additional goodwill resulting from Tellurian acquisition
    
    
    4
    
    
    
    
    
    
    
    4Balance as of September 30, 2009
    
    $
    435
    
    
    $
    299
    
    
    $
    734
  5. Identifiable Intangible Assets
  As of September 30, 2009Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    BookValue
    
    
    Amortization
    
    
    Value(in millions)Customer-based assets
    
    
    83
    
    
    
    (42
    )
    
    
    41Other intangible assets
    
    
    3
    
    
    
    (2
    )
    
    
    1Total
    
    $
    86
    
    
    $
    (44
    )
    
    $
    42
  6. Comprehensive Income
  Three months
    
    
    Nine monthsended September 30,
    
    
    ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in millions)Net income
    
    $
    33
    
    
    $
    30
    
    
    $
    92
    
    
    $
    88Change in fair value of derivative financial instruments
    
    
    1
    
    
    
    (9
    )
    
    
    2
    
    
    
    (25
    )Reclassification of derivative financial instruments into earnings
    
    
    2
    
    
    
    8
    
    
    
    7
    
    
    
    7Foreign currency translation adjustments
    
    
    (4
    )
    
    
    (15
    )
    
    
    2
    
    
    
    (21
    )Total comprehensive income
    
    $
    32
    
    
    $
    14
    
    
    $
    103
    
    
    $
    49
 7. Stockholders Equity
  8




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8. Stock Options and Stock-Based Compensation
 Stock-based compensation
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in millions)
    
    
    (in millions)Direct cost of services
    
    $
    1
    
    
    $
    1
    
    
    $
    2
    
    
    $
    3Selling, general and administrative expenses
    
    
    4
    
    
    
    3
    
    
    
    11
    
    
    
    10Total stock-based compensation expense
    
    
    5
    
    
    
    4
    
    
    
    13
    
    
    
    13Total stock-based compensation expense, net of tax
    
    
    3
    
    
    
    3
    
    
    
    9
    
    
    
    8
   Nine months endedSeptember 30,2009
    
    2008Weighted average risk free interest rates
    
    
    1.86
    %
    
    
    2.80
    %Weighted average life (in years)
    
    
    4.4
    
    
    
    4.7Volatility
    
    
    34
    %
    
    
    27
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %Weighted average grant-date fair value per share of options granted
    
    $
    3.64
    
    
    $
    4.09
 Activity in our stock-based compensation plans
  Nine months ended September 30,2009
    
    2008Weighted-
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    AverageOptions/
    
    Exercise
    
    Options/
    
    ExerciseSSARs
    
    Price
    
    SSARs
    
    PriceOutstanding at January 1
    
    
    15,420
    
    
    
    15.25
    
    
    
    16,240
    
    
    
    15.00Granted (1)
    
    
    946
    
    
    
    11.79
    
    
    
    1,683
    
    
    
    14.34Exercised
    
    
    (3,312
    )
    
    
    16.28
    
    
    
    (1,427
    )
    
    
    11.10Forfeited
    
    
    (1,032
    )
    
    
    15.56
    
    
    
    (953
    )
    
    
    15.92Outstanding at September 30
    
    
    12,022
    
    
    
    14.66
    
    
    
    15,543
    
    
    
    15.23Exercisable at September 30
    
    
    6,821
    
    
    
    15.18
    
    
    
    9,176
    
    
    
    15.73
 
 (1)
    
    All awards granted for the nine months ended September 30, 2009, were SSARs.  9




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Nine months ended September 30,2009
    
    2008Weighted-
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    AverageGrant-Date
    
    
    
    
    
    Grant-DateAwards
    
    Fair Value
    
    Awards
    
    Fair ValueOutstanding at January 1
    
    
    1,030
    
    
    
    14.68
    
    
    
    1,010
    
    
    
    14.90Granted
    
    
    1,096
    
    
    
    11.80
    
    
    
    441
    
    
    
    14.28Vested
    
    
    (150
    )
    
    
    13.44
    
    
    
    (71
    )
    
    
    16.94Forfeited
    
    
    (90
    )
    
    
    14.08
    
    
    
    (151
    )
    
    
    14.80Outstanding at September 30
    
    
    1,886
    
    
    
    13.11
    
    
    
    1,229
    
    
    
    14.66
 9. Income Taxes
     10




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10. Segment Data
  Industry
    
    GovernmentSolutions
    
    Services
    
    Other(1)
    
    Total(in millions)For the three months ended September 30, 2009:Revenue
    
    $
    470
    
    
    $
    160
    
    
    $
    (1
    )
    
    $
    629Income before taxes
    
    
    35
    
    
    
    8
    
    
    
    
    
    
    
    43For the three months ended September 30, 2008:Revenue
    
    $
    544
    
    
    $
    168
    
    
    $
    (1
    )
    
    $
    711Income before taxes
    
    
    39
    
    
    
    9
    
    
    
    
    
    
    
    48For the nine months ended September 30, 2009:Revenue
    
    $
    1,412
    
    
    $
    470
    
    
    $
    (4
    )
    
    $
    1,878Income before taxes
    
    
    114
    
    
    
    23
    
    
    
    (6
    )
    
    
    131For the nine months ended September 30, 2008:Revenue
    
    $
    1,608
    
    
    $
    490
    
    
    $
    (2
    )
    
    $
    2,096Income before taxes
    
    
    123
    
    
    
    17
    
    
    
    
    
    
    
    140
 
 (1)
    
    Other includes our remaining operating areas and corporate activities, income and expenses
that are not related to the operations of the other reportable segments, and the elimination
of intersegment revenue and direct costs of services of approximately $1 million for the three
months ended September 30, 2009 and 2008, respectively, and $4 million and $2 million for the
nine months ended September 30, 2009 and 2008, respectively, related to the provision of
services by the Industry Solutions segment to the Government Services segment. In addition, $6
million of cost reduction activities are included in this segment in the nine months ended
September 30, 2009. 11. Earnings Per Share
  For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands, except per
    
    
    (in thousands, except pershare data)
    
    
    share data)Basic Earnings per Common ShareNet income
    
    $
    33,470
    
    
    $
    30,341
    
    
    $
    92,662
    
    
    $
    88,443Weighted average common shares outstanding
    
    
    121,189
    
    
    
    120,151
    
    
    
    120,279
    
    
    
    119,750Basic earnings per common share
    
    $
    0.28
    
    
    $
    0.25
    
    
    $
    0.77
    
    
    $
    0.74Diluted Earnings per Common ShareNet income
    
    $
    33,470
    
    
    $
    30,341
    
    
    $
    92,662
    
    
    $
    88,443Weighted average common shares outstanding
    
    
    121,189
    
    
    
    120,151
    
    
    
    120,279
    
    
    
    119,750Incremental shares assuming dilution
    
    
    2,673
    
    
    
    2,425
    
    
    
    1,728
    
    
    
    1,962Weighted average diluted common shares outstanding
    
    
    123,862
    
    
    
    122,576
    
    
    
    122,007
    
    
    
    121,712Diluted earnings per common share
    
    $
    0.27
    
    
    $
    0.25
    
    
    $
    0.76
    
    
    $
    0.73
  11




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12. Commitments and Contingencies
 Litigation
   IPO Allocation Securities Litigation
  Dell Acquisition Securities Litigation
   12




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Other
  13. Subsequent Events
        13




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This quarterly report contains forward-looking statements. These statements relate to future events
or our future financial performance. In some cases, you can identify forward-looking statements by
terminology such as may, will, should, could, forecasts, expects, plans,
anticipates, believes, estimates, predicts, potential, see, target, projects,
position, or continue or the negative of such terms and other comparable terminology. These
statements reflect our current expectations, estimates, and projections. These statements are not
guarantees of future performance and involve risks, uncertainties, and assumptions that are
difficult to predict. Actual events or results may differ materially from what is expressed or
forecasted in these forward-looking statements. In evaluating these statements, you should
specifically consider various factors, including the risks described in our Annual Report on Form
10-K for the year ended December 31, 2008, which have not materially changed. These risk factors
describe reasons why our actual results may differ materially from any forward-looking statement.
We disclaim any intention or obligation to update any forward-looking statement.
 
 Item 2:
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Recent Developments  Merger
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##### Table of Contents



RESULTS OF OPERATIONS
  Lines of Business
  Overview of Our Financial Results for the Third Quarter of 2009
    Revenue Growth
  
    
    Reductions from existing accounts largely resulting from reductions in scope of services and
completing task orders in the normal course of business in excess of new project starts, and a
reduction of discretionary project services. The discretionary services that we provide, which
include short-term project work, can vary from period-to-period depending on many factors,
including specific customer and industry needs and economic conditions.
 
    
    A reduction of pass-through revenue as a result of transitioning the contract management
function back to a client.
 
    
    An unfavorable impact from foreign currency movements.
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##### Table of Contents




    
    Revenue from new contracts signed during the twelve-month period following the third quarter
of 2008.
 
    
    Increase from revenue related to an acquisition in the fourth quarter of 2008.
 Earnings Growth
  Free Cash Flow
  Nine Months Ended September 30,2009
    
    
    2008Net cash provided by operating activities
    
    $
    161
    
    
    $
    138Purchases of property, equipment and software
    
    
    (53
    )
    
    
    (38
    )Free cash flow
    
    $
    108
    
    
    $
    100
  TCV of Contracts Signed
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##### Table of Contents



Additional Measurements
  Comparison of the Three Months Ended September 30, 2009 and 2008
 Revenue
  Three Months Ended September 30,2009
    
    
    2008
    
    
    $ Change
    
    
    % ChangeIndustry Solutions
    
    $
    470
    
    
    $
    544
    
    
    $
    (74
    )
    
    
    (13.6
    )%Government Services
    
    
    160
    
    
    
    168
    
    
    
    (8
    )
    
    
    (4.8
    )%Elimination of intersegment revenue
    
    
    (1
    )
    
    
    (1
    )
    
    
    
    
    
    
    Total
    
    $
    629
    
    
    $
    711
    
    
    $
    (82
    )
    
    
    (11.5
    )%
 Industry Solutions
  
    
    $92 million net decrease from existing accounts largely resulting from completing task orders
in the normal course of business in excess of new project starts, a reduction of discretionary
project services, and a renegotiated contract with less pass-through revenue as a result of
transitioning a contract management function back to the client. The discretionary services
that we provide, which include short-term project work, can vary from period-to-period
depending on many factors, including specific customer and industry needs and economic
conditions.
 
    
    An unfavorable impact from foreign currency movements of $4 million.
  
    
    $18 million increase from new contracts signed primarily in the Healthcare group during the
twelve-month period following the third quarter of 2008. The services that we are providing to
these new customers are primarily the same services that we provide to the majority of our
other long-term outsourcing customers.
 
    
    $4 million increase from revenue related to an acquisition within our Healthcare group during
the fourth quarter of 2008.
 Government Services
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##### Table of Contents



Gross Margin
  
    
    Increased contract profitability on existing accounts in Industry Solutions resulting from
contract efficiencies on fixed-priced outsourcing contracts, volume increases on unit-priced
contracts, and cost containment activities.
 
    
    Increased gross margin in Industry Solutions due to a reduction of pass-through revenue and
expenses, as a result of transitioning a contract management function back to a customer.
  Selling, General and Administrative Expenses
  Other Income Statement Items
  Comparison of the Nine Months Ended September 30, 2009 and 2008
 Revenue
  Nine Months Ended September 30,2009
    
    
    2008
    
    
    $ Change
    
    
    % ChangeIndustry Solutions
    
    $
    1,412
    
    
    $
    1,608
    
    
    $
    (196
    )
    
    
    (12.2
    )%Government Services
    
    
    470
    
    
    
    490
    
    
    
    (20
    )
    
    
    (4.1
    )%Elimination of intersegment revenue
    
    
    (4
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    (100.0
    )%Total
    
    $
    1,878
    
    
    $
    2,096
    
    
    $
    (218
    )
    
    
    (10.4
    )%
 Industry Solutions
  
    
    $213 million net decrease from existing accounts largely resulting from completing task
orders in the normal course of business in excess of new project starts, a reduction of
discretionary project services, and a renegotiated contract with less pass-through revenue as
a result of transitioning a contract management function back to the client. The discretionary
services that we provide, which include short-term project work, can vary from
period-to-period depending on many factors, including specific customer and industry needs and
economic conditions.
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##### Table of Contents




    
    An unfavorable impact from foreign currency movements of $27 million.
  
    
    $32 million increase from new contracts signed primarily in the Healthcare group during the
twelve-month period following the third quarter of 2008. The services that we are providing to
these new customers are primarily the same services that we provide to the majority of our
other long-term outsourcing customers.
 
    
    $12 million increase from revenue related to an acquisition within our Healthcare group
during the fourth quarter of 2008.
 Government Services
  Gross Margin
  
    
    Increased contract profitability on existing accounts in Industry Solutions resulting from
contract efficiencies on fixed-priced contracts, volume increases on unit-priced contracts,
and cost containment activities.
 
    
    Increased gross margin in Industry Solutions due to a reduction of pass-through revenue and
expenses, as a result of transitioning a contract management function back to a customer.
 
    
    Increased gross profit for Government Services related to a contract that was in transition
during the first and second quarter of 2008.
  Selling, General and Administrative Expenses
  Other Income Statement Items
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##### Table of Contents



Liquidity and Capital Resources
   Operating Activities
  
    
    Cash provided by changes in accounts receivable was $48 million for the nine months ended
September 30, 2009, as compared to $18 million cash used in accounts receivable for the same
period of the prior year. Our accounts receivable balance at the end of each period can change
based on the amount of revenue for that period and the timing of collection from our
customers, which may vary significantly from period to period.
 
    
    During the nine months ended September 30, 2009, we made net cash payments for income taxes
of $26 million as compared to $57 million in the nine months ended September 30, 2008.
  
    
    Cash used due to changes in accrued compensation was $17 million in the nine months ending
September 30, 2009, as compared to $31 million cash provided by changes in accrued
compensation for the same period of 2008. The changes in accrued compensation in the nine
months ended September 30, 2009 were driven by the compensation accrued as of December 31,
2008 that was paid during the nine months ended September 30, 2009, partially offset by our
2009 compensation accrual that will be paid in 2010. Bonuses paid to associates under our
bonus plans in the first nine months of 2009 and 2008 (including payments of annual bonuses
relating to the previous years bonus plan) were $62 million and $28 million, respectively.
 
    
    During the nine months ended September 30, 2009, there was a decrease of $6 million in net
deferred revenue received from customers as compared to an increase of $19 million for the
same period in 2008. The decrease in 2009 is primarily attributable to payments received in
2008 related to transition services on long-term outsourcing contracts.
 
    
    Cash used by changes in accounts payable and accrued liabilities was $23 million for the nine
months ended September 30, 2009, as compared to cash used of $15 million for the same period
of the prior year. This decrease is primarily due to the timing of vendor payments.
 Investing Activities
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Financing Activities
   Adoption of Significant Accounting Standards
  21




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##### Table of Contents



Item 3:
    
    Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4:
    
    Controls and Procedures
   
 PART II: OTHER INFORMATION
 
 Item 1:
    
    Legal Proceedings
   IPO Allocation Securities Litigation
  Dell Acquisition Securities Litigation
  22




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##### Table of Contents



Other
  
 Item 1A:
    
    Risk Factors
  23




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##### Table of Contents



Item 6:
    
    Exhibits
  EXHIBITNUMBER
    
    DESCRIPTION OF EXHIBIT2.1
    
    Agreement and Plan of Merger dated September 20, 2009 by and among the Company, Dell Inc. (Dell) and DII -
Holdings Inc. (DII). (Incorporated by reference to Exhibit 2.1 of the Companys Current Report on Form 8-K
filed September 21, 2009.)2.2
    
    First Amendment dated September 30, 2009, to the Agreement and Plan of Merger dated September 20, 2009, by and
among the Company, Dell and DII. (Incorporated by reference to Exhibit 2.1 of the Companys Current Report on
Form 8-K filed October 1, 2009.)2.3
    
    Form of Tender and Voting Agreement dated September 20, 2009, by and among the Company, Dell, DII and each of
the following executive officers and directors of the Company: Peter A. Altabef, Steven Blasnik, John S.T.
Gallagher, Carl Hahn, DeSoto Jordan, Caroline S. Matthews, Thomas Meurer, Cecil H. Moore, Jr., Anthony J.
Principi, Anuroop Singh, John E. Harper, Russell Freeman, Thomas D. Williams, John Lyon, Scott Barnes, Eugene L.
Carrick, Steve Curts, Anurag Jain, Chuck Lyles and Jeff Renzi. (Incorporated by reference to Exhibit 2.2 of the
Companys Current Report on Form 8-K filed September 21, 2009.)2.4
    
    Form of Tender and Voting Agreement dated September 20, 2009, by and among the Company, Dell, DII and each of
the following stockholders of the Company: H. Ross Perot, HWGA, Ltd., The Perot Foundation, Petrus Financial
Services Ltd., Perot Family Trust, Perot Investment Trust I, Perot Investment Trust II, Perot Investment Trust
III, Perot Investment Trust IV and Perot Investment Trust V. (Incorporated by reference to Exhibit 2.3 of the
Companys Current Report on Form 8-K filed September 21, 2009.)2.5
    
    Amended and Restated Tender and Voting Agreement dated September 30, 2009, among the Company, Dell, DII and the
Perot Family Trust. (Incorporated by reference to Exhibit 2.2 of the Companys Current Report on Form 8-K filed
October 1, 2009.)3.1
    
    Third Amended and Restated Certificate of Incorporation of Perot Systems Corporation (Incorporated by reference
to Exhibit 3.1 of the Companys Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2002.)3.2
    
    Fifth Amended and Restated Bylaws. (Incorporated by reference to Exhibit 3.2 of the Companys Current Report on
Form 8-K filed December 17, 2008).4.1
    
    Specimen of Class A Common Stock Certificate (Incorporated by reference to Exhibit 4.1 of the Companys
Registration Statement on Form S-1, Registration No. 333-60755.)10.36
    
    Plan Amendment to the Perot Systems Corporation Amended and Restated 1999 Employee Stock Purchase Plan/US,
effective as of September 30, 2009. (Incorporated by reference to Exhibit (e)(17) to the Solicitation /Recommendation
Statement on Schedule 14D-9 filed October 2, 2009.)10.37
    
    Plan Amendment to the Companys Amended and Restated 1999 Employee Stock Purchase Plan/Non-US, effective as of
September 30, 2009. (Incorporated by reference to Exhibit (e)(19) to the Solicitation / Recommendation
Statement on Schedule 14D-9 filed October 2, 2009.)10.38
    
    Perot Systems Corporation 2001 Long-Term Incentive Plan  Sub-Plan of Perot Systems TSI (India) Limited
(formerly called HCL Perot Systems Limited). (Incorporated by reference to Exhibit (e)(14) to the Solicitation
/ Recommendation Statement on Schedule 14D-9 filed October 2, 2009.)10.39
    
    Plan Amendment to the Perot Systems Corporation 2001 Long-Term Incentive Plan  Sub-Plan of Perot Systems TSI
(India) Limited (formerly called HCL Perot Systems Limited). (Incorporated by reference to Exhibit (e)(15) to
the Solicitation / Recommendation Statement on Schedule 14D-9 filed October 2, 2009.)
 24




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##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION OF EXHIBIT10.40
    
    Plan Amendment, effective as of September 30, 2009, to the Perot Systems Corporation 2001 Long-Term Incentive
Plan Amended and Restated. (Incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form
8-K filed October 1, 2009.)10.41
    
    Third Amended and Restated License Agreement dated September 20, 2009, between Perot Systems Family Corporation,
H. Ross Perot, Ross Perot, Jr. and the Company. (Incorporated by reference to Exhibit 10.1 of the Companys
Current Report on Form 8-K filed September 21, 2009.)10.70
    
    Non-Competition Agreement dated September 20, 2009, between Ross Perot, Dell, DII and the Company. (Incorporated
by reference to Exhibit (e)(43) to the Solicitation / Recommendation Statement on Schedule 14D-9 filed October
2, 2009.)10.71
    
    Non-Competition Agreement dated September 20, 2009, between Ross Perot, Jr., Dell, DII and the Company.
(Incorporated by reference to Exhibit (e)(44) to the Solicitation / Recommendation Statement on Schedule 14D-9
filed October 2, 2009.)31.1*
    
    Rule 13a-14 Certification dated November 6, 2009, by Peter A. Altabef, President and Chief Executive Officer.31.2*
    
    Rule 13a-14 Certification dated November 6, 2009, by John E. Harper, Vice President and Chief Financial Officer.32.1**
    
    Section 1350 Certification dated November 6, 2009, by Peter A. Altabef, President and Chief Executive Officer.32.2**
    
    Section 1350 Certification dated November 6, 2009, by John E. Harper, Vice President and Chief Financial Officer.
 
 *
    
    Filed herewith.**
    
    Furnished herewith. 25




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##### Table of Contents



PEROT SYSTEMS CORPORATION
(Registrant)Date:  November 6, 2009
    By
    /s/ ROBERT J. KELLYRobert J. KellyCorporate Controller and Principal
Accounting Officer 26