In the global tech industry, the services business has become a strategic asset. Last week, Dell (NASDAQ: DELL) agreed to shell out a whopping $3.9 billion for Perot Systems (NYSE: PER).

Now, there's another biggie deal: Xerox (NASDAQ: XRX) has agreed to pay $6.4 billion for Affiliated Computers Services (NASDAQ: ACS). Just like Dell, Xerox's core hardware business is undergoing lots of pressure. So why not expand into something else?

The Securities and Exchange Commission charged an employee of Perot Systems (NYSE: PER) with insider trading related to Dell's (NASDAQ: DELL) proposed acquisition of PER. PER options were active on elevated volatility preceding the announcement of the $3.9 billion deal.

CBOE Volatility Index S&P 500 Options - VIX at 23.48; 10-day moving average is 23.68.

CBOE Volatility Index NASDAQ 100VXN at 24.46; 10-day moving average is 24.61.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Dell's (Nasdaq: DELL) acquisition of Perot Systems (NYSE: PER) came at a nosebleed valuation of $3.9 billion. In fact, it will probably make it impossible for another suitor to come to the table. In other words, the transaction is an indication of how much Dell needs Perot, so as to compete better against rivals like Hewlett Packard (NYSE: HPQ).

Of course, it's also a stellar outcome for the Perot family. How much so? Well, Bloomberg.com dug into the SEC filings to find out. Essentially, the deal boosted the family's wealth by roughly $400 million, with the total value of the equity holdings coming to $952 million.

Analyst upgrades:

• Credit Suisse upgraded Hewlett-Packard (NYSE: HPQ) to Outperform from Neutral and raised its target to $55 from $44 based on earnings momentum and a bottom in the Imaging and Printing segment. Note that Dell was downgraded to Neutral from Outperform.
• Jefferies upgraded Covance (NYSE: CVD) to Buy from Hold as it believes investor expectations are more reasonable following the company's conference presentation and that its Late Stage segment should continue to post strong results. The firm raised its target on shares to $65 from $5.
• Stephens upgraded Home Bancshares (NASDAQ: HOMB) to Overweight from Equal Weight to reflect improved capital levels and a better-than-expected near-term outlook. The firm raised its target on shares to $27 from $24.
• Citigroup upgraded Macy's (NYSE: M) to Buy from Hold after meeting with management as it believes the My Macy's localization is gaining traction. The firm raised its target on shares to $30 from $15.
• Gymboree (NASDAQ: GYMB) was upgraded to Outperform from Market Perform at FBR Capital.
• DISH Network (NASDAQ: DISH) was upgraded to Outperform from Market Perform at Wells Fargo.
• Baytex Energy (NYSE: BTE) was upgraded to Sector Outperformer from Sector Performer at CIBC.

Today was a weak day even before the leading economic indicators brought a disappointment. The dollar was strong ahead of the FOMC meeting decision this week, where the Fed is expected to give less free money but will likely hold rates firm. The good news is that despite a negative news bias from companies, the drops were not as hard as they could have been.

Here were today's unofficial closing bell levels:

Dow 9,778.93 -41.27 (-0.42%)
S&P 500 1,064.71 -3.59 (-0.34%)
Nasdaq 2,138.04 +5.18 (0.24%)

Top Analyst Upgrades/Downgrades
Top Trader Alerts

Early on Monday morning, Dell (NASDAQ: DELL) announced that it has agreed to buy Perot Systems (NYSE: PER) for roughly $3.9 billion. Perot is an information technology services company, which was created by former presidential candidate Ross Perot.

Dell will offer $30 per share in cash for Perot, which represents a 68% premium over Perot's Friday close. Overall, the deal is reportedly worth $3.9 billion (according to Dell). The deal is expected to close in the quarter running from November to January -- Dell's fiscal fourth quarter.

Dell (NASDAQ: DELL) will commence an offer to acquire Perot Systems (NYSE: PER) for $30 per share in cash. DELL expects the transaction to be accretive to DELL's GAAP earnings in its fiscal year 2012. PER options were active last week, with 2,549 contracts trading on September 18, the most active day since July 2002. PER over all option implied volatility of 48 is above its 26-week average of 36, according to Track Data, suggesting larger price movement.

Sara Lee (NYSE: SLE) closed at $10.68. SLE October option implied volatility of 34 is near its 26-week average of 36. SLE options were active on September 18 with 17,563 contracts trading according to Track Data.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Perot Systems Corporation (NYSE: PER) offers information technology, business process outsourcing and strategic consulting services through its operations in the US, Mexico, Europe and India. Offerings include applications development, systems integration, claims processing, call center operations, enterprise analysis and research. The company serves clients in banking, insurance, healthcare, manufacturing, telecommunications, travel, energy and defense. Electronic Data Systems (NYSE: EDS) and IBM (NYSE: IBM) are major competitors.

The firm pleased investors earlier in the month, when it reported Q4 EPS of 35 cents and revenues of $732 million. Analysts had been looking for 30 cents and $707.9 million. The CEO attributed the solid results to new business, globally-delivered projects and existing client expansion. Management also guided Q1 EPS to 21-23 cents (21 cent consensus) and Q1 revenues to $665-$680 million ($673.52M consensus).

MOST NOTEWORTHY: Thornburg Mortgage, Expedia and Perot Systems were today's noteworthy upgrades:

• Jefferies upgraded shares of Thornburg Mortgage Inc Corp (NYSE: TMA) to Buy from Hold as they believe the stock is at an inflection point, characterized by accelerated earnings and dividend growth.
• Expedia Inc (NASDAQ: EXPE) was upgraded to Outperform from Neutral at Credit Suisse, as they believe the company is well-positioned to benefit from global e-travel and media opportunities, strong free cash flow, and attractive valuation.
• Perot Systems Corporation (NYSE: PER) was upgraded to Sector Perform from Underperform at RBC Capital following its Q4 report.

OTHER UPGRADES:

• HSBC raised Swiss Reinsurance Company (OTC: SWCEY) to Overweight from Neutral.
• The Estee Lauder Companies Inc (NYSE: EL) was upgraded to Equal Weight from Underweight at Lehman.
• Cantor upgraded Genomic Health Inc (NASDAQ: GHDX) to Buy from Hold.

With the market being propelled upward due to private equity and corporate acquisitions, investors should not stay on the sidelines. Rather, they should target private equity's next frontier -- IT services. Of the companies in this sector, Unisys Corp. (NYSE: UIS), Perot Systems Corp. (NYSE: PER) and Ingram Micro, Inc. (NYSE: IM) may be worth examining.

A few months ago, I suggested several sectors and companies that private equity could target next. On Friday, TheStreet.com reiterated one of those sectors -- IT services. Here's how much seven such companies have gone up or down since my March 29th post along with their market capitalizations ranked by their Price/Earnings to Earnings Growth (PEG) ratios:

Brent Bracelin, an analyst with Pacific Crest Securities, is warming up to Dell Inc. (NASDAQ: DELL). He notched his rating from "Sector perform" to "outperform."

And with $12.5 billion in the bank, Dell might start shopping for buyout prey. Why? He thinks the company will want to expand aggressively into the services space -- which would certainly be an extension of its PC business.

Here are some of Bracelin's picks:

Computer Sciences (NYSE: CSC)
Perot Systems Corp. (NYSE: PER)
Unisys Corp. (NYSE: UIS)
TechTeam Global Inc. (NASDAQ: TEAM)

Bracelin thinks Dell might also look at companies with proprietary technology. An interesting target is actually Sun Microsystems (NASDAQ: SUNW).

Although, it's mostly a yawn for the Street. Dell's stock is up $0.25 to $23.76.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.