Predicting the Outcome of the Dell/EMC Merger

One of the things analysts are asked to do is predict outcomes. We don’t have a crystal ball, so we typically work off of history. If there is a noticeable trend, we draw a straight line, assuming that trend will continue. If there is a history of a certain behavior, we will likely assume this history will continue unless there is some reasonable and verifiable change. In the case of large corporate mergers, most fail. Since the largest to date, the HP/Compaq deal, was nearly a train wreck, you can understand why many of my peers have concluded that the even larger / merger will end badly.

However, what they are missing is that both Dell and EMC are very different from other technology companies. Plus, unlike HP/Compaq, the two firms aren’t both in trouble. Both HP and Compaq were in the early stages of emergency turn-arounds when they decided to merge. Thus you can’t use the history of mergers in general or HP/Compaq in particular as indicators of this merger’s potential for success. You have to look at Dell’s history and EMC’s history, instead.

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NOTE: This column was originally published in the .

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