Dell is now reaching a critical point where, due to size, acquisitions may be the only way for it to continue it's historical growth patterns. Don't get me wrong, I think Dell will do fine for years to come, it just seems to me that GTW, at this point in time, presents an opportunity that Dell should consider very seriously, especially since such an acquisition would almost surely be immediately accretive to earnings.
Alohal, a few comments about your post. The reasons Dell ought to consider a GTW purchase are:
1. It removes a potential danger from the marketplace -- a mechanism to bridge the BTO gap by companies such as CPQ and HWP. That gap is really a chasm, because a piecemeal internal transition will cause a rebellion within the channel and rapid loss of market share;
2. It supplements Dell's position by adding strength to the segment of the market that Dell has just targeted;
3. It provides Dell with immediate market share.
But, what it does not do is provide accretive earnings on a per share basis. As a matter of fact, when the smoke and mirrors are removed from M&A jargon you will find that acquisitions are never accretive because the purchasing company is always forced to pay a greater than market price for the acquired company. The rationale behind any merger is that ubiquitous word "synergy", which basically means that the whole is worth more than the sum of the parts. This is accomplished through a combination of expense reduction and cross-selling. In the case of a possible GTW purchase we must consider the damage that GTW in hostile hands could do to Dell. Therefore, I consider the value of Dell/GTW competing against CPQ as one scenario vs the possibility of Dell competing against CPQ/GTW as the second scenario.
TTFN,
CTC |
