While the EMC offer represented a $27 %$ premium to the EMC trading price immediately prior to the announcement of the deal, most of the premium comes from the problematic valuation of the tracking stock. Dell valued the deal at $\$ 33.15$ per EMC share but investors questioned the valuation as EMC's share value rose to only $\$ 28.07$ at the end of trading on the announcement date. Shares of VMware dropped by $10 %$, reflecting concern about the loss of key employees and the uncertainty associated with future decisions made by the Dell board. EMC shareholders also fretted that the issuance of tracking shares (shares that trade like VMware shares) would increase the supply of VMware shares and depress the price. Nevertheless, EMC shareholders approved the deal since the outlook for EMC as an independent entity was dire, with the firm's core enterprise business faltering and the promising cloud-software unit too small to have much of an impact. VMware's server virtualization business was doing better resulting in EMC's investment in VMware accounting for almost one-half of the consolidated company's market capitalization. In other words, the Dell deal simply seemed to EMC shareholders as better than no deal at all.

The new firm (including EMC) has more than $\$ 50$ billion in debt on its consolidated balance sheet. Interest paid on the debt amounts to $\$ 2.5$ billion annually. That is $\$ 2.5$ billion less to spend on $R \& D$ and other critical activities, thereby potentially limiting new product development and improving customer service. In addition, integrating EMC and Dell, which combined have more than $\$ 75$ billion in revenue and nearly 200,000 employees, is a massive undertaking and an enormous distraction for employees and their management team as two very different cultures come together and a new business strategy is implemented. Moreover, bringing two business portfolios together will require a significant amount of pruning overlapping and unprofitable products, which will be disruptive to their business and create confusion for their customers. Customers simply will not know if the products they are buying today from either company will be supported in a year or two. Finally, since many of these products are sold through distributors, this merger is going to cause chaos in the distribution channels as they bring together two different distributor programs and marketing approaches.

Large acquisitions often are used to rapidly change corporate direction and are referred to as transformative to appear as bold and imaginative moves. However, history shows that many large acquisitions fail to live up to their expectations either because of a flawed strategy, overpayment, inadequate integration, or simply bad postmerger execution. Time will tell whether Michael Dell's "bold" changes represented true strategic thinking or simply a series of desperate moves.