All Mergers Are Not Created Equal

I read "The case against mergers" (Special Report, Oct. 30) with keen interest. Traditionally, acquisitions praised on the altar fall short of expectations within a few months or years. The networking industry, however, runs counter to this trend.

The three largest data networking companies--Cisco Systems, 3Com, and Bay Networks--are also the fastest-growing and have provided shareholders substantial returns on their investments. In the most recent quarter, their annualized returns on equity were 42%, 43%, and 30%, respectively.

Acquisitions have been an important part of their growth and success. For instance, 3Com Corp. has made 10 acquisitions in the past four years, during which time the company's market capitalization has increased enormously--from $385 million to more than $8 billion. In contrast, over that same period of time (which in our industry is certainly long enough to pass judgment), some other companies that have chosen to buck the consolidation trend have not grown as fast, have in fact lost market share in many cases, and have failed to take advantage of the opportunities emerging in new market segments of our industry.

Eric Benhamou

Chairman and CEO

3Com Corp.

Santa Clara, Calif.

What continues to amaze me is the number of "megadeals" that go wrong. These are large companies staffed with smart people being advised by top investment bankers, lawyers, and accountants. The very problems that have led to the failure of many of the megadeals cited in BUSINESS WEEK were facts that should have been obvious to the buyer from the start.

While Mattel is happy to be among the 17% of companies that "created substantial value" in the Mercer [Management Consulting] analysis, it's still hard to understand why the group is so small.

Michael J. Welch

Vice-President for Corporate Development

Mattel Inc.

El Segundo, Calif.

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