Most of the coverage of Dell’s decision to buy Perot Systems for $3.9 billion says the move makes strategic sense, because the big players in the computer industry have large services businesses, and Dell will now have a much stronger services offering. Some writers also note that Dell paid a steep price: nearly 30 times estimates for Perot Systems earnings this year, and a 68% premium over where Perot stock traded before the takeover announcement. But no one seems to have tried to assess whether the price is so high that the deal shouldn’t have been done. The answer is that the price is likely way too high–the deal will make Dell shareholders poorer. How is that strategic?

Nokia’s introduction of a netbook computer shows all the signs of a misguided move into an adjacent market. Nokia is operating from a position of weakness, not strength–because of slowing growth in Nokia’s cellphone markets. Nokia also seems to be overestimating what it can bring to the netbook market while underestimating the difficulties that it will find there.

We’ve updated “Perfecting the Art of the Deal,” a working paper that applies our research to potential mergers and acquisitions. Read the introduction below and click to download the entire article in PDF form.