Sometimes big acquisitions and deals work, sometimes they result in a whole mess o' money being thrown away.
On Monday, Google announced it will acquire video-sharing site YouTube in a US$1.65 billion stock deal. It's impossible to say right now whether this megadeal will work, but it's good to be reminded that not everything results in synergy. Here's a look back at seven that went awry, and two that succeeded:
• Broadcast.com: Yahoo bought the company for US$5.7 billion as a way to marry TV and the Internet in 1999. It eventually happened, but in 2005, not in 1999 when Yahoo bought the company. The assets were never fully exploited by Yahoo, but it turned Mark Cuban, a PC reseller from Indiana, into a billionaire celebrity.
• Netscape: Remember when these guys were a software company? They came up with the browser and jump-started the whole Internet IPO thing. In 1998, AOL bought them and crafted a three-way alliance with Sun Microsystems. Sun gave AOL about US$1 billion for the right to sell Netscape software. The Sun cooperation fell apart, and now Netscape hawks ISP services on B-grade cable channels.
• Spyglass: OpenTV bought Spyglass--which came out of the same University of Illinois lab as Netscape--for US$2.5 billion in 2000. You should check out the link. The three-digit stock prices are quaintly charming. This was going to be some sort of TV-Internet synergy thing.
Microsoft dodged this bullet. It licensed technology for Internet Explorer from Spyglass. While it paid several million to Spyglass, the total was far less than the acquisition price.
• WebTV: But Microsoft wasn't always right. US$425 million later, and TV on the Web still isn't a big deal. Founder Steve Perlman, though, did pretty well.
• Intel and anything: Intel acquired 35 companies, for US$11 billion, between January 1999 and December 2001 before it had to start laying people off and closing some divisions. Then in 2003, it started hiring people again. Layoffs are occurring again at the big I.
• Diba: Sun bought this Internet set-top box maker as a way to mix TV and Internet (is anyone else seeing a pattern here?) in 1997. Four years later, it unwound the deal.
Not all Sun deals are bad, though. In 1996, it bought Lighthouse Design. Lighthouse was run by future Sun CEO Jonathan Schwartz.
• The Globe.com: Remember these guys? Two students formed a Web company in their Cornell dorm. In 1998, they set a record for first-day gains on an IPO. By 2001, the company was on life support. The company that passed it for one-day gains in an IPO, VA Linux, is now leading an ordinary life selling proprietary software, and VA CEO Larry Augustine, who became a billionaire when VA went public, is not still one.
And those that worked:
• PayPal: Can't argue here. The acquisition has allowed eBay to simplify transactions. PayPal has also been a good farm for future Silicon Valley leaders. Founder Elon Musk has gone on to fund Tesla Motors and invest in solar companies. YouTube founder Chad Hurley also came out of there.
• Mirabilis: AOL again, but this time a good one. They bought Mirabilis, makers of ICQ, back in 1998. Instant messaging was born; and they paid only US$287 million. Still, that allowed Yossi Vardi, Yair Goldfinger and other early Mirabilis employees to fund further software companies in Israel.
So what about MySpace? Many would argue that News Corp.'s US$650 million deal is looking good so far, but is still way too early to tell.
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