How Many Times Will Skype Be Acquired For Too Much Money By Big Tech Companies With Little Strategic Synergies?

from the the-big-huh? dept

You may recall, back in 2005, that the tech world let out a massive "Huh? when eBay acquired Skype for somewhere around $2.6 billion. eBay kept insisting there were synergies there, and lots of people tried to puzzle out what those might be. Calling people to discuss auctions? Auctions embedded in your phone? There was some vague talk about China, but it amounted to "lots of people use Skype in China," and didn't get much further than that. Just a couple years later, eBay was already writing off the supposed synergies and then gave up looking for the synergies altogether. Not so long ago, it spun the company out, and there were plans for an IPO.

Just a few days ago, there were rumors that both Facebook and Google were considering buying Skype at around $3 or $4 billion. In both cases, you could make out some potential synergies. Facebook has become a huge communications platform, and adding more voice capabilities could be compelling. Google, obviously, has Google Voice and owns Skype-clone Gizmo.

However, at the last minute, it appears that Microsoft swooped in and more than doubled the asking price, paying $8.5 billion. And, we're left with deja vu. It seems we're not the only one asking how this makes sense. It certainly has all the earmarks of a big company with too much cash feeling the need to do something to be considered relevant, especially after hearing that two of the newer darlings in the tech world were considering the buyout themselves.

Are there synergies here that make sense? Well, certainly more than existed with eBay. But enough to make it worth so much more to Microsoft than Facebook or Google? I can't see it. Also, almost everything I can think of where Microsoft might integrate with Skype would likely make the product more annoying and less valuable. And while Skype is definitely a great product -- I use it all the time -- and usage has steadily grown over the years, the company is still having trouble finding profits. $8 billion is a lot to spend on a company that keeps using up the red ink on its income statements.

Perhaps Skype just puts something in the water it serves in conference rooms that makes big tech companies go loopy, increasing how much they're willing to pay and seeing magic synergies where none really exist.

Filed Under: acquisitions, voip
Companies: ebay, facebook, google, microsoft, skype

Amazon Acquires Woot; Woot CEO Pens Best Acquisition Letter Ever

from the earning-a-living-on-snarky-commentary-and-junk dept

It appears that Amazon is expanding by trying to buy up cool e-commerce companies that have unique and fun cultures that its fans love. I would imagine there are worse strategies out there. We already covered how Amazon bought Zappos, with the company culture playing an important role in the decision-making. Now Amazon has bought Woot (a site, I should admit, that I have a bit of an addiction to). And unlike the lame corporate-speak note that Zappos put out when it was acquired, Woot has handled the announcement in true Woot-like fashion with perhaps the best CEO letter you'll ever read about an acquisition. Here's just an excerpt:

Over the next few days, you will probably read headlines that say "Matt Rutledge revealed to be monstrous pseudo-human creation of Jeff Bezos." You might even see this photo making the rounds. Rest assured that these rumors have nothing to do with our final decision. We think now is the right time to join with Amazon because, quite simply, every company that becomes a subsidiary gets two free downloads until the end of July, and we very much need that new thing with Trent Reznor's wife on our iPods.

Other than that, we plan to continue to run Woot the way we have always run Woot -- with a wall of ideas and a dartboard. From a practical point of view, it will be as if we are simply adding one person to the organizational hierarchy, except that one person will just happen to be a billion-dollar company that could buy and sell each and every one of you like you were office furniture. Nevertheless, don't worry that our culture will suddenly take a leap forward and become cutting-edge. We're still going to be the same old bottom-feeders our customers and readers have come to know and love, and each and every one of their pre-written insult macros will still be just as valid in a week, two weeks, or even next year. For Woot, our vision remains the same: somehow earning a living on snarky commentary and junk.

We are excited about doing this for all sorts of reasons. One, our business model is so vague that there's no way Amazon can possibly change what it is we're truly doing: preparing the way for the rise of the Lava Men in 2012....

And then there's this lovely rap video Woot staff put together to explain the acquisition. The video even ends by noting "the preceding video does not represent the view or opinions of Amazon.com. Obviously." Let's just say that it's not your standard bland "hey we've been acquired" announcement: Taking a step back, it's pretty interesting to see Amazon acquiring companies with such unique cultures and then leaving them alone and letting them act entirely independently. It will be worth watching to see if that lasts (or if it can last). But for now, it's cool to see.

Filed Under: acquisitions
Companies: amazon, woot

Can't Buy 'Em? Sue 'Em For Patent Infringement!

from the welcome-to-modern-business dept

JohnForDummies alerts us to Broadcom's latest patent infringement suit, this time against Emulex. Broadcom is quite aggressive on the patent front, so at first this didn't seem like a big deal. But, this time it's more interesting, because Broadcom just spent about a year trying to do a hostile takeover of Emulex, which failed. Basically, this seems like a sour grapes patent lawsuit. Emulex wouldn't agree to be taken over, so Broadcom decided to throw the patent book at them. Patent lawsuits as revenge? Just like Thomas Jefferson intended...

Filed Under: acquisitions, patents, spite
Companies: broadcom, emulex

Is Google's Proprietary Tech Stack Destroying Its Acquisitions?

from the not-invented-at-Google-syndrome dept

While Google has bought plenty of small startups, almost none of those deals have amounted to very much. It almost seems like most of the startups disappear into Google forever. There are a few exceptions such as YouTube and (maybe) Writely. But the list of startups that have simply languished or died is much longer. TechCrunchIT is running an interesting post that suggests one of the key reasons: Google's proprietary tech stack. While Google is a big open source supporter for lower level infrastructure, once you get above that -- it's very much a strong believer in doing everything its own way. I've heard from friends at Google about the difficulty they've had learning to deal with Google's tech stack -- and certainly have heard how it's slowed down the progress of some Google acquisitions while they learn how to "transition."

In fact, some have pointed out that this is one of the side benefits to Google's AppEngine offering. Since it exposes some of Google's tech stack to folks for them to develop and run their applications, it will make it much easier to integrate them into Google at a later date. So, for startups whose strategy is to get acquired by Google (and, I should note, if you start with that strategy, you're probably going to fail), it may make sense to develop on AppEngine just because you're already signaling to Google that the integration costs are significantly lower.

Still, this highlights one of the major downsides to Google's belief that it can do everything much better than everyone else by starting from scratch: in doing so, it actually makes it much harder to capitalize on synergies from many acquisition targets. Yes, there are reasons to go against the "standard" way of doing things, but there are significant costs as well.

Filed Under: acquisitions, open, proprietary, standards, synergies
Companies: google

A Hostile Microsoft Bid For Yahoo! Would Likely Be A Pyrrhic Victory

from the culture-clash dept

Marc Andreessen has an interesting post looking at the consequences if Microsoft officially goes hostile in its bid for Yahoo! Thus far, the two firms have been engaged in a careful dance where each side has left the door open for a negotiated settlement. But with neither side showing any sign of backing down, it's looking increasingly likely that Microsoft will be forced to make an overt bid for control of Yahoo's shares. There are two basic strategies Microsoft could pursue. One would be a tender offer, in which Microsoft attempts to purchase a majority of Yahoo!'s stock. The other would be a proxy fight, in which Microsoft nominates a competing slate to Yahoo!'s board of directors, on the understanding that the new slate would accept Microsoft's existing offer. Either of these options would spark litigation from the losing party. Then, it would have to clear regulatory hurdles, and after that would come the hard work of actually integrating the two companies, something that will be made more difficult if Yahoo's senior management is still bearing grudges from the takeover fight. I've pointed out before that culture is extremely important in high tech firms. Companies need to attract the best talent, and talented programmers want to work where the most innovative work is being done. Right now, Google already has an edge over Yahoo! and Microsoft on that front, and the gap is only going to widen if they spend the next two years beating each others' brains out. It's not at all clear that the Microsoft-Yahoo merger would make sense even if it were done with the support of Yahoo's current management; it's a doubly bad idea if it involves all the nastiness that would come with a hostile takeover.

Filed Under: acquisitions, hostile bid, integration
Companies: microsoft, yahoo

AOL Realizes Way Too Late That AIM Should Have Been A Social Network

from the catching-up-four-years-late dept

As social networks like Friendster and then MySpace first came to prominence in the 2003/2004 time frame, we wondered why the big players (AOL/Yahoo/Microsoft) in the instant messaging space didn't recognize that those instant messaging networks were better social networks than the networks. Whereas most social networks had little to do once you connected, most people used instant messaging to communicate all the time. Those instant messaging systems already knew who all your "friends" were, and it shouldn't be that hard to then take that information and convert it into a more standard social network, with instant messaging features built right in. Yet, nothing really happened. Yahoo and Microsoft made some half-hearted attempts at social networking with little success, keeping them mostly separate from their vibrant instant messaging networks. Now, it appears that AOL has finally woken up and realized this possibility, but since it's so late to the game, it's decided to just buy Bebo for $850 million and integrate it with AIM.

While $850 million is less than was earlier rumored, and suggests that Bebo's growth rate isn't as strong as it would like, the site does have plenty of users (mostly in the UK). When I was over in the UK a few months ago, everyone was talking about Bebo the way people talk about Facebook here. That said, linking AIM to Bebo in a way that gets people interested may be difficult. There's certainly a bit of social network fatigue going on these days, and it seems as though people are beginning to wonder why they should join yet another social network unless it really provides something different and compelling than the last social network. Yes, AOL should be turning AIM into a social network, but they should have done it four years ago when it still made sense. As it stands, this seems likely to go nowhere fast -- especially with the cloud over AOL's future strategy.

Filed Under: acquisitions, instant messaging, social networks
Companies: aol, bebo, time warner

Microsoft Figures Yahoo May Finally Be Desperate Enough To Sell

from the embrace,-extend...-extinguish dept

It seems that in the first half of every year there are some rumors that Microsoft might want to buy Yahoo. We heard it in 2006 and again in 2007. Now that it's 2008 and Yahoo is looking incredibly vulnerable, having just announced weak earnings and plans to layoff 1000 employees, and given their lack of a serious strategy, Microsoft has finally decided to take the plunge, making a somewhat unsolicited $44.6 billion bid for the company, representing a rather large 62% premium on the company's current valuation. This seems like a move both companies have to make, as a hail mary shot at coming up with something that can actually compete with Google. Going it alone hasn't been working. Both companies have been trying all sorts of tricks to get back in the race, without much success. Both seem to be living off a legacy past, but are unable to excite many new users. Microsoft has shown some signs of moving up the chart, but Yahoo has been steadily listing in the other direction. Combining the two gives them scale, but it'll still take a lot of work and has a high likelihood of failure. Merging two huge companies like this is not an easy thing at all, and could very well be distracting enough to actually help Google gain even more ground. However, given how little either has been able to seriously dent Google's momentum, it seems that they need to give this a shot.

Filed Under: acquisitions, mergers, online advertising
Companies: microsoft, yahoo

The Enterprise Landgrab Continues: Oracle Buys BEA For $8.5B, Sun Buys MySql for $1B

from the buying-in-the-air dept

Something must be in the air today, as two big acquisitions were announced this morning. First, Oracle announced that it will fork over $8.5 billion for middleware maker, BEA. BEA has been on the radar since last October, when BEA rejected Oracle's unsolicited $6.7 billion offer. Carl Icahn, BEA's largest shareholder, had initially agreed with BEA's counter offer of $21 per share, but then later started pushing publicly for the sale. Oracle held fast to its offer of $17 per share, so it's surprising to see that they were able to agree on $19.375 per share, especially when there were seemingly no other bidders. These acquisitions continue an overall trend of consolidation in the enterprise software market, kicked off by Oracle's 2004 acquisition of PeopleSoft. Since then, Oracle has spent about $110 billion in its acquisition of about 30 companies. Oracle is in a battle with German software giant, SAP, who is also knee deep in the land grab with its recently successful $6.7 billion acquisition for Business Objects. Meanwhile, Sun will spend $1 billion for open source database maker, MySql, making a strong play in the $15 billion enterprise database market. This deal makes sense for Sun, who has been building up its stable of open source products. That said, when will the speculation begin for an Oracle-Sun merger? Both hate Microsoft deeply, and both have been trying to expand beyond their core markets. And, MySql even rejected Oracle's acquisition offer back in 2006. At some point, someone's going to think it makes sense for the two to combine.

Filed Under: acquisitions
Companies: bea, mysql, oracle, sun

Hey, Icahn, Haven't You Heard Of Playing Hard To Get?

from the blowing-it dept

Despite having publicly pushed BEA to sell itself, Carl Icahn's initial response to Oracle's takeover attempt was to say that the offer was too low at $17 per share. BEA itself responded by counteroffering at $21 per share. However, Oracle stood fast and said that since there didn't appear to be any competition, it saw no reason to raise the bid. It also said that the $17 offer would expire Sunday night. Of course, seeing as it's now Monday, the offer has, indeed, expired. Yet, Carl Icahn isn't happy. He's now demanding that BEA put the $17 offer to a shareholder vote and is threatening to sue over it. Perhaps it's just me, but this feels like one of those situations in a bad movie or TV show where two sides are negotiating, and even though one side has instructed everyone to stand firm and play hard to get, as soon as the other side stands firm itself, one guy in the corner gives in and says "take the deal guys! take the deal!" You can almost hear the sighs of exasperation from BEA's board members muttering under their breath and trying to kick Icahn to stay quiet for a little longer to see if Oracle comes back again with another bid.

Filed Under: acquisitions, carl icahn
Companies: bea, oracle

Deja Vu, Webshots Gets Sold.. Again and Again and Again...

from the hot-potato dept

In its Thursday earnings call, CNET announced that it sold photo-sharing site Webshots to American Greetings for $45 million in cash. This is yet another chapter in the crazy history of Webshots. Launched in 1996, the founders sold their company to Excite for $84 million in 1999. After the whole dotcom deflation, the founders bought their own company back for $2.4 million in 2002. Then, two years later in 2004, it sold Webshots to CNET for a cool $70 million. So, this week's acquisition marks the fourth time that this property has changed hands.

When CNET purchased Webshots in 2004, it was quietly one of the most trafficked photo-sharing sites on the web. However, momentum and buzz was all around media-darling Flickr and uber-popular MySpace tools like Photobucket, which, according to Alexa, both gained on and then passed Webshots in traffic. Webshots tried to turn the tide by jumping on the video bandwagon, adding social networking features, and launching a photobucket-like blind hosting service, but to not much avail. True, Comscore reports that Webshots is growing again this year while Alexa reports no such growth, but at least the two measures agree on the fact that Webshots growth and audience both pale in comparison with its competitors.

The bigger question remains though -- what is the new owner of Webshots, American Greetings, going to do with the site? American Greetings has made a few web acquisitions in the past, and now owns eGreetings and former #1 traffic king, Blue Mountain Greetings. However, both of those sites are greetings sites, which made perfect sense for them. If this isn't the right place for Webshots, will we yet see another sale for Webshots next year?

Filed Under: acquisitions
Companies: american greetings, cnet, webshots