For a time it seemed as if tech companies were the geese that not only laid golden eggs but also made those eggs into delicious omelets that could give people superpowers. Combining tech companies to breed even more successful geese can seem like a surefire winner. Alas, business is business, even on the internet, and the 21st century has seen some disastrous tech mergers, leaving feathers all over the place and egg on the CEOs’ faces.
In 2008 Bebo was a force to be reckoned with. A userbase of 40 million enticed AOL to hand over a payment of $850 million for the social networking site. Unfortunately for AOL, Bebo had peaked and users were abandoning their accounts for the simpler format of Facebook. AOL sold off the company just 2 years later for an undisclosed sum thought to have been less than $30 million (with some sources claiming the figure to have been under $10 million). Wryly attempting to spin this $820 million loss into some kind of positive, the AOL chairman and CEO, Tim Armstrong, floated the idea that it would “create a meaningful tax deduction.” Indeed.
In 2006 these two telecommunications tech companies merged in a $13.4 billion stock-swap deal, with Alcatel CEO Serge Tchuruk boldly proclaiming that it was “the right time, the right solution, the right companies.” If that’s what’s right then it’s difficult to see what wrong might be, in light of the fact that after the Franco-American marriage Alcatel-Lucent posted eight consecutive quarterly losses amounting to billions of dollars. Sounds like grounds for divorce.
8. ITV/Friends Reunited
In 2004 a young man named Mark Zuckerberg registered a little website known as Facebook. Meanwhile, over the pond, the UK’s main commercial broadcaster, ITV snapped up Friends Reunited for a cool £120 million (around $200 million). ITV planned to use Friends Reunited’s userbase as a captive audience for its programming. Unfortunately, constantly changing prices and other rejiggings aren’t very popular with users, and as Facebook grew, Friends Reunited withered away. In 2010 ITV sold the site for a paltry £25 million ($40 million) and went back to concentrating on what it does best: ridiculous soap operas, mediocre talent shows and reruns of American programs.
7. IAC/Ask Jeeves
In 2005 web company IAC cut a check for $1.85 billion for Ask Jeeves (now known simply as Ask.com). Speaking at the time, the head of IAC, Barry Diller, said: “We believe that in the future Ask Jeeves has the potential to become one of the great brands on the internet and beyond.” The potential might have been there – and in all fairness the nice little butler was a terribly polite interface – but it certainly wasn’t realized. The rise of Google was unstoppable, and all the butler saw was a faltering market share. In 2010 AIC cut jobs and took a $991 million impairment charge relating to its search and media business. That means you, Jeeves.
6. News International/Myspace
In yet another corporate merger ruined by Facebook, News International acquired Myspace in 2005 for a sum of $580 million. What’s particularly galling is the fact that Myspace (formerly MySpace) had won its own popularity by wiping out Friendster, but nobody at News International thought that the same thing might happen to Myspace. While Myspace is still a home for the odd independent musician or two, it’s certainly not the powerhouse it once was with ad revenue falling. Instead, News International has been left with the reject of the internet weighing down its books.
They say that there’s no such thing as bad publicity, but executives at telecommunications company Sprint may well disagree after their 2005 merger with Nextel was ranked by Bloomberg as one of the worst mergers of the early 21st century M&A boom. In 2005 Sprint paid $36 billion for Nextel but in 2010 was worth less than half of that amount! Worse still, in March this year the company was trading at less than the value of its assets minus liabilities – that’s cheaper than 99% of the companies ranked on Standard & Poor’s 500 Index.
4. Yahoo/Overture Services
Yahoo shelled out $1.6 billion for pay-per-click text advertiser and AltaVista search engine owner Overture in 2003. They then, for some reason, ditched Overture’s technology and replaced it with their own, then dumped the Overture brand name in 2005. Whatever the motivation, it didn’t do anything to put a dent in Google’s search domination: in 2002 Google’s ad revenue was half that of Overture’s, but by 2005 it had surpassed Overture to extent that it was making $2.50 for every dollar that Overture brought in.
In 2002 HP finally managed to take ownership of Compaq, after a long, hard battle with various naysayers. The deal cost a princely $25 billion, but within days HP’s shares had taken a hit of a full quarter of their price before the deal. Investors’ worries eventually led to the CEO, Carly Fiorina, being forced off the board, with shares left at half of the price they had been when she took control. It’s unlikely that she’ll be looking for a reference from that place of employment.
2. Lycos/Terra Networks
In 2000 we were at the dawn of a new millennium, and though it was only a little over a decade ago, the internet landscape looked very different back then. Lycos was a big hitter in the search engine market, thought to be in the top three most-visited internet sites in the US. The Spanish telecom company Terra Networks planned to use Lycos’ popularity to launch itself into the big leagues of online players. The deal was announced to be worth $12.5 billion, but the markets reacted by devaluing the companies to such an extent that a few months later, when the deal went through, it was worth only $4.6 billion.
1. AOL/Time Warner
This merger of giants was worth an astonishing $164 billion in 2000 and sparked fear of a mega-monopoly of media. Of course with hindsight we know such fears were unwarranted, as AOL is now the preserve of people who aren’t really sure what this internet thing is, but want their grandchildren to be able to send them pictures. Using dial-up. Whatever that is. With AOL’s stock falling even faster than its reputation, the merger led to a loss of $99 billion in 2002, and towards the end of the decade Time Warner abandoned AOL to its fate. Without doubt one of the worst mergers in history.