Worst tech mergers and acquisitions Cisco and Linksys; Appl.docx
- 1. Worst tech mergers and acquisitions: Cisco and Linksys; Apple and Lala.com By ZDNet EditorsALERTS: Redundant link for Between the Lines | September 20, 2016 Original Source (Note: not all examples are provided in this document) Corporate mergers - like marriages - can result in the whole being stronger than its parts -- or they can end in utter disaster. The IT industry has suffered its share of disastrous marriages. We're counting down the worst of the worst... CISCO & LINKSYS Cisco entered the highly competitive small office and home office market back in 2003, by purchasing LINKSYS for $500M. Linksys, once the dominant player in the space has since been joined by NETGEAR, D- LINK, ASUS and numerous other vendors making nearly identical products, not to mention that many service providers and telcos have also issued their own integrated OEM Wi-Fi routers/residential gateways included as part of
- 2. basic service offerings. Linksys as a result fell on hard times -- first being somewhat neglected by its parent company Cisco in the last several years, releasing extremely commoditized and less- reliable products. Various experimentation with "router design of the month" and heavy product overlap had produced a lousy generation of home routers by 2010, which required a complete re-design in 2011. Arguably this did improve the quality of LINKSYS's products. But it was too late. While LINKSYS did eventually solve its engineering issues, Cisco could not make the consumer products division profitable when compared to its enterprise networking equipment division. LINKSYS is now owned by Belkin, and has since been producing very good quality SOHO routers again, such as those which embrace the current 802.11ac "Wave 2" standard. APPLE & LALA With most of the company mergers listed in this piece, although many of them turned out horribly, you can at least say that the intentions of the company doing the https://www.zdnet.com/article/worst-tech-mergers-acquisitions-
- 3. cisco-linksys-apple/ acquisition had the objective of actually integrating the assets of the company being acquired and making money with it. I mean, this is usually why you acquire another company, right? Apple bought music streaming service Lala.com back in December of 2009 for about $80M. If you recall, Lala was doing some innovative things around pricing and service offerings in the music streaming business, and our own Ed Bott picked it as his favorite among iTunes alternatives in his article written in April of 2009. Well, Lala was being so innovative that it scared the hell out of Apple, so the company simply killed it. No further development, no integration into iTunes, nada. While the financial impact of Lala's death is far smaller than any of the mergers and acquisitions listed in this rogue's gallery, it is by far the worst and most malicious case of corporate merger infanticide I have ever seen to date. Apple would later purchase Beats Audio for $3B, and would integrate its streaming music service into Apple Music, which is now part of iTunes. Only the future will tell if that acquisition will be less of a case of pure infanticide than that of Lala's.
- 4. FACEBOOK & INSTAGRAM While not anywhere near on the "WTF" scale as Zynga's or HP's acquisition blunders in the last year, the $1B acquisition of the photo sharing service by Facebook is still somewhat questionable and it remains to be seen if the merger ends up being a successful one. On the surface it seems that Facebook entering the photo sharing space was a good idea, but whether they needed to spend a billion dollars to do something they probably could have coded in-house for far, far less money and gotten probably instantaneous market share on is another matter entirely. Years after the acquisition, Instagram is still a separate app download from the main Facebook app on both the iOS and Android platform, and the sharing of the photos on user timelines is anything but seamless, so the integration of the company's assets have been questionable. But code integration isn't the worst of this merger's problems. Facebook has in recent years lost its API integration with Twitter, which has enraged many of Instagram's core user base that actively uses both services. Kerfuffles over Instagram's terms of service and photo usage rights by Facebook haven't helped the company's image either.
- 5. MYSPACE & NEWS CORP. Founded in 2003, Myspace was once the most popular social networking web site in the world, and in June of 2006, the company surpassed even Google as the most visited website in the United States. In August of 2006, the site had reached over 100 million account activations. In 2005, the company was purchased by Rupert Murdoch's News Corporation for $580M. When the company was at its peak in 2007, Myspace had a market capitalization of about $12B. In 2008, the company's fortunes began to go into a steep decline. Rather than improving their social networking experience the company chose to go with a "portal- style" strategy for building its audience around music and entertainment instead. Additional modifications to the site in the hopes of increasing the company's advertisement revenue also made it unwieldy and slow to use. To make matters worse, the company's main rival, Facebook, was eclipsing it in traffic with its clean and efficient site design, increased number of users and was building a platform where 3rd-party developers could plug into an API to build new applications for it. By contrast, Myspace was doing all of its development in-
- 6. house. In June 29, 2011, Myspace was sold to Specific Media and pop star Justin Timberlake for approximately $35 million, a far cry from the $12B valuation it had only four years previous. MICROSOFT & DANGER, INC. Danger Inc, formed in the year 2000 by executives from Apple, WebTV and Philips was a company that specialized in software and services for mobile computing devices. The company was best known for a mobile smartphone/messaging device called the T- Mobile Sidekick, which was also branded as the Danger Hiptop. In 2008, Microsoft purchased the company for an undisclosed amount, but the price was rumored to be around $500 million. Post acquisition, the employees were all absorbed into Microsoft's Mobile Communications Business (MCB) where they went to work on a future mobile phone platform. While this future device development was underway, in October 2009, Danger incurred a catastrophic data loss resulting in complete business continuity failure at one of its data centers. This data center was hosting personal customer data used by the T- Mobile Sidekick product that eventually took two months to recover from. The highly publicized fiasco undermined consumer confidence
- 7. in the product, and it resulted in T-Mobile canceling the Sidekick in the summer of 2010. CISCO & LINKSYSAPPLE & LALAFACEBOOK & INSTAGRAMMYSPACE & NEWS CORP.MICROSOFT & DANGER, INC. 1. A firm has consistently adjusted its allowance account at the end of the fiscal year by adding a fixed percent of the period's sales on account. After seven years, the balance in Allowance for Doubtful Accounts has become very large in relationship to the balance in Accounts Receivable. Give two possible explanations. 2. Growth is an important part of building a successful business. However, sometimes growth strategies don't work. In this forum, you will analyze a failed merger/acquisition. Here's an interesting article from ZDNet that should give you several examples to explore in greater depth. Here's another resource https://www.rasmussen.edu/degrees/business/blog/best-and- worst-corporate-mergers/as well. After selecting and researching a failed merger/acquisition, post a summary of the deal and what went wrong. Also, think about the following when formulating your responses: · What was the innovation? Is that where the failure occurred? · Would any tools we've learned so far, such as the Customer Centered Job Map, have helped? Then, state if you think the merger/acquisition could have been successful if the circumstances were different. Describe anything you've learned in this class that might have improved the situation. Be sure to explain your rationale, and use course materials as references. Remember to cite your references. The summary should be at least 200 words. After posting your summary, read at least two other summaries posted by students. For your response, post your thoughts on
- 8. what could have been changed or influenced that might have improved the outcome of the failed merger/acquisition. Or if you don't think anything would have helped, state why.