Many technology companies are built around a single idea that enables them to reach out to, and interact with, the general public. Through innovative concepts, these companies compete both to have a greater number of users and to be as profitable as possible. They’re helped along by strict laws that protect innovators and entrepreneurs, ensuring that no one can use another person’s inventions without paying for it. Many companies thrive on this royalty based model, allowing other companies to use their inventions and patents for different purposes, and then taking a cut of the licensing company’s products. It’s a common enough practice that tech industry giants like Google, Apple, Microsoft, Cisco, and many other companies shell out billions of dollars every year in royalties.
When this model is not favourable on a long-term basis, or when a startup threatens to take a piece of the market with new technology, the larger and already established organisations often try to buy out the smaller company. There are many factors that influence such a buyout or merger, ranging from financial reasons to personal decisions. While it’s not a new phenomenon, the internet age has seen a large number of multi-billion dollar mergers and buyouts, and several potential deals that ultimately fell through.
Quite a few tech companies have rejected tempting buyout offers because of red-hot valuations and the lure of initial public offerings (IPOs). Though some start-ups favor acquisition, a growing number have a desire to go public. Some companies, like Groupon and Friendster, made poor choices and regretted rejecting their acquisition offers. Key executives who were part of the wrong decisions also suffered, and some ended up getting sacked for their bad judgement calls. Still, some others, in remaining their own entity, undoubtedly made the right choice.
Read on for more about the top 10 biggest tech industry buyouts that could have happened, but didn’t.
10. Microsoft Was in Talks to Buy Nintendo (1999-2000)
When Microsoft decided to enter the video game market, it made a move to snag Nintendo, prepared to shell out $25 billion for the gaming giant. Nintendo executives were interested in the offer, and the two parties met several times in the winter of 1999. Microsoft encouraged Nintendo to abort its GameCube product and support Xbox, but Nintendo’s CEO Hiroshi Yamauchi was not in favor of this idea, and was instrumental in Nintendo rejecting the bid. The two companies agreed to part ways amicably. Nintendo said there was a big difference in their mutual objectives. If Microsoft had succeeded, the world would never have seen the Nintendo Gamecube.
9. Box.net rejected Citrix Systems (2013)
Earlier this year, Citrix Systems had offered to buy out Box.net for $600 million. The acquisition would have been the largest to date for Citrix, and given it an advantage over its competitors. It would have fetched handsome returns for Box.net’s investors. Ultimately, the company decided to go it alone. A few months after the rejection, the start-up bagged new funding of $81 million, and was valued at more than $600 million. Box.net will use the funds to tackle its competitors in the cloud storage field, taking on giants like Microsoft, Oracle, and IBM. It offers a basic free service, and charges $15 per month for extras like password protection and additional file storage.
8. Foursquare Checked Out of Yahoo! and Facebook Takeover Talks (2010)
In 2010, Foursquare rejected acquisition offers from Yahoo and Facebook, both worth more more than $100 million. One of them, it has been said, offered up to $140 million. But Foursquare CEO Dennis Crowley was firm on $150 million, which was not entertained by either of the prospective buyers. Twitter and Facebook added insult to injury by buying Foursquare’s competitors Spindle and Gowalla for much less. Some analysts think Foursquare is destined to fail by the end of 2013, despite receiving a recent investment of $41 million.
7. FireEye rejected Cisco Systems Inc
Cisco systems has been on a buying spree to fortify its position as a leading security service provider in the IT industry, eyeing different startups to improve the range of its offerings in its security portfolio. FireEye has created cloud based security services – an area that many of Cisco’s business rivals are investing in for research, and so Cisco offered to buy FireEye, by offering nearly $3 billion – which the company rejected. FireEye went public recently, and because of soaring stock value its worth has been valued at about $5 billion. The company reported revenue of $61.6 million in the first half of this year.
6. Twitter says “No” to Facebook’s $500 million bid (2008)
In 2008, Twitter had started coming into its own as a go-to social media service, and attracted the attention of Facebook. Zuckerberg’s company offered to acquire it for $500 million, which Twitter rejected, primarily for two reasons. First, it wanted cash, while Facebook offered an all-stock bid. Twitter thought that Facebook enjoyed an inflated valuation, which meant its stock was much less valuable than was claimed. Second, Twitter had chalked out a revenue model upon which it had great hope. Twitter went public this year at a price of $26 a share, with the price soaring to $45.10 on strong investor demand. Twitter is currently valued at more than $24 billion. Facebook, by comparison, is valued at around $114 billion.
5. Friendster Turned Down Google’s Offer (2003)
Friendster was a pioneer in social networking and had high hopes in 2003. So when Google offered $30 million for it, Friendster rejected it, waiting for its value to rise so that it could eventually get a better deal. That never came about, with social networking rivals like Facebook and MySpace overtaking Friendster and becoming more popular. A relative failure, Friendster was acquired in 2009 by MOL Global for $26.4 million. If Friendster had agreed to Google’s offer, its value could have soared to about $180 million.
4. Yahoo! Rejected Microsoft (2008)
By 2008, Google’s rise had sufficiently alarmed Microsoft, which tried to counter by offering to buy out Yahoo for $44.6 billion. Yahoo had been in existence for over a decade, and was one of the major players in the internet industry. By combining forces, Microsoft intended to go toe-to-toe with Google, which had the lion’s share of the search market. Yahoo rejected this bid as being too low, stating that it undervalued the company. It turned out to be a bad decision, with Yahoo’s stock falling considerably after the rejection. Co-founder Jerry Yang quit Yahoo, and Microsoft shifted its focus to other things. Yahoo’s fortunes have since turned around, and the company’s valuation now hovers around $32 billion.
3. Groupon Rejected Google and Regretted It (2010)
In 2010, Google tried to bolster its global presence by making forays into local markets. It set its sights on Groupon, whose network had spread across North America, Europe and Latin America. In 2010, Groupon was pulling in annual revenues of more than $1 billion. Google offered $6 billion for Groupon, which declined the offer. It proved to be a bad move on their part, with the company’s profits and popularity waning shortly after. Groupon fired its CEO, Andrew Mason, in early 2013.
2. Snapchat Waved Off Facebook’s Advances (2013)
Recently, Snapchat, which offers a mobile messaging system, rejected Facebook’s $3 billion all-cash buyout offer. It was huge news, but it might have been a smart move – investors have valued Snapchat at more than $4 billion. Snapchat boasts of over five million daily users, and about 9% of mobile users in the US have downloaded it. The company’s chief executive officer, Evan Spiegel, says he is waiting until next year to consider options, hoping to get a larger valuation as the number of users continues to grow. Earlier this year, Facebook had offered $1 billion for Snapchat.
1. MySpace Chose Not to Buy Facebook -Twice (2005-2006)
On a list of questionable decisions, Myspace’s stubborn rejections of Facebook definitely take the cake. In a meeting with Mark Zuckerberg in 2005, the CEO of MySpace refused to purchase Facebook for $75 million. A year later, a similar meeting of CEOs again led to no sale, with Facebook now estimated to be worth $750 million. In 2007, Facebook overtook MySpace as the leading social networking website. In 2012, Facebook went public, and is now valued at $116 billion. Myspace, on the other hand, was sold for $35 million in 2011. Of all the deals that might have been, this is the one that has to hurt the most.
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