Categories:
Mega Acquisitions
Authored by: Sean  

If you have a few billion dollars, what would you do? Well, if you were Google, then you would buy a company called Nest.  Nest is this amazing technology that is the brainchild of ex-Apple executives and is a smart thermostat. Basically, you can control the heating of your home with commands generated from a smart phone. And Google has paid $3.2 billion to acquire Nest. What connection can there possibly be between an Internet giant and a thermostat device? Primarily, it may be because Google is known to do plenty of crazy things but there is business sense to it all!

 

Image – https://upload.wikimedia.org/wikipedia/commons/thumb/0/05/Nest_Diamond_Thermostat.jpg/360px-Nest_Diamond_Thermostat.jpg

 

For instance, just a few days ago Google acquired Boston Dynamics which is into robots. Of course, it has not always been a question of acquiring seemingly unrelated products and companies! In the recent past Google has paid truckloads of money to acquire companies that deal with social media platforms, security solutions, advertisement networks and so on. Also, multibillion dollar acquisitions are not really all that rare in the world of technology. Almost every big name in the business has invested tons of money in acquiring technological solutions.

 

For instance, way back in 1997, Apple acquired NeXT for $404 million. Almost for the same amount of money and in the same year, Microsoft acquired Hotmail. Dell got hold of Quest Software for $2.4 billion. Salesforce shelled out $689 million to acquire a social media marketing platform – Buddy Media. 1999 saw the mammoth $6 billion purchase of Broadcast.com by Yahoo! And Cisco picked up Sourcefire for $2.7 billion. Compared to all this, Microsoft’s acquisition of 86-DOS for $75,000 way back in 1981 seems like small change!

Image – https://flic.kr/p/cZHbKb

 

Why do companies shell out such unimaginable sums of money to acquire technology? The most popular reason perhaps is managerial vision. There is a sense of what the future will bring and a company like Google therefore invests mega money in a seemingly unrelated product. Acquisitions may also be a preferred weapon of choice when it comes to staving off competition. For instance, when Microsoft bought Nokia for $7.2 billion it was basically to up the ante in its war in the smart phone space.

 

Of course, acquisitions can also help a business entity conquer new markets. For instance, IBM picked up SoftLayer Technologies that allowed it to become a bigger presence in cloud computing. IBM was also able to take on the likes of Rackspace and AWS or Amazon Web Services with this acquisition. On the other end of the spectrum, not all acquisitions turn out to be bestsellers for a company. 2 years after AOL Time Warner came to be, the new entity lost $99 billion. Yahoo’s acquisition of Geocities for $4 billion did not turn out so well for the company and the jury is still out on the Google-Motorola deal.

 

For every big acquisition that became successful, there are a few others that went horribly wrong. But, the power of multibillion dollar acquisitions is tremendous indeed and companies will continue to take risks and pay top dollar (in huge piles) to acquire cutting-edge technology that will help them play in the big league. So, billion dollars and more is completely par for the course when it comes to technological acquisitions.

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