Special Feature
Part of a ZDNet Special Feature: 2015: The Year's Best Tech for Work and Play

2015: Worst mergers and acquisitions in tech history

While it's too early to tell whether two recent technology mergers -- Dell & EMC and Western Digital & SanDisk -- will lead to long-term bliss, the industry has suffered its share of disastrous marriages. Here are the worst of the worst.


Corporate mergers - like marriages - can result in the two parts being stronger than the whole, or they can end in utter disaster.

Just this month, Western Digital and SanDisk announced plans to tie the knot in the largest storage consolidation to date, while Dell and EMC's impending nuptials equate to technology's largest leverage buyout.

While it's too early to tell whether or not these two marriages will lead to long-term bliss, the tech industry has had its share of frighteningly awful mergers.

In no particular order, here are the worst of the worst we've ever set our sorry eyes on.

Caldera & SCO

With Darl McBride at the helm of SCO, the company became entirely focused on litigation as opposed to product development.
Once a prosperous, medium-sized and laid-back Northern California software company that produced successful and reliable vertical market UNIX operating systems for x86-based servers throughout the 1980s through the early 2000's, the Santa Cruz Operation (SCO) began its demise shortly after being acquired by Caldera, Inc., a Linux vendor based out of Provo, Utah.

Part of the Ray Noorda-backed family of companies known as the Canopy Group, the company re-named itself "The SCO Group" and soon began to find itself in a bit of an identity crisis.

SCO Group's first incoming CEO and former CEO of Caldera Ransom Love wanted to merge Caldera and SCO's Linux and UNIX product lines, and create a best of breed OS. Indeed, that would have been a marriage worth consummating.

SCO had partnered with Intel, IBM and Sequent briefly during the mid-1990s on "Project Monterey", an attempt to unify, merge and port the best aspects of the company's UNIXWare OS and IBM's AIX to the new Intel Itanium as well as IBM's POWER processor.

With the rise in popularity of Linux and 64-bit x86 chips, interest in Itanium waned and the effort to market the completed IA-64 variant was scuttled.

SCO's failure to market the IA-64 version of Monterey resulted in Ransom Love being pushed aside and succeeded by Darl McBride. With McBride at the helm of SCO, the company became entirely focused on litigation as opposed to product development.

SCO not only sued IBM for alleged contributions of Monterey code to the Open Source Linux kernel, but also large customers, end-users and vendors of various Linux OSes, including Red Hat and Novell.

This turned the company into a pariah not only among the legion of Open Source and Linux developers but SCO's own customers and the entire technology industry. The litigation debacle went on for years, chronicled in gory detail on sites such as Groklaw.

SCO's sales of UNIX products went down the toilet, and was forced to lay off virtually all of its employees to focus entirely on its lawsuits.

In 2007, SCO filed for Chapter 11 bankruptcy protection. In 2009, Darl McBride was fired. Early in 2011, UnXis Inc purchased SCO's remaining UNIX software assets.

The sad tale of Palm

The Zsa Zsa Gabor of the technology industry.
Palm has such a storied history with its relationships with companies that it acquired and companies that acquired it that it would be not be unreasonable to deem it as the Zsa Zsa Gabor of the technology industry.

A few years after its founding, Palm Computing was purchased by US Robotics, a company known mostly for producing data communications products.

Under that marriage, starting in 1996, the legendary PalmPilot PDA was sold and manufactured. But that marriage was short-lived, as networking company 3COM bought US Robotics in 1997. Unhappy with the way the company was going, the company's two founders, Donna Dubinsky and Jeff Hawkins, went their own way and formed Handspring, a company that produced PalmPilot clones.

In 2000, Palm was eventually spun off by 3COM into an independent publicly traded company. While this improved the company's finances for a time, by June of 2001 the company had lost over 90 percent of its publicly traded value.

In 2001, Palm also purchased Be Inc., a company that produced high-performance computer workstations that ran on BeOS, which was one of the original contenders to replace Apple's aging Mac OS System 7.

read this

Cloud shift spurs enterprise tech mergers as customers hit pause

The slew of enterprise tech mergers is an old-school response to the disruption from cloud computing. But before there's a scale payoff, IT buyers may just play wait-and-see as they make strategic bets.

When Apple chose Steve Jobs' NeXT company and their OpenStep OS instead, Be was bought by Palm at a fire-sale price of $11 million.

While industry followers expected the company to use the OS as the basis for its future products, Palm never did anything with BeOS.

In order to attempt to generate more revenue, In 2003 Palm split itself into two companies, PalmSource (for licensing the Palm OS) and PalmOne for producing the PDA hardware. In 2003, PalmOne also purchased Handspring to bring Dubinsky and Hawkins back into the fold.

You still following this?

PalmSource, the company that was meant to become the software licensor, ended up being purchased by Japanese company ACCESS in 2005, which had the intention of creating a next-generation Linux OS, ALP (ACCESS Linux Platform) for mobile devices that would have Palm emulation capability. This went effectively nowhere.

What ACCESS did do was sell the trademarks for the name 'Palm' back to PalmOne for $30 million in 2005.

Palm continued to flounder for several years until 2009, when the webOS mobile operating system and the Palm Pre smartphone was introduced. While displaying innovative multitasking features and a unique user interface, the Pre was a market failure.

In 2010, Hewlett-Packard acquired Palm for approximately $1.2 billion. The Palm brand was discontinued in favor of HP's branding, and the company began development of new smartphone as well as tablet products that used webOS.

On July 4th, 2011, HP's TouchPad tablet went on sale to an unreceptive public and to extremely unfavorable reviews, many citing the product's sluggishness and numerous software bugs. After 45 days on the market and abysmal sales. Hewlett-Packard made the decision to discontinue the manufacturing of all webOS-based products.

In December of 2011, under the leadership of HP's new CEO, Meg Whitman, the company announced that webOS would be released in the near future under an open source license.

The webOS assets were eventually sold off to Korean electronics giant LG for use in its smart TV sets, which premiered in 2014.

Oracle & Sun Microsystems

Did Larry Ellison and Scott McNealy's friendship play a role in this acquisition?
Take one of the most established players in the enterprise software industry and merge it with one of the most established players in enterprise hardware, you get one hell of of combination, right?

Well, maybe not.

Sun Microsystems, once the darling of Silicon Valley, started to experience problems in the mid-2000's when the emergence of commodity Linux x86-based servers, the rise in popularity of Open Source software and pressure from other high-end enterprise systems vendors such as IBM and HP began to erode much of the company's core server business.

Special Feature

Innovation: How to be a World-Changer

The best business leaders use tech as one of their most important levers to drive innovation and change. Here's the wisdom to make it happen.

To counteract this downward trend, the company began to embrace a more Open Source philosophy with projects such as OpenSolaris, OpenOffice and Glassfish, and began to acquire Open Source software firms such as MySQL AB, VirtualBox and sponsor external Open Source projects such as Xen, which became the foundation for their xVM virtualization product line.

Unfortunately, many of these efforts were too late to save the company, and it became obvious in 2009 that the only route for the company's survival was that of being acquired by a much larger competitor.

IBM, Fujitsu and HP were thought to be the prime candidates, but in a last minute and completely unexpected move, Oracle came in with the winning bid for about $7.2 billion including buying off the company's debt.

What followed was to be expected. Thousands of employees lost their jobs, and many of the Open Source efforts that Sun began were quickly extinguished, including OpenSolaris. The OpenOffice project effectively disbanded and regrouped under the Document Foundation as LibreOffice, and the founding MySQL team forked into a number of different projects.

Under Oracle's leadership, Sun's core hardware business has continued to decline dramatically. To recoup the losses, Oracle filed patent lawsuits against Google for allegedly using their Java intellectual property in their Android operating system, which uses virtual machine software called Dalvik that emulates the programming syntax of, but is not compatible with Java.

Oracle asked the courts for billions of dollars in damages in the hopes of turning their Sun lemon into lemonade. If Oracle had succeeded in collecting substantial damages from Google, it would have made its investment in Sun a smart one.

But as we know now, Oracle's damages by Google were deemed to be zero, and the company collected effectively nothing as a result of its litigation.

If that appeal turns out to be fruitless, then the Oracle acquisition of Sun will probably go down in history as one of the biggest strategic blunders by a technology company of all time.

Either way you look at it, between the mass layoffs of talent, extinguishing of Sun's open source corporate culture and its attempt at weaponizing Java against Google, Sun has become anything but an honest woman under Oracle's stewardship.

AOL & Time Warner

Facing challenges from the growing Internet/Web and broadband industry in the late 1990s that was encroaching on its bread and butter dial-up services and "walled garden" of content, on-line services provider America Online pursued a strategy of re-invention as a content and broadband giant by purchasing Time Warner in the year 2000 for a whopping $164 billion.

The merger, executed by AOL CEO Steve Case and Time Warner CEO Gerald M Levin, turned out to be a total fiasco, with the new company unable to capitalize on Time Warner's strengths. Total subscribers of AOL went from an estimated 30 million at the height of its popularity to less than just over 5 million in 2007, with no significant quarterly growth since 2002.

The company's market valuation had plunged significantly from a high of $240 billion to $1.73 billion as of February of 2012.

In 2009, shortly after appointing a new CEO, Tim Armstrong, AOL announced it would spin off Time Warner into a separate public company, ending a fruitless eight year relationship.

AOL has since gone on a New Media purchasing spree, including Patch, TechCrunch and The Huffington Post, which joins their other New Media properties such as Engdaget which it acquired as a result of its Weblogs, Inc. purchase in 2005.

The result of these New Media mergers has been something of a disaster in and of itself.

After re-organizing all of its new media properties under one roof and appointing Arianna Huffington as its leader, TechCrunch became the subject of a highly publicized internal power struggle.

TechCrunch's founder Michael Arrington came into conflict with Huffington over journalistic ethics when he unveiled a plan, with AOL's backing, to start a venture capitalist fund to invest in the very same sort of companies which he writing for TechCrunch chronicled.

After weeks of public blog posts criticizing his employer and the media circus surrounding him, Arrington was terminated. This resulted in the departure of several members of TechCrunch's staff, including Paul Carr, one of its most popular writers, as well as the company's CEO, Heather Harde.

In June of 2015, AOL was acquired by Verizon for $4.4 billion. Only time will tell if this second marriage will be more fruitful.

HP & Compaq

Under the guidance of CEO Carly Fiorina, HP decided to merge with Compaq in a $25 billion dollar deal.
In the late 1980's, HP determined that their PA-RISC systems architecture for enterprise-class servers was going to hit a performance scaling threshold and began to investigate a new systems architecture, VLIW (Very Long Instruction Word).

In 1994, under the direction of CEO Lewis E. Platt, believing that it was no longer cost-effective for HP to have its own microprocessor foundry, the company ceased production and development of PA-RISC, shut down its own foundries and instead partnered with Intel to produce this new VLIW 64-bit enterprise chip, which came to be known as the IA-64.

Released by Intel and HP as the "Itanium" in 2001 after seven years of development and billions of dollars of R&D invested, the chip earned the early nickname of "Itanic" due to its low performance compared to less expensive, commodity x86 chips in most regular business applications. IA-64 also proved to be horribly slow when executing x86 instructions, which it had to do using software emulation.

Eventually, both AMD and Intel would produce 64-bit x86 systems, which when clustered in HPC configurations would easily outperform equivalent IA-64 systems for significantly less money.

IBM and Sun would continue to develop their POWER and SPARC architectures for their high-end servers, which eroded most of HP's high-end market share.

While other vendors such as Dell and IBM briefly introduced and sold Itanium-based systems, they shortly discontinued them. An executive at Dell publicly referred to the product as an "Albatross".

While the Itanium partnership with Intel surely started HP down the road to hell, it was accelerated in 2001 when HP, under the guidance of CEO Carly Fiorina decided to merge with Compaq in a $25 billion dollar deal.

Many large shareholders opposed the merger, including Walter Hewlett, the company's outspoken director and son of the company's co-founder, who engaged in a proxy battle in an attempt to prevent it. The prime objection was that Compaq had many overlapping product lines and would get the company involved in the low-margin PC business that its main competitor, IBM, was already in the process of exiting.

Compaq had only just acquired Digital Equipment Corporation (DEC) four years before, along with its powerful 64-bit Alpha RISC chip and Windows NT/Digital UNIX servers that had seen some moderate success in High-Performance Computing environments.

special feature

The Evolution of Enterprise Storage

How to plan, manage, and optimize enterprise storage to keep up with the data deluge.

Seen by both executives at HP and Compaq as a redundant overlapping product under the new merged company and with Intel's IA-64 efforts underway, the Alpha -- arguably a much more mature, better supported and more desirable platform was phased out.

Under Carly Fiorina's reign, the merged "New" HP lost half of its market value and the company incurred heavy job losses. Fiorina stepped down in 2005.

Since the Compaq merger, HP has endured numerous problems with failed initiatives, dubious acquisitions (3COM, EDS, Palm, Autonomy) and has been plagued with ineffective management, including two major ethics scandals that have forced Chairwoman Patricia Dunn and two CEOs in succession, Mark Hurd and Leo Apotheker to resign.

Third-party OS development for Itanium other than HP's HP/UX UNIX derivative is now practically non-existent, as Microsoft no longer produces an IA-64 version of Windows Server. Itanium is considered to be a deprecated and legacy architecture by the Linux Kernel Project and is no longer actively supported by mainstream Linux distributions such as Red Hat, SuSE, Debian and Ubuntu.

On August 1, 2015, HP split into two companies -- HP Enterprise, which is keeping the servers, storage, services and software businesses, and HP Inc., which will sell PCs, printers and other consumer products.

HP Enterprise is now the only company to sell Itanium-based servers under their Integrity brand, after entering and exiting litigation with Oracle over the matter of supporting the chip with their flagship database software.

Northern Telecom & Bay Networks

As a result of the merger, the company renamed itself Nortel Networks.
As part of the Bell Canada group of companies, starting with its formation in the 1890's, Northern Telecom Limited grew into a huge multinational telecommunications equipment manufacturer, and until the rise of Research in Motion, was the poster child for technological innovation in Canada.

During an expansion period during the internet boom of the late 1990s, the company acquired Bay Networks for $9.1 billion in 1998, which was formed only four years previous by the merger of two networking companies, Synoptics and Wellfleet. Synoptics was one of the earliest innovators of baseband twisted pair Ethernet products which had heavy penetration into the enterprise networking market, and Wellfleet manufactured enterprise routers and was a heavy competitor to Cisco.

As a result of the merger, the company renamed itself Nortel Networks. In the hopes that the company would make tremendous profits from the sale of fiber optic network communications equipment, huge speculation of the stock on Wall Street cranked up the price of the company's shares to ridiculous levels, this despite the fact that the company was unable to be profitable, quarter after quarter.

After numerous efforts to restructure the company and financial mismanagement scandals over a period of about ten years, the company filed for Chapter 11 in January of 2009, and its various businesses were eventually liquidated.

Microsoft & DANGER, Inc.

The company was best known for a mobile smartphone/messaging device called the T-Mobile Sidekick, which was also branded as the Danger Hiptop.
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 in the product, and it resulted in T-Mobile canceling the Sidekick in the summer of 2010.

And that future mobile phone platform that the Danger developers were working on at Microsoft?

After two years of effort approximately $1B worth of development, it became the Microsoft KIN, and two versions were launched exclusively on Verizon in April of 2010. The devices were utterly savaged by the press for their lack of key features such as Instant Messaging, Calendaring, GPS navigation and memory expansion.

After 48 days on the market, the product was pulled.

Microsoft has since launched a much better mobile device platform in the form of Windows Phone, but the KIN will always be a hard learned lesson for the company.

Borland & Ashton Tate

Ashton-Tate's flagship product, dBase, was the first widely-used database management system (DBMS) for PCs.
Before Visual Studio, there was Borland, which was the world's leading vendor of computer programming languages for personal computers. Its flagship programming environment in 1990 and 1991, Borland Turbo C++, is shown above. Borland also produced Turbo Pascal as well as Turbo Assembler, as well as a relational database product, Paradox, which competed with Ashton-Tate's dBase.

special feature

IT Budgets 2016: A CIO's Guide

It's budget planning time for technology decision makers as they look ahead to next year and plan on where to focus their IT resources to make the biggest impact. We've got perspectives and research to help inform those decisions.

While the name is virtually unknown today, Ashton-Tate was a prosperous software company in its day. Its flagship product, dBase, was the first widely-used database management system (DBMS) for PCs. Like Lotus 1-2-3, it was a character-mode app.

dBase was a hierarchical database, in that it organized data in a tree-like structure. Prior to the introduction of PC databases such as Borland's Paradox, Clipper, FoxPro and Microsoft Access which introduced relational database capability into their products, dBase was considered to be one of the most important and popular productivity apps.

Numerous clones of dBase, known collectively as "xBase" were all over the market.

In 1991, Ashton-Tate merged with Borland, just as the industry was starting to move to Microsoft Access, Visual FoxPro and SQL-based systems using client-server technology.

In the mid 1990s, Borland quickly found itself in competition with Microsoft's Visual C++. Access and Visual Basic products which started to become popular, and as a result of Microsoft's dominance in the software development toolset space, the company's products lost considerable market share. Borland eventually renamed itself to Inprise, sold off a number of its software product assets, renamed itself as Borland again, to eventually be acquired as a subsidiary of Micro Focus in 2009.

Novell & UNIX

In 1991, if you were running a personal computer network in your business or enterprise, there was a good chance it was running on Novell's NetWare, which was the predominant server-based network operating system at the time.

Released in both 16-bit and 32-bit versions for the 286 and 386 Intel processors, 1990's era NetWare ran on a proprietary protocol called IPX, which ran on Local Area Networks using Ethernet, Arcnet or IBM Token-Ring topologies.

NetWare was known for its excellent network performance, server reliability, fault tolerance and OS stability, as well as its relatively easy administration, which helped it maintain its market position for many years.

Novell had several competitors in the space, such as IBM OS/2 LAN Manager and Banyan-Vines, but none of them were ever as popular as the NetWare stack. However, with the release of Microsoft's Windows for Workgroups 3.1 in 1992 and Windows NT operating system in the summer of 1993, companies quickly began to shift to a fully integrated, single-vendor Client and Server OS solution for their networks.

To maintain relevancy in the network operating system space, in 1991 Novell entered a partnership with AT&T's Bell Unix Systems Laboratories (USL) to produce a "SuperNOS", that would combine the network protocols of Netware with the power of the UNIX operating system.

The partnership, called Univel, resulted in USL being purchased by Novell in 1993 and the release of the UnixWare operating system.

UnixWare at Novell was a complete dud. In 1995, Novell sold the operating system to SCO. However, the exact terms of the transaction were not fully determined until 2011, when it was ruled by the US Court of Appeals for the tenth circuit that despite SCO's ownership of the UnixWare operating system itself, the UNIX copyrights still belonged to Novell.

In addition to the failed UnixWare partnership, in June of 1994, Novell looked to enter the office productivity software space by purchasing WordPerfect Corporation. That marriage lasted a whole two years, and the WordPerfect company's assets were sold off to Corel in January of 1996.

The legacy Novell NetWare operating system continued to be developed until 2003, where it was superseded by Open Enterprise Server (OES) a network operating system which runs on top of Linux.

In November of 2010, Novell was acquired by Attachmate, for $1 Billion.

MySpace & News Corp.

In 2005, MySpace was purchased by Rupert Murdoch's News Corporation for $580M.
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-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.

Google & Motorola

The Google and Motorola Mobility merger failed on so many levels that it's hard to quantify the extent of the incompetence that surrounds it.
In 2012, Google purchased the handset/tablet division of Motorola, for $12.5B. Over the next two years, Motorola essentially floundered with its product releases and was one of the worst offenders in lagging Android OS updates of all the Android handset OEMs.

The Google and Motorola Mobility merger failed on so many levels that it's hard to quantify the extent of the incompetence that surrounds it.

Not only did Motorola consistently fail to innovate after being acquired by Google, but during its time under Google's ownership, the company released a number of Android handsets of questionable quality, stability and performance, that have been mired by shovelware and awful user interface overlays.

The company has also reneged on its promises to upgrade an entire generation of dual-core handsets released in late 2011 to Ice Cream Sandwich, effectively leaving many of its existing customers in the lurch.

To add insult to injury Google continued to release its own branded smartphones, which begged the question of what the Silicon Valley search giant really intended to do with Motorola's engineering and future handset and tablet plans, especially since Google partnered more and more with companies like Samsung, Asus and LG for its "Nexus" line of products.

Google did eventually try to integrate Motorola into the company, and release a flagship handset, the Moto X, which had the distinction of being manufactured in the United States and having many different unique customizable designs that could be ordered to personalize the look of the product.

Unfortunately, the Moto X was not a big hit in the marketplace. After less than a 2-year romance with the company, it sold Motorola for $2.91B to Lenovo.

Google is retaining much of the patents from Motorola and also the company's research facility, so it isn't a total loss for them. Still, this is a fling that will almost certainly go down as one of the search giant's biggest failures.

Zynga & OMGPOP

You'd think that OMGPOP would have other assets worth $200 million besides a single game that had questionable monetization value to Zynga.

In what is probably the most "WTF" of all mergers and acquisitions that took place in 2012, none made less sense than Zynga's $200 million cash purchase of OMGPOP, the publisher of DrawSomething!, a popular game for iOS and Android devices.

You'd think that OMGPOP would have other assets worth $200 million besides a single game that had questionable monetization value to Zynga, but no, they did not.

With this splurge purchase, and having to cut about five percent of its workforce as a result, this has to be one of the worst possible outcomes for a startup. It's also unlikely the company was able to retain its DrawSomething! userbase as a result of the acquisition, so the value of the purchase is entirely questionable.

HP & Autonomy

Leo Apotheker's very short term as HP Chairman and CEO will be always known for the company's $11.1 billion acquisition of Autonomy.
In addition to the scuttling of the TouchPad and the webOS/Palm division at HP, Leo Apotheker's very short term as HP Chairman and CEO will be always known for the company's $11.1 billion acquisition of Autonomy, a European maker of unstructured data analytics software.

At the time the purchase occurred many industry observers were keen on figuring out what HP would do with the technology after the acquisition, and well over a year later HP has still not effectively communicated how it fits in to its overall enterprise software strategy.

But the real bombshell came in 2012 when the company announced that after an internal investigation, HP had discovered Autonomy had cooked its books, that the software and company was overvalued at time of purchase, and would have to write down almost a $9 billion loss, sending the company's stock into a tailspin.

This alone probably makes the Autonomy purchase by HP the most infamous and wasteful cash spend for a software asset of all time.

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.

Apple & Lala

Lala was being so innovative that it scared the hell out of Apple.
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 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.

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 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 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.

Nokia & Microsoft

One partner that had taken that risk was Nokia, which -- under the leadership of former Microsoft exec Steven Elop -- was itself being forced to transform.
In Steve Ballmer's 15-year tenure as Microsoft CEO, he got a lot of things right: several highly successful product launches, significant increase in shareholder value, and a few acquisitions that proved quite valuable to the company.

However, he will likely be remembered as the man who drove the most catastrophic merger in the company's history.

Microsoft has always struggled in the mobile space. The company was early to the game with Windows CE and Windows Mobile (far earlier than Apple and Google); but it was late to adopt the mobile developer ecosystem and "app store" strategies of its competitors.

In November 2010, following the surprising success of the iPhone, the company introduced Windows Phone, which abandoned much of the legacy 32-bit Windows code in previous mobile releases. Windows Phone featured a brand-new user experience that has evolved into the Universal Windows Platform (UWP) that powers Windows 10 and runs on all Windows devices.

However, Microsoft needed OEM hardware partners, who were reluctant to take on the risk of an unproven software platform when they were already enjoying success with Android.

One partner that had taken that risk was Nokia, which -- under the leadership of former Microsoft exec Steven Elop -- was itself being forced to transform. Competitors such as Samsung and Apple were eating Nokia's lunch in the company's stronghold EMEA smartphone markets.

Nokia made some impressive Windows Phones during its partnership with Microsoft, but it was not able to bring itself back to profitability. By 2013, in fact, the company was considering a move to Android and had even built prototype devices running Google's software. If that move had succeeded, Windows Phone would have been left with no OEM support. It would have effectively been a death sentence.

Ballmer, looking to solidify his legacy, saw a potential synergy. Nokia, with its native manufacturing capability and R&D, could be Microsoft's solution to ramping up their mobile presence, in addition to providing an essential distribution channel via previously existing carrier relationships.

In September of 2013 Microsoft bought Nokia's mobile business for over $7 billion. This included the acquisition of most of the company's assets in Finland as well as manufacturing capacity in Asia, along with 24,000 employees. Crucially, it didn't include the potentially valuable Here maps business, which the Microsoft board reportedly refused to go along with.

Many analysts questioned why Microsoft had not simply contract manufactured the phones, negotiated the carrier relationships on its own, and hired engineering talent for much less money. The analysts turned out to be correct. Microsoft struggled to consolidate its development platform over two consecutive OS releases on the desktop and its mobile OS, and was unable to attract the developer and carrier partnerships needed to make the new Lumia phones successful.

Since Ballmer's departure from Microsoft in 2014, under the leadership of its new CEO Satya Nadella, the company has laid off over 15,000 employees, the majority of whom came in from the Nokia acquisition.

In all, more than 20,000 jobs at Microsoft will have been cut once the restructuring is complete.

In 2015, the company was forced to write down the acquisition of Nokia's mobile and services businesses for $7.6 billion.

While Microsoft has recently announced several new Windows 10 Mobile phones, and has committed to the continued development of the platform, it has yet to solidify its carrier relationships or attract the developer attention it needs to compete favorably with devices running Apple's iOS or Google's Android.

Although the pieces are now finally in place for the "One Windows" that could finally make Microsoft smartphones and the modern Windows development platform successful, the company could have saved itself a huge amount of money and heartache if it did the work in-house, rather than by a failed and costly acquisition.


You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
Subscription failed.
See All
See All