Love stinks: The worst mergers in the history of the technology industry

Love stinks: The worst mergers in the history of the technology industry

Summary: Valentine's Day is here again, and love is in the air. Couples flirting, courting, forming relationships. Sometimes those relationships result in marriage. Marriages occur in the tech world, too. Corporate mergers can result in the two parts being stronger than the whole, or they can end in utter disaster.


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  • 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 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 (AT&T) 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 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.

    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 my 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

    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 sold much of Motorola's manufacturing capability to Flextronics, 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. Google recently decided to cut its losses with its less than 2-year romance with the company, selling it 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.

Topics: Software, Enterprise Software, Hardware, Mobile OS, Mobility, Networking, Software Development


Jason Perlow, Sr. Technology Editor at ZDNet, is a technologist with over two decades of experience integrating large heterogeneous multi-vendor computing environments in Fortune 500 companies. Jason is currently a Partner Technology Strategist with Microsoft Corp. His expressed views do not necessarily represent those of his employer.

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  • RE: Love stinks: The worst mergers in the history of the technology industry

    ZDNet first post bug . . .
    • Dear ZDNET editors


      It's sucks. I have to load an entire new page just to see the next image. The scroll triggered by the arrows don't make sense.

      It looks like a relic from the 90s
  • RE: Love stinks: The worst mergers in the history of the technology industry

    "The litigation debacle went on for years, chronicled in gory detail on sites such as Groklaw."

    Indeed, I think Groklaw pretty much started because of this debacle. Frankly, SCO's biggest blunder was this lawsuit. It's not worth bankrupting the company over a lawsuit.

    "The Many Marriages of Palm"

    Yeah, who knows what Palm was doing in its last years. Before it finally merged with HP, it went from a great company to one that released new products once in a blue moon.

    Thankfully, by the time they went under smartphones became popular, and I moved myself to my iPod touch, and later iPhone. Today's smart phones have all of the PIM features the old Palm devices had.

    And alas, HP was unable to save the already floundering Palm.

    "Oracle & Sun"

    Guess we'll find out. I was never so much interested in Sun's hardware as their software, and Java is still being actively developed.

    "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."

    Dunno if that was the result of the merger so much as it was the result of broadband and the internet. AOL was a walled garden stuck in dialup.

    "Hewlett Packard & Compaq & Digital Equipment Corporation"

    Compaqs, oh I remember those - BSOD city. They crashed all the time.

    "Nortel & Bay"

    "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."

    And one of my relatives lost his job :(. He worked for Nortel.
    • Bad Mergers....Nortel and Bay...

      Yeah, I worked for Nortel for 12 years......I think the problem there was too much focus on Marketing and not enough on engineering..........there was a time when they had no sales and marketing but after all the smart designers and engineers left adding more sales and marketing people was a giant can't market what you don't have.

      That and the whole company was run by bean counters and clerks.

      It had its moment in the sun as a much welcomed alternative to the AT&T / Pac Bell monopoly but then crashed and burned with the loss of outstanding engineering and design people.
      Gary Amstutz
    • Re: AOL was a walled garden stuck in dialup.

      The completely peculiar and inexplicable thing was, while every other ISP adopted PPP as the standard dialup protocol, allowing any off-the-shelf OS to connect without custom software, AOL insisted on its own special proprietary client. While this didn't seem to put off customers in dialup days, maybe the fact that AOL allowed itself to be left behind by the move to broadband was simply because it could not create an equally proprietary broadband connection client.
    • Proliant vs Netserver

      Give me a Compaq any day over an HP. That is why they rebranded the compaq stuff and got rid of most of the HP line
      Turd Furgeson
    • Origins of Groklaw

      It did indeed begin as a commentary on SCO v IBM. It branched out from there, but that was the focus as long as the SCO cases were active.
      John L. Ries
  • I would agree with your assesment on many of mergers you have mentioned

    except for the KIN.

    [i]But the negative experience with the Kin still taints its reputation not only with consumers but also with critical wireless carriers such as Verizon, who as of yet has refused to commit to selling more than one model of Windows Phone or an LTE version which puts it on par with its arsenal of Android devices[/i]

    The vast majority of consumers have never heard of the KIN, so how can one have negative opinion of something that they have no knowledge of?

    As for Verizon, there are issues on many levels, one is theirs, and Google's heavy investment into Android, as an early counter to the iPhone, something they passed on, so one can argue they do not make the best decisions when given the chance.

    I feel the lack of a push on Verizon's end in reference to WP7 is an effort to "not upset the boat" in relations to Google at the moment.
    Tim Cook
    • RE: Love stinks: The worst mergers in the history of the technology industry

      @Mister Spock <br>The problem is that Verizon mandated data plan on what is essentially NOT a smartphone.<br><br>KIN would have done well to compete with feature phones.
    • Peoples' memories are only as long as their current contract

      Are tech people already measuring their lives in numbers of mobile phone contracts?
  • Is this the rational behind spending billions on dated technology?

    You mention companies like Novel and Borland or their assets being acquired by other companies - spending huge dollar amounts to do so.

    Is it because of patent portfolios that acquiring companies purchase these outdated technologies or businesses?
    • RE: Love stinks: The worst mergers in the history of the technology industry

      @kenosha77a Patents and legacy maintenance business.
  • RE: Love stinks: The worst mergers in the history of the technology industry

    My(Murdock)Space a perfect example of how not to do it. <br>Take a new technology, totally misunderstand what it is about, destroy the customer base by enforcing change without analyzing the likely effects, etc., etc. <br>One for the classroom of Business 101.
    • RE: Love stinks: The worst mergers in the history of the technology industry


      Well of course, Mr Murdoch was not used to "customers" creating their "own news". His model was that his empire created it, and the "customers" consumed it. Duh. Bad move Murdoch. Perhaps he should have got the company to bribe the police a bit more... Oh wait, that wouldn't have worked on MySpace either.
    • MySpace was already on its way out...

      when Murdock purchased it, which is what made that purchase even weirder. Prodigy, Geocities, Myspace, and now Facebook... That's the progression so far. Facebook's replacement is next, just hard to say what it is, or what it will be...
      • Replacing Facebook?...

        riiiight. Keep us posted on how that goes ;)
        Robert Fishwick
    • sounds

      Like a certain MS
  • Too early to pass judgment on Oracle's acquisition of Sun

    It's far too early to say whether Oracle's acquisition of Sun was good or bad. If the alternative for Sun was insolvency, then Sun shareholders probably came out ahead. The same may be true of Sun employees, not all of whom were laid off. Of course, we'll never know for certain what would have happened to Sun if Oracle hadn't acquired it.<br><br>From the Oracle side, if the Java litigation is successful, Sun will have turned out to be rather a bargain for Oracle shareholders, no matter how badly the hardware business does. It will also serve as a warning to other firms that trying to use someone else's IP without paying for it can actually cost more in the long run than than paying for it up front. This is good for Oracle, the IT sector generally and all industries that rely on IP protection. It will be bad for Google, of course, but it was Google management's choice to gamble on not paying Sun for the Java IP Google allegedly used anyway.
    • ummm, the Java code used was Open Sourced anyway.

      No money to be made, just a license. Oracle's suing mainly over the terms of a free license not being observed, and Oracle LOST on almost all counts. The Judge on the lawsuit, has written extensively on the decision mainly in Google's favor that almost precludes appeal, unless Oracle is nuts.

      Sun would have been better off being acquired by IBM, which uses Java extensively in its projects, is a large Open Source company, as well as having the Symphony fork of OpenOffice. Essentially, IBM makes serious money on Java, while Sun didn't comprehend how to do that.
      • No it would not have been.

        As an employee of Sun at the time, I can tell you that Oracle did not swoop in and out bid IBM, the deal with IBM had already fallen through. And the general attitude of the employees was that we were thankful that it did. The overlap in product lines between Sun and IBM was nearly 100%. The only thing we knew they wanted was Java, everything else was subject to immediate cancellation. Oracle, on the other hand had very little overlap with Sun. We knew they wanted Java as well, but there was very little that we could be sure would be cancelled.

        As far as how it all worked out, it is indeed too soon to tell. Much was canceled because it either didn't make money or didn't fit the Oracle corporate strategy. Other areas declined because they were destined to decline and Oracle couldn't stop it just as Sun had been unable to. But many areas have flourished and are on the rise.