Elon Musk finally has Twitter in his kitty. After his $44 billion acquisition of Twitter, the world’s richest man and owner of Tesla and SpaceX, signalled changes at the micro-blogging platform which will include a new content moderation council and a move to reinstate “free speech” as he calls it. All this has triggered questions about what the future of the social platform will be and if its business model itself will change to look beyond advertising. Musk is famously unpredictable and that makes this an even more uncertain future for Twitter. And that is why we thought it’s a good time to relook at five much-hyped tech mergers and acquisitions that have been epic failures.
Microsoft and Nokia (2013)
Microsoft buying Nokia’s mobile unit was the biggest tech news of 2013, but three years later, the tech behemoth wrote off $7.6 billion and cut 7,800 jobs. $8 billion spent on the acquisition of Nokia’s handset business went down the hill and in return, Microsoft got nothing but a bad name. The strategy to acquire Nokia’s mobile business was always risky, but it was former CEO Steve Ballmer who wanted the deal to go through despite the Microsoft board being divided.
Multiple reasons can be attributed to the failure, among them underestimating iPhone’s reach and the bid to build a new smartphone platform at a time when iOS and Android already have significant market share. Upon the arrival of CEO Satya Nadella, Microsoft’s strategy changed and the company made a shift away from “devices and services”. Microsoft no more makes smartphones of its own; instead, it is a collaborative partner with both Apple and Google. Although the software heavyweight is no more in the smartphone business, it does sell Android-powered, dual-screen Surface Duo. Sadly, the phone-tablet device hasn’t been the commercial success Microsoft had originally hoped for.
Google and Motorola (2012)
Google acquiring Motorola Mobility for $12.5 billion was key to its mobile phone strategy but no one had anticipated the company would sell the iconic phone maker to the PC maker Lenovo for $2.9 billion in less than two years, despite its dominance of the smartphone ecosystem. Google initially promised to use Motorola against Apple and Samsung to make its own Android phones but the decision to buy the major phone maker was questionable from the beginning.
While many said Motorola’s 17,000 patents were key to the acquisition, Google clearly wanted to sell smartphones which the company had been trying to do on its own with Nexus phones but with limited success. Ultimately, Google started to sell its own smartphones under the new Pixel lineup in 2016.
HP and Compaq (2002)
When Hewlett-Packard bought Compaq in 2002 for $25 billion, the move would have given HP an edge over Dell. In fact, the two companies would have combined revenue that would be closer to IBM. Compaq shareholders were eager to pass the deal and make a premium. HP shareholders, on the other hand, were skeptical and the proxy battle against the deal was very public. Dell took advantage of the ongoing friction between the leadership teams of HP and Compaq and gained market share. HP had already lost the plot by integrating Compaq products under the HP brand name and shifting Compaq to the budget segment. After the deal, HP’s share price dropped by a quarter which resulted in 18,000 layoffs. In 2005, CEO Carly Fiorina was fired by HP’s board. Analysts saw the merger as ill-fated, as critics pointed out that HP’s engineering-driven culture and the sales-driven Compaq culture were no-match.
eBay and Skype (2005)
During her tenure as CEO of eBay, Meg Whitman grew the online auction site’s revenue from $4 million to $8 billion in 10 years. But she did something that wall street doubters had expected from the beginning when eBay bought an Internet telephony upstart called Skype in 2005 for $2.6 billion. Whitman saw potential in Skype, hoping eBay customers would doVoIP and video calls with sellers over email. The move backfired and eBay had to sell 65 per cent of Skype at a loss to private investors for $1.9 billion. Two years after buying the company, eBay took a $900-million writedown on the purchase. Seeing Skype’s potential in the long run, Microsoft later bought the internet telephony company for $8.5 billion. eBay’s acquisition of Skype remains one of the most criticised tech acquisitions in recent memory.
Nvidia-ARM deal (2020-2022)
Nvidia tried hard to buy ARM from Softbank for $40 billion but ultimately failed. The chip giant agreed to buy Arm back in September 2020 to create the “world’s premier computing company for the age of AI”. It had initially planned to close the deal by September 2021, but due to competitive and regulatory hurdles derailed the deal.
ARM, which is based in Cambridge, UK, designs the components of processors but does not produce any chips on its own. Instead, it licenses its chip designs to a wide range of chipmakers. Amazon’s Kindle, Apple’s iPhone and essentially every smartphone powered by a Snapdragon processor utilises some Arm intellectual property. Nvidia also produces its own Arm-based CPUs for gaming consoles, connected cars, and data centers.
Buying ARM would have granted Nvidia access to advanced Arm designs before any other chipmakers, allowing it to block rival chipmakers from licensing those designs and gain access to license ARM’s design for free. Meanwhile, its competitors would still have needed to pay royalties and licensing fees to ARM.
Nvidia attempted to win over regulators, saying it would allow other companies to keep using ARM’s designs but its efforts were in vain. On top of that, Qualcomm, Google and Microsoft objected to the deal. The rising scrutiny over ARM being taken over by Nvidia got the attention of antitrust regulators, especially in China. Earlier this year, Nvidia announced the termination of the deal.