The year 2014 saw some major acquisitions in the tech world with big guys
like Apple, Facebook, Google brokering important deals.
The biggest shocker was, of course, Facebook’s buyout of the popular
messaging app WhatsApp. Then, Apple finally closed the deal on Beats, the music
company. Where Google was concerned, it sold off Motorola’s mobile divisions
(for which it paid $12.5 billion when it bought the company) to Lenovo and also
acquired Nest Labs, a company that makes “smart” thermostats and smoke alarms
for homes.
We take a look at acquisitions that mattered in the technology world not
just because of the numbers involved but because they showed a new direction,
new strategy from the companies that took part in these deals:
Facebook-WhatsApp: This deal was worth $19 billion and was
announced in February this year. Facebook recently finalised the acquisition
and closed the deal with
a price tag of $22 billion thanks to the increased value of Facebook’s
stock in recent months.
Facebook paid $4.59 billion in cash and 178 million shares of its stock for
WhatsApp, as well 46 million of grants in restricted stock units for WhatsApp
employees that will vest over a four year period. Interestingly, WhatsApp’s
total losses were close to $138 million in 2013 alone, against a revenue of
$10.2 million.
According to this Bloomberg
piece, “WhatsApp which had 400 million users in December, generated less than 3
cents in revenue for each one last year. By comparison, Facebook paid $55 per
user when it acquired the company.”
For Facebook, the acquisition is a strategic one. It now has the perfect
social network aka Facebook, the perfect photo sharing app which is Instagram
(the service saw its user base cross 300 million this year) and the perfect
messaging app: WhatsApp with 600 million users.
Mark Zuckerberg made it clear that WhatsApp is the path for Facebook to get
its next batch of 1 billion users and that only once they have the numbers will
they start thinking of boosting revenue and a business model. For now, WhatsApp
remains ad-free and mostly a free service for Android and iOS users although
technically you have to pay $1 after one year of free service.
Facebook-Oculus Rift: Is Facebook just about social media?
No, not really. CEO Mark Zuckerberg’s acquisition of Oculus Rift, a company
that the creates of virtual reality 3D Goggles, showed a different side of
Facebook’s strategy. The company reportedly paid $2 billion for the deal.
Mark Zuckerberg made the announcement of the deal on his Facebook page, and
wrote: “I’m excited to announce that we’ve agreed to acquire Oculus VR, the
leader in virtual reality technology…They build virtual reality technology,
like the Oculus Rift headset. When you put it on, you enter a completely
immersive computer-generated environment, like a game or a movie scene or a
place far away. The incredible thing about the technology is that you feel like
you’re actually present in another place with other people. People who try it
say it’s different from anything they’ve ever experienced in their lives.”
Oculus VR was founded by Palmer Luckey. The firm got its initial funding via
a Kickstarter campaign and raised close to $2.4 million from 9,522 backers on
the site. Oculus Rift, are goggles which allows users to immerse into an
3D digital world with high-resolution images. There are motion sensors in the
headset that track the movement of a person’s head, shifting their view on the
screen and thus creating the illusion that the user is in another world.
According to Mark Zuckerberg, Facebook will “focus on helping Oculus build
out their product and develop partnerships to support more games.”
Oculus will continue operating independently within Facebook for now, but
its clear that with this acquisition the company will look at the idea of
augmented immersive reality seriously.
Apple-Beats: At the end of May this year, Apple confirmed
that it had bought Beats, the music-streaming service and the maker of Beats
headphone for a $3 billion. Beats co-founders Iovine and rapper Dr. Dre joined
Apple as part of the acquisition of the music streaming and audio equipment
company.
The deal was a seen as Apple’s effort to make waves in the music streaming
industry, as iRadio had failed to be a booming success and with iTunes sales
declining.
However, as this Billboard
article points out that given that Beats Music has only 200,000 subscribers at
the time of the deal, it’s hard to say how much the service is really worth to
Apple. We didn’t see Beats integration at the iPhone 6 launch, so it’s not
clear how Beats has fit into the Apple system till now.
Despite this, Apple clearly felt that it was okay to shell out the big bucks
for the company. Hopefully we’ll hear more on this in 2015.
Motorola-Lenovo: In January, Google announced that it was
selling Motorola Mobility to Lenovo. It was a shocker given that Google had
paid $12.5 billion to acquire the company in 2012 and the Moto smartphones
generated a strong buzz in developing markets like India.
Google, however, didn’t sell Motorola’s Advanced Technology and Projects
group, which includes the popular Project Ara modular phone concept, (an
open-source initiative that will potentially allow consumers to build their own
smartphone based on a modular platform). For Lenovo, the deal was an excellent
one as it showed their determination to grow as a smartphone maker in
China and the rest of the world.
According to IDC
data, Lenovo is the fourth largest smartphone vendor in the world with a
5.2 percent market share. Now with Motorola smartphones under its umbrella, the
numbers will likely go up.
The Motorola brand is a strong one that will boost Lenovo’s credentials
where smartphones are concerned.
Google-Nest: Google’s
major acquisition this year was the Nest Labs. The tech giant paid a
whopping $3.2 billion in cash for the builder of smart thermostats and smoke
alarms. Nest is the key creator in the “Internet of things” market and these
devices can be controlled via apps on smartphones. Interestingly, Nest was
founded by Tony Fadell, a former Apple employee who is popularly known as the
“Father of the iPod”.
At the time of the deal, Google CEO Larry Page had said this in a press
release, Larry Page, CEO of Google, said: “Nest’s founders, Tony Fadell and
Matt Rogers, have built a tremendous team that we are excited to welcome into
the Google family. They’re already delivering amazing products you can buy
right now–thermostats that save energy and smoke/CO alarms that can help keep
your family safe. We are excited to bring great experiences to more homes in
more countries and fulfill their dreams!”
In essence, the Nest deal was Google’s first big step into entering the
living room, via regular devices and later
this year it was announced that Nest would be opening its API for
third-party companies to access its gadgets. The company said that nearly 5000
developers had shown interest in creating apps for Google.
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