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WhatsApp: 2nd Biggest Tech Acquisition of All Time 257

Posted by timothy
from the of-all-time! dept.
Nerval's Lobster writes "Facebook CEO Mark Zuckerberg decided to drop a cool $16 billion on WhatsApp, a messaging service with 450 million users. It was a mind-boggling sum, even if you buy into Facebook's argument that WhatsApp (which will continue to operate as an independent subsidiary, at least for the moment) will soon connect a billion people around the world. But it wasn't the biggest tech acquisition of all time: that honor belongs to Hewlett-Packard, which bought Compaq for (an inflation-adjusted) $33.4 billion in 2001. Facebook's purchase of WhatsApp comes in second on the list, followed by Hewlett-Packard's purchase of Electronic Data Systems for $15.4 billion; Google's acquisition of Motorola Mobility for $13 billion, and Oracle snatching up Peoplesoft for $12.7 billion. In sixth comes Hewlett-Packard again, with its Autonomy buy in 2011 (for $11.7 billion), followed by Oracle's BEA Systems acquisition ($9.4 billion) and Microsoft seizing Skype ($9.0 billion). What do many of these highest-cost purchases have in common? Many of them didn't pan out. Hewlett-Packard's Compaq, Autonomy, and EDS acquisitions, for example, made all the sense in the world on paper, the tech giant eventually took significant write-downs on all three (Autonomy in particular was an outright disaster, resulting in a $8.8 billion write-off and widespread allegations of financial and management impropriety)." Update: 02/20 19:32 GMT by T : Of interest: Mother Jones has an interesting take on the seeming mismatch between Facebook's business model and the way the WhatsApp founders think about advertising. Hint: they hate it.
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WhatsApp: 2nd Biggest Tech Acquisition of All Time

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  • by rolfwind (528248) on Thursday February 20, 2014 @02:33PM (#46297627)

    http://money.cnn.com/2014/02/2... [cnn.com]

    But I will not tech history in the last 20 years is littered with companies that were bought because of instant messaging in one form or another, stuff like Skype, that later on did not really bring it's parent company anything (eBay sold skype to Microsoft at a loss iirc).

    The problem seems to be how to integrate and monetize these services without people jumping ship. Until then, they are hosting a free service that's quite a bit to fund with no obvious revenue stream in sight other than ads.

    Of course, Facebook is an expert on that, so it may turn out well for them. Still, amazing returns on a 4 year old company.

  • by trifish (826353) on Thursday February 20, 2014 @02:33PM (#46297631)

    Are you sure it's really a honest acquisition and not a lame attempt to use a portion of your huge pile of money just to monopolize a market you're afraid of slowly losing?

  • (Over valued)^2 (Score:5, Interesting)

    by 140Mandak262Jamuna (970587) on Thursday February 20, 2014 @02:33PM (#46297633) Journal
    Bulk of that 16 billion dollars comes in the form of Facebook stock, which is already heavily overvalued. And some of the retention boni (*) are restricted stock. So over all this valuation of 16 billion is overvalued whole squared.

    (*) boni = plural of bonus

  • by DdJ (10790) on Thursday February 20, 2014 @02:34PM (#46297645) Homepage Journal

    ...was when someone commented that Sun Microsystems was worth about one third of a chat service.

  • by gurps_npc (621217) on Thursday February 20, 2014 @02:46PM (#46297805) Homepage
    It seems obvious. WhatsApp, a product designed to kill abusive telephone policy rules (i.e. charge practically nothing per byte for internet access but a huge amount for the text messaging - when internet costs the corp money while the text messaging is free). WhatsApp is specifically anti-advertisement and Facebook is almost entirely about advertisement.

    WhatsApp was a great company and it has been bought about by an evil one that clearly intends to subvert it.

    But I can hope that the founders of WhatsApp can use Facebook's money more effectively to create a new anti-advertisement business. Hopefully their use will outway the evil that facebook is about to do to WhatsApp

  • by ericloewe (2129490) on Thursday February 20, 2014 @02:59PM (#46297971)

    Did YouTube ever positively contribute to Google's bottom line?

    Even being a data mine (and a stupid way of forcing people to use Google+), I can't imagine it will come even close to paying off in the near future.

  • by sootman (158191) on Thursday February 20, 2014 @03:00PM (#46297991) Homepage Journal

    At the other end of the spectrum, the biggest bargain ever was NeXT acquiring Apple for negative $429 million.

  • by ceoyoyo (59147) on Thursday February 20, 2014 @03:25PM (#46298233)

    Several hundred million users, some of whom have already pledged to quit since Facebook bought it, and many of whom will quit when the first annual renewal comes around and/or Facebook decides to introduce ads.

    Besides, FB already has most of their address books. It's begged for mine often enough I'm surprised I haven't accidentally hit yes yet.

  • by ErichTheRed (39327) on Thursday February 20, 2014 @03:26PM (#46298247)

    I think it's time to call the near top of the social media bubble. Maybe this one will be called the Web 2.0 Bubble.

    It's funny, because I remember the last tech bubble in the 90s ending a few months after similar insane acquisitions. Remember when AOL was bought by Time Warner because they were panicked that they would be left behind in the Web 1.0 future? How about all the IPOs of completely unprofitable companies based only on the fact that they sold stuff online or were funded by advertising?

    I think whether this turns out to be a bubble or the "new normal" depends on how well these social media companies and device manufacturers can present themselves to the average joe as "the internet." Remember that AOL used to be "the internet" for anyone non-technical. People keep predicting the death of PCs simply because anyone under 25 uses tablets and phones as their primary computers, considers email old fashioned, and lives on Facebook. The question is whether this is universally true or just some hipster marketing buzz. I know people who live on Facebook, people like me who use it to post family pictures, and people who actively hate it. I think it could go either way, but the market for this stuff is way too frothy now. Even my boring corner of IT is being bombarded by cloud this and cloud that, and it's touted as the solution for everything.

    The strange thing is this -- during the 90s, I was a new grad riding out the dotcom boom in one of those "boring" corners of traditional IT (sysadmin for an insurance company). This time around, I'm in a different "boring" corner of IT (systems architect in air transport). The plus side of this is that I never got laid off during the bust cycle. Marketing flash may sell IPOs, but people who actually know their stuff get to keep working when most of the fluff gets thrown out. Oh well... At least the 90s tech boom sparked a huge Internet build-out, oh, and left a lot of Aeron chairs on eBay. :-)

  • by 140Mandak262Jamuna (970587) on Thursday February 20, 2014 @03:37PM (#46298339) Journal
    This is what my Indian cousins tell me. India has huge number of plain dumb cell phone users. It also has a decent chunk of smartphone users. Whats App bridges the gap. It allows dumb phones and smart phones to interoperate. It allows sending SMS from smart phones/internet to dumb phones. In India and most Asian countries all incoming calls/texts are free. So a smart phone user can mix dumb phone numbers and smart phone numbers in the broadcast list and send out messages. Dumb phones have varying degrees of multimedia support and they get to see as much as their phones would support. It allows users to send out one text message to Whats App portal and it relays the messages to all other recipients. Thus you pay for one out going text but manage to send it to multiple people. Most importantly it allows text messages to travel across the internet to multiple countries helping you avoid international texting charges.

    When my cousin visiting USA texted to his brother in Singapore, the Singapore brother was like, "what? you got money growing in trees? Why send regular text when you have Whats App?"

    But dumb phones market share is shrinking, Smart phones don't ever pay for international texting rates, they have more options... So I don't see Whats App growing any bigger than what it is. I am not sure people would be willing to pay more than a dollar or two per year for Whats App in smart phones. But I could be, and frequently have been, wrong.

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