The behavior of public technology companies that throw off lots of cash is entirely predictable. They are utterly shitty allocators of capital, esp when run by "visionaries." Some easy predictions:
-This acquisition will have zero to negative return on investment, just like Motorola.
-Oculus acquisition for 2B will have zero to negative return on capital
-WhatsApp will have zero to negative return on capital
The abuse of shareholder cash at cash-rich tech companies like Apple, Facebook, and Google is quite breathtaking to observe.
Google has a pretty good track record with acquisitions (YouTube, Android, DoubleClick, Picasa... lots of smaller tuck-in acquisitions around their big products). The Motorola is an extremely poor example, because it was defensive against the Nortel patents/Rockstar consortium. Numerous analyses have shown it was very cost effective on a per-patent basis after taking into account Motorola's cash on hand, NOL credits, and the various parts of it they sold.
Edit: I couldn't find the terms of this deal, but the rumor was FB was offering $60M USD, so it's probably on that order of magnitude. I don't think it would be hard to make a business case for integrating this technology with Maps, making satellite view closer to real-time while reducing their bill for actual satellite imagery.
These bets are easy because it's hard to figure out if you've won or lost. Among the challenges is that acquisitions like WhatsApp and Motorola can be more about stopping threats. WhatsApp had been adding ~1 million people a day, and if FB's mission is to connect people in the world, then WhatsApp could have become a serious competitor in a few years. The Motorola patent portfolio has been discussed, but there's a lot of potential for simple expertise in consumer goods that was acquired as well. Us outsiders will never really really know.
Since we're talking about tech companies and not airlines, the value of an acq is a lot more difficult than discounted future revenue. YouTube was much derided as a terrible acquisition for YouTube in 2006 -- a bandwidth money pit and a copyright nightmare. But it looks like it was a smart move.
What you describe does happen, though. Microsoft paid $6B to acquire aQuantive in 2007 and then wrote if all off in 2012.
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The behavior of public technology companies that throw off lots of cash is entirely predictable. They are utterly shitty allocators of capital, esp when run by "visionaries." Some easy predictions:
-This acquisition will have zero to negative return on investment, just like Motorola.
-Oculus acquisition for 2B will have zero to negative return on capital
-WhatsApp will have zero to negative return on capital
The abuse of shareholder cash at cash-rich tech companies like Apple, Facebook, and Google is quite breathtaking to observe.
Google has a pretty good track record with acquisitions (YouTube, Android, DoubleClick, Picasa... lots of smaller tuck-in acquisitions around their big products). The Motorola is an extremely poor example, because it was defensive against the Nortel patents/Rockstar consortium. Numerous analyses have shown it was very cost effective on a per-patent basis after taking into account Motorola's cash on hand, NOL credits, and the various parts of it they sold.
Edit: I couldn't find the terms of this deal, but the rumor was FB was offering $60M USD, so it's probably on that order of magnitude. I don't think it would be hard to make a business case for integrating this technology with Maps, making satellite view closer to real-time while reducing their bill for actual satellite imagery.
These bets are easy because it's hard to figure out if you've won or lost. Among the challenges is that acquisitions like WhatsApp and Motorola can be more about stopping threats. WhatsApp had been adding ~1 million people a day, and if FB's mission is to connect people in the world, then WhatsApp could have become a serious competitor in a few years. The Motorola patent portfolio has been discussed, but there's a lot of potential for simple expertise in consumer goods that was acquired as well. Us outsiders will never really really know.
Since we're talking about tech companies and not airlines, the value of an acq is a lot more difficult than discounted future revenue. YouTube was much derided as a terrible acquisition for YouTube in 2006 -- a bandwidth money pit and a copyright nightmare. But it looks like it was a smart move.
What you describe does happen, though. Microsoft paid $6B to acquire aQuantive in 2007 and then wrote if all off in 2012.