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.
