When it comes to corporate hubris and strategic inanity, there is no “beating a dead horse.” The poor animal simply will not die.
So The Merger Verger offers herewith the prospect of history repeating itself yet again, this time in the large-cap tech sector. I quote below a series of comments from a business blog discussing the acquisition by a tech giant of a very young company in a field only tangentially related to its core operations. See if it smells to you the same way it smells to me.
- “With today’s purchase of [Seller], [Buyer] is making its boldest bid yet to remain the most potent force in e-commerce.”
Query: does the definition of the word “bold” inherently imply “smart?” Some analysts wondered:
- “It’s a marked departure for [Buyer], which to date has acquired only companies directly related to e-commerce.”
- “It’s also a heckuva lot of money for a nascent business, no matter what the growth and the promise—and one in an entirely new area in which [Buyer] has no experience.”
One tech analyst went so far as to ask:
- “… why [Buyer] couldn’t have gotten the same benefits much more cheaply and wondered if [Buyer] management might be leaning on their sizable market cap a little too much.”
Eschewing such doubters, Buyer’s CEO offered this tidbit of strategic happyspeak:
- “Together, we can pursue some very significant growth opportunities. We can create an unparalleled e-commerce engine.”
Each of those quotes – including the one from the CEO – could have been made (and several were made) about the Amazon/Kiva deal. But they all come from a very different transaction, one that was made in 2005 and then unwound (after a huge write-down) in 2008. The deal?
eBay’s purchase of Skype.
At the time of the unwind, one analyst remarked:
- “eBay seems to have bought Skype and set it on auto-pilot (destination: nowhere) almost immediately.”
So all that Meg Whitman said about her acquisition, mirroring as it does what Jeff Bezos has said about Kiva Systems, could perhaps have been realized … if they had integrated the businesses more thoughtfully. God is in the details (another quote, architect Louis Sullivan, this time.)
I seem to be in quote mode, so I will offer one more, this one from the 18th century philosopher, Georg Wilhelm Friedrich Hegel, who said:
“We learn from history that we do not learn from history.”
To which Karl Marx appended:
“He forgot to add: the first time as tragedy, the second time as farce.”
The eBay acquisition of Skype was a tragedy, to use Marx’s term. It was one part strategic clunker and three parts integration disaster. The Merger Verger will watch with interest to see if the Amazon acquisition of Kiva – repeating history – turns into a Marxian farce.
Previous postings on Amazon/Kiva:
Further reading on eBay/Skype: