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 a (inflation-adjusted) $33.4 billion in 2001, according to Business Insider Intelligence.
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. While Hewlett-Packard’s Compaq, Autonomy, and EDS acquisitions made all the sense in the world on paper, the tech giant eventually took significant write-downs on all three subsidiaries; Autonomy in particular was an outright disaster, resulting in a $8.8 billion write-off and widespread allegations of financial and management impropriety. (“HP has had a ready, fire, aim approach to acquisitions,” Dane Anderson, IT outsourcing analyst with Gartner, told the Financial Times a few years ago.)
But the whiffs don’t stop with Hewlett-Packard. When Google announced it would purchase Motorola Mobility in 2011 for $12.5 billion, it framed the purchase as a competitive maneuver. “We recently explained how companies including Microsoft and Apple are banding together in anti-competitive patent attacks on Android,” Google CEO Larry Page wrote in a blog posting at the time. “Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.”
But the acquisition failed to halt the patent wars over Android; and fearful that it might alienate its manufacturing partners, Google put little effort into transforming Motorola into a flagship Android vendor. In January, it sold its remaining Motorola assets to Lenovo for $2.91 billion.
So it remains to be seen whether Facebook can use WhatsApp in a way that justifies that monster investment. History suggests that things might not work out as intended.
Image: Business Insider Intelligence