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  • Seriously Pathetic

    Posted by David Foster on July 7th, 2013 (All posts by )

    In 2008, Michael and Xochi Birch sold Bebo, which is some kind of social networking company, to AOL—for 850 million dollars.

    Things didn’t go too well, and in 2010, AOL sold Bebo to a private equity firm for 10 million dollars.

    Things continued to not go so well, and Michael Birch has bought the company back–for 1 million dollars. He doesn’t know exactly what he’s going to do with Bebo now, but plans to have fun trying to reinvent it.

    I think what often happens in such situations is this: if a company is so clueless about its market that it fails to either develop internally the product for which there is a critical emerging need…or to acquire the product externally before the prices go out of sight…then it winds up paying an exorbitant price. The price will be one that makes sense economically only if the acquiring company is able to obtain truly stellar results on its new property…but typically, the same cluelessness that led to the product shortfall in the first place will also lead to an inability to successfully integrate or even effectively manage the acquisition.

     

    8 Responses to “Seriously Pathetic”

    1. Michael Kennedy Says:

      AOL has a pathetic if consistent record.

    2. IGotBupkis, "Faeces Evenio", Mr. Holder? Says:

      }}} AOL has a pathetic if consistent record.

      A fool and his money are soon parted. Anyone who continues to own AOL stock, for instance…

    3. David Foster Says:

      It’s not just AOL…check out acquisitions at HP, for example.

    4. Bill Brandt Says:

      David – I know HP from way back – when they were a proud company run by ‘Bill & Dave” Since their leaving they have been trying to find there way ever since.

      Dumbest acquisition they made was Compaq – it was supposed to make them “lean and mean” – dominating PC sales when a wag said that all ig gave them was a beer belly. And with desktops considered commodities and sales rapidly declining they came close to abandoning PC sales altogether.

      AOL – what a trick acquiring Warner.

    5. Alcibiades Says:

      FaceBook bought Instagram for one billion dollars. Some of that was in stock, but a company with a single product that doesn’t make money isn’t worth a billion dollars. A couple of guys could easily make a clone of the same program using licensed APIs and libraries, so why didn’t FaceBook bother to?

    6. tomw Says:

      .
      They wanted to sell computers. At a time when Personal Computers were becoming a commodity, they entered the market partnered with an Olivetti {Italian} product line. I as a first line, thought it one of the stupidest mistakes ever.
      Later on, sometime in the last century, the largest phone company in the world bought one of the “BUNCH”, in a hostile takeover
      They ended up selling it back for significantly less than the purchase price. Who knew.
      At the same time, they monitored their competition, and found the reported cost for ‘service mile/minute’ {maybe…} was significantly less than the internal cost. So they cut, and cut and cut to meet the competitors costs.
      Came to find out the competition was lying, and they had cut their service too far, losing not only market share but customer confidence. That’ll lern ya.
      Too bad, they now have their name pasted on a former subsidiary that is a pale shadow of their former self.
      Sometimes it doesn’t pay to listen to MBA graduate “million dollar ideas”, and instead, stick to your knitting.
      tom

    7. Grurray Says:

      This is probably what we are seeing now happening with 3D printing companies like 3D Systems and Statasys.
      The big problem is absorbing and consolidating the disruptive culture into the established one.

    8. David Foster Says:

      Tomw….HP should have been able to easily enter the PC market without the need to pay big bucks for anybody. They had managed in the late 1960s to create a very innovative programmable calculator (basically a computer, not called that for marketing reasons) which required creating their own CPU design, their own memory design, their own software/firmware, etc….going into the PC business should have been MUCH easier given that the CPUs and the memory chips were already purchasable items. (Note that Michael Dell was originally able to enter the PC business from his dorm room, IIRC)