7 Awful Acquisitions of Giant Companies

BOSTON (MainStreet) -- We are all guilty of the occasional impulse buy -- from the infomercial that catches our eye, of the candy bar displayed in the checkout line, the late-night one-click on Amazon (AMZN).

Businesses may be less immediate or rash with their acquisitions, but they too can act too fast and face buyer's remorse. What seems like a great idea at the time can wind up being a disastrous case of "What were we thinking?"

Sony's ( SNE) expensive ($4.8 billion) acquisition of Columbia Pictures in 1989 probably seemed to be good strategy as it beefed up its entertainment efforts. It didn't work out that way, though, and wound up being a $3.2 billion net loss for the company just five years later.

The big mistake was deciding that the various big-name producers attached to the studio would be automatic box office magic. In hindsight, one has to wonder whether those billions might have been better spent cultivating fresh talent. To reduce the deal to baseball terms, Sony ignored its farm system and blew its budget on aging veterans who had lost their curveball.

The purchase of Snapple in 1994, a 1.7 billion deal, quenched Quaker Oats' thirst for a solid brand-name complement to its Gatorade line. Rather than start a competing beverage, the brain trust at Quaker (now owned by Pepsi ( PEP)) expected to benefit from the brand appeal of the company and fought a bidding war with Coca Cola ( KO) to ensure it. The deal was a failure, and within three years Snapple was unloaded to Triarc Beverages for just $300 million.

Rubbing salt in the wound, Snapple flipped to Cadbury Schweppes for $1 billion and a few years later was spun off. Today the beverage is everything Quaker hoped it would be as the publicly traded Dr Pepper Snapple Group ( DPS).

These two examples of deals gone bad aren't even the most extreme examples of corporate acquisitions. The following are five others that still leave Wall Street scratching its collective head:

News Corp buys MySpace
Sale price: $580 million
In 2005, as Myspace was just starting to lose its mojo to Facebook and was reduced to the Web's largest depository of pre-teen poetry and glittery unicorn GIFs, it found a savior.

News Corp ( NWS) -- led by no less an Ashton-like hipster as Rupert Murdoch -- acquired Myspace and its parent company Intermix Media for $580 million.

Things looked good for a while, and until 2008 Myspace held on to its place as the top social networking platform in the world. Then Facebook finally blew past it in Web traffic.

Murdoch reportedly grew increasingly frustrated that the site failed to meet revenue projections and that it never materialized as an entertainment hub. Worst of all, it was adding little or no value in pushing Fox-produced content. Massive layoffs began in 2009 and continued until the company was sold in June of this year to Specific Media (who counts among its owners the far more Ashton-like Justin Timberlake) for nearly $35 million.

eBay buys Skype
Sale price: $2.6 billion
Here's an idea scenario for eBay ( EBAY) back in 2005: A customer wants to buy a vintage owl macrame kit off a seller in Utah, but first decides to consult with a sheik in Dubai and, later, shows off the handiwork over webcam to a salaryman in Tokyo.

Our ridiculous idea here may make more sense than eBay's ill-fated purchase of Skype.

Yes, people loved the idea of free or cheap Internet phone calls and Web chats with users around the world. But what's the synergy? How does the purchase fill a need?

Plentym of people asked that at the time, and eBay never seemed to have an answer. One wonders if it pulled the trigger on the $2.6 billion deal just to beat out other bidders, as though the company was just another vintage Beanie Baby (tag still attached!).

eBay eventually had to wash its hands of the deal and take a writedown. Skype then took steps toward an IPO.

But the saga doesn't end there, since the IPO never happened. In May, despite having its own Internet telephony capability built into MSN Messenger, Microsoft ( MSFT) jumped in at the last minute and acquired Skype for $8.5 billion, 32 times its operating profits. It is the largest such acquisition ever made by Microsoft.

With Microsoft paying as handsomely as it did, one has to wonder if Skype -- despite being a popular and profitable venture -- might still prove to be the worst deal two companies ever made.

AT&T buys NCR
Sale price: $7.4 billion
Remember those fun and powerful AT&T ( T) computers businesses had in the 1990s?

No? Well, the fact there weren't any speaks to the uselessness of the telecom giant's purchase of NCR ( NCR).

Even the old-school name of the company, National Cash Register, should have been enough to give AT&T pause before thinking this was a revolutionary deal. Nevertheless, in 1991, the purchase went through and AT&T shelled out $7.4 billion, abandoning in the process its foray into computer making known as AT&T Computer Systems, perhaps hoping that the purchase would move the stalled effort in a new direction.

To be fair, NCR was, and is, a leader in point-of-sale equipment, barcode scanners, ATMs and check processing systems. On that basis alone, one can see how AT&T hoped to bolster its portfolio of business services.

The deal proved disastrous, though.

By 1993, the new subsidiary lost more than $1 billion. In fact, for three years, its biggest customer was actually its owner, AT&T, meaning money was merely being swapped from one pocket to another.

AT&T started chipping away at the subsidiary, selling two divisions to Hyundai. NCR was spun off and, by 1997, was back to life as its own, stand-alone company.

The reason the deal ended so poorly is fairly obvious in hindsight. If AT&T wanted to launch a technology division tailored to the communications industry, it somehow eluded execs' thinking that the customer base would have to be its competitors. Not surprisingly, other telecoms wanted no part in boosting revenues for their top competitor, giving it business and potentially processing and storing vital data using its technology.

Daimler buys Chrysler
Sale price: $40 billion
Word association: Mercedes.

If your answer wasn't "Chrysler" you may understand why the 1998 move by Daimler ( DAI) to acquire Chrysler was so ill-fated.

The $40 billion purchase was positioned as some sort of brilliant takeover of the U.S. auto industry. Combining the pedigree of Mercedes with the mom and pop appeal of Chrysler would lead to the sort of manufacturing efficiencies that would be needed to topple GM ( GM), Ford ( F), Toyota ( TM) and Volkswagen.

Not quite.

After bleeding money for nearly a decade, Daimler unloaded its slightly used car company to Cerberus Capital Management for just $6 billion. We assume whoever brokered the deal had to consult with a "manager" in the back room before agreeing to the price. No word on whether floormats were included with the deal.

AOL buys Time Warner
Sale price: $165 billion
We all owe a debt of gratitude to America Online ( AOL). In its day, it was how almost all Americans discovered the Internet.

And it was great and powerful in its day, until it got too big for its own good. Cue the .WAV file: "You've got hubris."

In what many consider to be the worst business deal of all time, AOL -- jacked up on the dot-com bubble like a wrestler on steroids -- brokered a $165 billion deal (or, in a lack of consensus with an intensity peculiar to this case, $284 billion or any of several other valuations) to buy the traditional media giant Time Warner ( TWX).

Then a funny thing happened. People stopped using modems, discovered that the Web was for more than just arguing Kirk vs. Picard in a Star Trek chat room and new, better and cheaper ISPs emerged. Worst of all, the gold rush of the dot-com era imploded. The vision of new and old media joining forces to conquer the world proved a very expensive pipe dream.

The companies are now back to being separate entities, and AOL continues to seek its niche in a rapidly changing world. It still hasn't given up its media aspirations, though, and has gone on to buy sites such as the Huffington Post and build a national network of community news sites branded as Patch.

-- Written by Joe Mont in Boston.

>To contact the writer of this article, click here: Joe Mont.

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