Archive for March, 2014

The Acquisition Boom in Technology

Wednesday, March 26th, 2014

In this post, I will leave science behind and discuss the technology “craziness” that has been happening. Billion Dollar acquisitions of companies that not even have revenue or profit. The Internet revolution now is eccentric and transforms youngsters with an app idea in millionaires and billionaires from day to night.  In less than 2 months, for example, Facebook acquired Whatsapp, the Drone maker Titan Aerospace and now the virtual reality company Oculus. A mix of software and hardware and new technologies are becoming the sexiest thing to acquire nowadays. Companies with tons of cash such as Facebook, Apple, Microsoft, Google, Yahoo and others can choose what to buy and how to buy. We are living in the new era of the internet. Working in Wall Street in the  financial district getting millions in investment deals is not the big American Dream anymore. The dream is to have an idea, build a start up and sell it for millions or billions of dollars to the big ones. Or even grow it to become the next Facebook or Google. One interesting case is Whatsapp, that was sold to Facebook by around 16 billion dollars. If you think about it, this is a lot of money, but strategically, it was a bold move. Whatsapp has no revenue whatsoever or even sell adds. It is simple, just a messaging app, but the number of Users builds its value. Let’s make the math: Facebook has around 1.2 billion users and of these probably millions use Whatsapp or have an account of it. However, millions that use Whatsapp (which is probably 200 million people) doesn’t have a Facebook account. Thus, Facebook indirectly bought new users that Whatsapp has to incorporate in its platform. I use Whatsapp to message people from family, friends and colleagues and see the trend in txt messaging. It is simple, useful, and the bottom line is that it does the job. Another example is Google buying Nest for 3 billion dollars. As its own early dive into wearables with Google Glass demonstrates, Google knows it can’t miss this next big leap in hardware. And Nest provides what they want in terms of geolocation of thermostats. The last big move occurred these days with Facebook buying the virtual reality company Oculus by 2 billion dollars. This is another example of a software company buying a hardware company. Facebook believes Oculus has the potential to be the most social platform ever by enabling sharing not just moments with your friends online, but entire experiences and adventures. This might be a competitive move by Facebook towards Google Glass Platform. Since after the burst of the bubble of the internet in the beginning of 2000, we have been watching another bubble of tech internet companies popping up and acquisitions of billions occurring. It has been all about strategy and new technology, not profits or revenue increase. The companies that are in the big “club” such as Facebook, Apple, Google, Yahoo and Microsoft are positioning themselves in a competitive scenario. The only question is who is going to be successful in the long run with these acquisitions. There is a promising future in the tech sector. Are we close to the movie “Minority Report” with virtual reality? Facebook believes so. We will see.