Top 10 technology merger mistakes

After last week's look at some of the most important mergers in the IT world it's time to look at the other side of the coin when mergers show management mistakes.

Most, but not all, of the deals listed below made sense on some level. After all, there may be many fools in the finance industry, but the billion dollar deals we're talking about needed to have some credibility in order to free up the purse strings. Failure was not a guarantee, but it was the result.

We've tried to keep the list fairly recent, and certainly all of these mergers came in the past 15 years and most are in this decade. Given the enormous changes the industry has gone through in that time, it's not surprising that there have been mistakes; no-one is perfect. What is more interesting is how often certain companies seem to make them.

One final note, when Shaun and I had our traditional lunch of burgers, a beer and a blistering argument, one idea came to mind for a future Top 10: mergers we'd like to see. Feel free to add suggestions to the comments section.

Honourable Mention: ITV and Friends Reunited
Iain Thomson: For a lot of people in the UK, Friends Reunited was their first introduction to the new-fangled phenomenon of social networking.

Friends Reunited was literally started in a spare bedroom by British couple Steve and Julie Pankhurst and enjoyed explosive growth, climbing to 2.5 million members a year after launch. It was an instant hit, and Friends Reunited was one of the few internet firms to prosper in the dark days of the post internet bubble hangover that kicked in after the millennium.

ITV, the main commercial broadcaster in the UK, saw the site and liked its potential. With the papers full of how television was having to get on the web, this looked like a good way to gain an instant local user base that could then be turned onto ITV's excellent programming. It paid £120m for the company in 2005 and the Pankhursts grinned all the way to the bank.

Unfortunately for ITV there were two major problems. Firstly ITV doesn't produce much in the way of excellent programming, and secondly the site's users, troubled by the yo-yoing access price and other changes, started to move to other sites. The other bit of bad luck was called Mark Zuckerberg, who registered Facebook.com in the same year that ITV splashed out.

The rest is history. Facebook soared ahead while the audience of Friends Reunited dwindled. In the end the site was flogged off for just £25m.

Shaun Nichols: Thus far, the only real success strategy I can find with social networking sites is to start up, grow as fast as possible, and then sell the company to an unwitting old media firm before all your users get bored and go somewhere else.

The 21st century internet is littered with the empty husks of old social networking sites like Friendster, Friends Reunited and (likely soon) MySpace. In every case, the people who did the best were the ones who sold out their stakes and then got the heck out of town.

Perhaps Facebook will be able to break the cycle and transition into a profitable, long-running business, but right now it looks like the odds are against them. If history is any indication, Zuckerberg and company would be smart to take a couple of billion dollars and cash out.

In the meantime, one has to wonder what the next big networking platform will be. Perhaps Twitter or Google, maybe even a tiny startup we have yet to hear from.

Honourable Mention: AMD/ATI
Shaun Nichols: This merger only barely made our list because, when all is said and done, it may turn out to be a very savvy purchase.

In 2006, chipmaker AMD announced a deal to acquire graphics card vendor ATI for $5.4bn. The move looked at the time to be a tremendous gamble on AMD's part, and for some time after it looked like a bad bet.

Shortly after the deal became official, AMD entered into an extended period of financial losses. Without an offering to match the quad-core chips of rival Intel for much of 2007, the company fell behind in the market and began to lose money while still saddled with debt from the ATI deal.

Lately, however, things have begun to turn around. A spin-off of its Global Foundries operation combined with improved sales and a tidy anti-trust settlement with Intel have boosted financials, while the benefits of an in-house GPU firm are coming in handy as platforms like Stream look to expand multi-threading capabilities.

Iain Thomson: I was a bit iffy about this one. In my opinion the benefits AMD is getting from ATI outweigh the short term problems that the company suffered in terms of financing.

The kind of GPU design skills in a graphics firm makes me suspect that Intel will be making a move for Nvidia before too long.

That said, the short term hit was considerable, and would have been worse if AMD hadn't managed to reach a settlement with Intel as a result of a well organised legal and media campaign against anti-competitive behaviour.