Data Sheet—Monday, October 31, 2016

Oct 31, 2016

In Term Sheet last week Erin Griffith discussed how difficult it is to buy innovation. (If you’re not yet a subscriber, you will want to see what Griffith does with her new platform; subscribe here.) The occasion for her rumination was the demise of Vine, a once-buzzy six-second-video service that Twitter bought young and killed last week.

The list of tech monoliths buying and then smothering hot startups is long. Yammer was a big deal before Microsoft bought it. Of course, Microsoft’s list alone is long: aQuantive (gone) and Nokia (barely there) come to mind. HP bought the once-promising Palm. Cisco had horrible timing with the maker of the Flip video camera. And so on. As Griffith wrote in Fortune in her outstanding feature about Cruise Automation, the self-driving vehicle technology company General Motors recently bought: “Startups have a 90% failure rate, according to studies. The failure rate for mergers and acquisitions—at least when it comes to meeting expectations—is just as high.”

This is all true. But this got me thinking that there are plenty examples of technology acquisitions, when done right, that are huge successes. PayPal was such a good acquisition for eBay that it’s worth more than its former parent today. Google bought a tiny company called Applied Semantics whose technology became AdSense, one of the core drivers of Google’s business. (It also bought a small concern called Android, and we know how that turned out.) Apple, which under Steve Jobs favored so-called acqui-hires, still buys promising groups that don't yet have mature products. One of the best historic examples: Apple bought a company called SoundJam that became the software known as iTunes, which eventually spawned one of the most lucrative e-commerce stores in history.

So the question is, are these the exceptions or the rules? Statistics undoubtedly will show they are the exceptions. But I think there are enough of them to suggest that acquiring technology is a highly evolved art form. Few may excel at it, but the rewards are huge for those who do.

Happy Halloween.

Adam Lashinsky
@adamlashinsky
adam_lashinsky@fortune.com

BITS AND BYTES

Get ready for another mammoth telecommunications merger. CenturyLink is offering more than $19 billion for Level 3 Communications in a deal that will expand its network by 200,000 miles of fiber optics technology. The transaction is expected to close in the third quarter. (Reuters)
Fund manager T. Rowe Price is still resisting the Oracle-NetSuite merger. The cloud software company's largest shareholder (after Larry Ellison) wants $133 per share, rather than the $109 that was offered. The deadline for the tender offer is Friday, Nov. 4. (Reuters)
Google execs insist cloud business is growing. The company is synonymous with Internet search and advertising but is pushing its cloud business as a priority. How big is that nascent business? Specifics are in short supply, but CFO Ruth Porat says cloud services are generating “substantial revenue growth." (Fortune)

PEOPLE AND CULTURE

Meet the woman hired to make Ford's self-driving cars a reality. Laura Merling is the new vice president of autonomous vehicle solutions at Ford Smart Mobility, the subsidiary developing transportation services such as car-sharing. She previously ran her own Internet of things consultancy and was a former executive vice president at SAP. (Fortune)

THE DOWNLOAD

Why Snapchat's IPO cloud snap the stock market. Snapchat’s parent company Snap hasn’t filed any of its official IPO paperwork yet nor set its IPO date, but it’s reportedly targeting an offering as early as the first quarter of 2017. It has been waiting for a sweet spot in the market for close to 18 months. But it’s worth reminding investors of another social networking company whose botched IPO could serve as a cautionary tale for Snapchat’s owner: The early rollercoaster ride endured by Facebook. Success is far from certain.

ONE MORE THING

How economists view the rise of artificial intelligence. Adoption of machine learning technology will lead to “a drop in the cost of prediction,” according to a prominent University of Toronto professor. (Fortune)

This edition of Data Sheet was curated by Heather Clancy.
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