Behind every corporation is a story of acquisitions. This article is the story of the big five tech companies and their big acquisitions.
What is GAFAM?
GAFAM or FAAMG, is an acronym coined by Goldman Sachs for the big five tech companies: Google, Amazon, Facebook, Apple and Microsoft. These big tech companies have a total value of over $5 trillion and up to 13% of the value of the whole S&P500 by market capitalization. These companies are included because they are leaders of sociocultural evolution and social change on a large scale. Big corporations in the free-market world have two options: grow or perish. They grow through mergers and acquisitions. These big five tech companies have acquired numerous companies and made them subsidiaries.
Founded: September 4, 1998
Revenue: $185.527 billion (2021)
Google is one of them most popular search engines. It efficiently indexes hundreds of terabytes of data from millions of web pages and allows image-based searches. Google also provides software for both personal and enterprise use. It offers the email service Gmail as well as YouTube and app store Google Play. The big tech company earns most of its revenue from ads. It gives advertisers insights and analytics so they can reach more people. In recent years, Google has begun providing premium hardware, such as Google Pixel and Google Home.
Though it started as a search engine, Google is now a giant in the technology industry. Google’s has made over 240 acquisitions since 1998. In 2015, Google was re-organized into a subsidiary of a larger holding company known as Alphabet Inc.
Largest Acquisition: Motorola
Acquired on: August 15, 2011
Cost of acquisition: $12.5 billion
At the time, Motorola was the market leader in the home devices and video solutions business. It was suffering financially, though, having five straight quarters of loss prior to its acquisition by Google. There were two main reasons behind this acquisition: patents and Samsung. Motorola had billions of dollars’ worth of patents, with 17,000 confirmed patents and 7,500 pending. By acquiring Motorola, Google managed to better protect Android from anti-competitive threats. Samsung was the driving force behind Android, being the operating system’s main host. The Samsung interface was released in 2010 and featured a full-touch user interface. Its bloatware was wasting storage space and slowing the operation of the Android. Thanks to the Motorola acquisition, Google was about to teach Samsung a lesson in smartphone manufacturing. At the beginning of 2014, Google and Samsung signed a new 10-year global patent agreement.
Founded: April 1, 1976
Revenue: $274.515 billion (2020)
Apple is not only the world’s largest technology company by revenue but also the world’s most valuable company. In 2018, it was valued over US$1 trillion, making it the first publicly traded U.S. company to hit the US$1-trillion mark. The big tech company is considered a leader in innovation. Compared to other big tech companies, Apple excels in data security and privacy. It prefers to acquire small companies that can easily integrate into its line of products. With the exception of Beats Electronics, all acquisitions from Apple are counted in the millions, not billions.
Largest Acquisition: Beats
Acquired on: August 1, 2014
Cost of acquisition: $3.0 billion
Apple’s successful marriage of technology with culture was the inspiration for Beats Electronics. The acquisition was a vital solution to Beats’ revenue growth, which had slowed significantly in the last few years. The core headphone brand is producing headphones to this day, including the Beats Studio 3, and the Powerbeats Wireless headphones, which incorporate the technology of AirPods.
Founded: February 4, 2004
Revenue: $86 billion (2020)
Since its founding, Facebook has been has taken on many acquisitions and has now Facebook remains a popular platform for people looking to connect with old friends or make new ones. Facebook began by connecting Harvard students with one another before it was made publicly available. Today, it earns based on an ad revenue model and the platform now has billions of monthly active users. Its tech team also stays current with technological advancements.
Largest Acquisition: WhatsApp
Acquired on: April 19, 2014
Cost of acquisition: $19 billion
WhatsApp is one of Facebook’s most costly acquisitions. When Facebook bought WhatsApp back in 2014, WhatsApp was under huge growth. The app had a bigger market reach than Tumblr, Foursquare, Vine, and Google+ at the time.
Founded: July 5, 1994
Revenue: $386.1 billion (2020)
Amazon started in the mid-’90s as an eCommerce store selling books and is now the biggest global retailer. With over 100 acquisitions, Amazon’s interests span from artificial intelligence to cloud computing. This big tech company has expanded into several sectors like e-retailing, streaming, e-book publishing, smart home solution manufacturing, film and television show production, low-cost electronics manufacturing, online gaming, and web service provision.
Largest Acquisition: Whole Foods Market
Acquired on: August 28, 2017
Cost of acquisition: $13.7 billion
When Whole Foods Market, the American organic supermarket chain was bought by Amazon, it was the #1 brand in the organic business. The acquisition of Whole Foods Market gave a bigger brick-and-mortar presence to Amazon through over 300 physical stores across the US. Furthermore, Amazon now has more insight than ever before, as it combines data from online and offline purchases of its customers.
Founded: April 4, 1975
Revenue: $143 billion (2020)
The oldest of the big five tech companies, Microsoft Corporation, made its first acquisition in 1983. Since then, it has acquired an average of six companies per year. Of all the big tech companies it is the biggest earner and has the highest market value. It has an unbeatable desktop operating system (OS) and office productivity market shares with Microsoft Windows and Microsoft Office, respectively. Microsoft is also the second-biggest company in the cloud computing industry, with Microsoft Azure. It is also a key player in the video gaming industry with its Xbox.
Largest acquisistion: LinkedIn
Acquired on: December 8, 2016
Cost of acquisition: $26.2 billion
Acquiring LinkedIn was Microsoft’s biggest acquisition, and one of the biggest tech deals of all time. The purpose of this acquisition was data. It connected the professional world, with more than 1 billion Microsoft users and more than 467 million members on LinkedIn.
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