The Biggest Mergers and Acquisitions in Technology

By Markets Fool.com

The tech industry has seen some of the most significant and largest acquisitions in corporate history.

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Below are five of the biggest -- in some cases in terms of dollars spent, in others, in terms of their significance. Whether it was a larger firm absorbing a start-up that later defined its business, or a tech giant absorbing an established rival, these acquisitions have all helped to define the current tech landscape.

Google buys Android
Google has made many prescient acquisitions over the years -- YouTube in 2006, Applied Semantics in 2003 -- but its acquisition of Android may have been the most significant. When Google purchased Android back in 2005, few people had ever heard of Andy Rubin's start-up. In terms of a raw dollar figure, the deal was rather insignificant (an estimated $50 million), but the resulting effects have been so notable (a Google executive later termed it "its best deal ever") that the purchase deserves its place on this list.

Today, Android is one of the largest operating systems in the world, with around 1 billion active users, and a dominant share of the mobile market -- the overwhelming majority of smartphones and tablets sold worldwide run Google's operating system.

Google doesn't profit from Android directly (it gives it away for free) but Android serves as a tapestry for Google's services, allowing it to push its products like Maps, search, and Gmail onto its many mobile users.

Apple acquires Steve Jobs' NeXT
Like Google's purchase of Android, Apple's acquisition of NeXT in late 1996 wasn't the largest in terms of dollars -- it cost just $400 million. But if it hadn't happened, Apple probably wouldn't be in business today, let alone bethe world's largest company.

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The purchase of NeXT brought Steve Jobs back to Apple, and set the stage for the company's resurgence. Technologies developed at NeXT form the backbone of what are arguably Apple's two most important products: its operating systems. Both OS X (Mac) and iOS (iPhone, iPad) were built on technologies developed at NeXT, and Apple's exclusive use of these operating systems sets its products apart from competitors.

AMD gets into graphics with ATI
Both Android and NeXT are, in hindsight, wildly successful acquisitions. The success of semiconductor giant AMD's 2006 purchase of graphics maker ATI, however, is a bit less clear.

For $5.4 billion, AMD entered the graphics market, buying what was then one of the top dedicated graphics card designers. At the time, AMD was coming off one of its most successful quarters ever (in terms of processor market share) and executives argued that the combination would allow the company to take even market share from Intel, as it could court PC OEMs with a combination of AMD processors and ATI graphics chips.

It's not clear if the merger was a significant contributor, but AMD's business has definitely gone downhill since acquisition, and its current market cap (about $2 billion) is less than half of what it paid for ATI. In the graphics card market, Nvidia has surged ahead of AMD, while Intel completely dominates the PC processor market.

Hewlett-Packard merges with Compaq
Hewlett-Packard's $25 billion purchase of rival PC-maker Compaq is, like AMD's purchase of ATI, fairly controversial.

The purchase did create a PC behemoth -- Hewlett-Packard is, to this day, one of the largest PC vendors in the world. But it may have tarnished Hewlett-Packard's culture and focus. Shareholders have certainly suffered. Since it announced the acquisition in September, 2001, Hewlett-Packard shares are up around 103% on a total return basis. The S&P 500, however, is up more than 138%.

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To be fair, other tech behemoths -- including both Microsoft and IBM -- have done even worse for their shareholders (returning about 102% and 91%, respectively) but Hewlett-Packard has largely wallowed in mediocrity since the acquisition, going through a string of CEOs and several failed attempts at transformation -- a sharp contrast to its massive success in the 1990s.

The merger is even more interesting considering the fact that it was opposed by board member Walter Hewlett, son of Bill Hewlett, the co-founder of the company. Hewlett led a proxy battle in an attempt to block the merger, but was ultimately unsuccessful.

AOL buys Time Warner
The merger of AOL and Time Warner was one of the largest in history. In total, AOL spent about $162 billion to acquire the media giant, creating a corporate colossus that was supposed to -- at least in theory -- dominate the Internet. With Time Warner's networks and cable assets, and AOL's Internet service, the mashup appeared to hold great potential. The combined company may have been able to dictate the flow of media and advertising in the United States.

Unfortunately, it is widely regarded as a disaster. In 2009, it came to an end, with Time Warner spinning AOL off. It also divested its cable company (Time Warner Cable) and later, its magazine publishing arm, Time, Inc. Although the share price of all the firms has rallied since the split, the market cap of all four firms combined (around $120 billion) remains a far cry from AOL-Time Warner's once enormous $350 billion valuation.

The article The Biggest Mergers and Acquisitions in Technology originally appeared on Fool.com.

Sam Mattera owns shares of Nvidia. The Motley Fool recommends Apple, Google (A shares), Google (C shares), Intel, and Nvidia. The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), and International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.