[aitrean]

I understand their strategy of neutralizing threats through acquisition. However, for this strategy to be effective, the companies have to consistently turn a profit on their acquisitions. Although it seems absurd for Facebook to spend 19 billion to acquire a 14-person company (Instagram), failing to keep Instagram popular amongst consumers will turn it into a 19 billion dollar writeoff as some Instragram clone captures consumer attention. IBM has a long record of acquiring competitive or smaller companies, but they're doing relatively poorly in the markets as of late. So while it seems clear that these companies might make life a nightmare for a lot of silicon valley entrepreneurs, they're still creating the best net value for society, no?

[amorphid]

> Facebook to spend 19 billion to acquire a 14-person company (Instagram)

Do you mean WhatsApp? I think they "only" paid $1 billion for Instagram.

[aitrean]

Woops. Yep. It's hard to keep track of all these billion dollar Facebook acquisitions.

[Spooky23]

It’s about control, not size. IBM controlled powerful segments of the market, and would defend or compete by buying technology.

This scales down to small things like parking lots. Real estate guys will buy and operate little surface lots at a loss for years to deny competitors the ability to develop properties that compete with them.

[aitrean]

>IBM controlled powerful segments of the market, and would defend or compete by buying technology.

Right, but IBM used to comprise almost the entire hardware and software market. Over time, they failed to consistently deliver the best experiences to consumers and clients, so they definitely declined from their glory days. I understand your comparison about real estate developers, but I don't think it applies here. IBM can buy competitors, but if they can't make sure their acquisitions remain the best in the market, then the acquisition loses profitability, or even becomes a writeoff.

As an anecdote, I used to work on one of their analytics products, which they acquired in one of their biggest acquisitions ever. Nevertheless, we were competing for clients with smaller, leaner, and sometimes better teams in the same field. We had no inherent advantage in development over our competitors either. Sure, IBM could always buy them, but then they'd have another x billion dollar investment to turn around, and still no way to stop new competitors from taking the clients, other than creating the best product - which would be net beneficial for society anyway. In many cases though, IBM's attempts to exert control by acquiring other companies backfired because they failed to provide client value, and the company has had to write off a lot of losses by trying.