The Most Shocking Business Blunders in History
Shocking Business News
Many companies make mistakes that at one point in time, seems like it would be the best choice for the future of either themselves or the company. At the same time, others take advantage of every opportunity and hope for the best. There’s an old business saying that goes, “Every multi Billionaire company also has a great story behind it, which most people are not aware of.” No one knows how it will end, and every situation is different such as the time when Excite turned down Google, or Block Busters turned down Netflix. Keep Reading for many stories like these, and many more.
Blunder #1: Excite turned down Google
Google, a well-known company, is a popular name used by schoolteachers, students, computer whizzes, and even the illiterate. It enriches lives by providing relevant information with its simple design and offers many more features. But what if I told you Google was not the same Google that the world knows today?
Back in 1999, Google tried to sell itself to excite for $1 Million, back when it was worth around $750k. The reason is that in the beginning, Larry Page and Sergey Brin, the founders of Google, were studying at Stanford University at the time, and Google was a project for them that they started in 1996. They thought that focusing too much time and energy on Google would cause them to lack in their studies, so they looked to Excite as the company to sell it too.
Excite, now ask.com was the most popular online portal and was headed by George Bell. It was founded by six alumni who also went to Stanford University and did not want to work under any boss and turned their idea into results, and thus Excite was born in 1993. The grind for them was hard work because they work hard for almost a year, and with their efforts, they reached the top in 1994, and then the big bucks started rolling in. They were first funded by Vinod Khosla from Venture Capital, which helped them begin on a positive note.
At the time, over several weeks, Excite developed a capacity to run hundreds of queries of common things people search for to compare them both. When they compared Excite versus Google search results, they didn’t see much difference, while also looking at it the way consumers would look at it. Additionally, Excite’s primary income came from people staying on their site. But, Google was giving the people what they wanted, which means less money for them because consumers would leave Excite and use Google every time. This rejection took a new face and pushed Google to grow as the best search engine, and within a few months, Google was funded by many and left behind all the other search sites.
Blunder #2: Blockbuster Turned Down Netflix
There is perhaps no other example that entirely defines the concept of industry disruption as the Blockbuster Netflix story. It may potentially go down as one of the biggest forehead-slaps and missed opportunities in History.
In 2000, Netflix executives, Marc Randolph and Reed Hastings were looking towards selling their company to BlockBuster for $50 Million. But unfortunately, it didn’t go as planned for both parties. Marc Randolph wrote a book describing his experience going to the Blockbuster’s headquarters in Dallas and meeting with the top executives to discuss an agreement. But, the CEO didn’t even bother to consider the possibility and thought of the whole deal as a big joke.
Before the meeting, the three executives were at a corporate retreat in rural California when McCarthy received word that Blockbuster wanted to meet with them. During that time, Netflix was in a bad position because from March 11, 2000, to October 9, 2004, there was a stock-market bubble caused by excessive speculation in Internet-related companies causing many internet-based companies to fail and eventually shut down. Additionally, the idea of a DVD by mail rental service was an idea everyone could catch on too because of slow download speeds. A year before this in 1999, Amazon attempted to buy Netflix for $12 Million but was turned down because the future seemed bright during that time for Netflix. Fast forward again to one year after that, Netflix is struggling to stay afloat, and Blockbuster seemed like the perfect oar to help them stay above water.
With that in mind, Netflix top executives had been requesting a meeting with Blockbuster’s leadership for months, and when the word finally came through that Blockbuster wanted to meet. They wanted it to be following morning in Dallas at 11 a.m., which was less than 12 hours…I encourage you to reread that. The offer given to the executives of Blockbuster was very arrogant because Netflix has been requesting to meet them for months, and when they finally agreed. It was at a time and place where it seems physically impossible for them to get too at that time the following morning.
Or at least somewhat impossible. Hastings pointed out that they could make it if they chartered a plane at 5 a.m. the following day. But, McCarthy objected and explained that the cost would be at least $20,000 when the company was well on its way to running out of money and shutting down. But, with the $50 million loss, they were tracked to lose that year was nothing compared to the 20k. So, it made sense, and with that, the three of them chartered a plane, and off they went.
During the Meeting at Blockbuster’s Dallas Headquarters, Hastings quickly ran over Blockbuster’s strengths and then noted areas that could benefit from their partnership and recommended joining forces. Blockbuster will focus on the stores, and Netflix will concentrate on the Online part, and both will combine their synergies to transform the market. Afterward, Ed Stead, Blockbuster’s general counsel, explained that the dot-com hysteria as completely overblown and explained how other online business models, including Netflix, were not sustainable and could not make money. After both sides debated, and got their points across. Stead went to the meat and potatoes and asked: “If we were to buy you, what were you thinking? I mean, a number.”
In which Hastings said, “Fifty Million.”
Randolph, who has been observing the CEO the whole conversation, noticed an odd expressed crossed Antioco’s face, turning up the corners of his mouth. Though it only lasted a moment, he knew that John Antioco was struggling not to laugh. After that, the meeting went downhill, and Blockbuster didn’t accept Netflix’s offer.
In 2007, a battle between Board Member Carl Icahan and CEO, Antioco, caused Antioco to leave Blockbuster. Additionally, a few years later, in 2010, Blockbuster filed for bankruptcy protection, and a few more years later, in 2014, the last Blockbuster corporate store closed.
If only Antioco had come to an agreement with Netflix, the meeting could have ended differently. Blockbuster could have made a lower offer for Netflix, which the founders might have accepted, given their shaky finances. Or, the two companies could have worked out some sort of partnership that could have given Blockbuster the benefit of Netflix’s online expertise without Blockbuster buying Netflix. If Antioco and Stead had considered any of this, History could have turned out very differently for Blockbuster and its 25,000 employees.
Blunder #3: The Merger of AOL and Time Warner
This was at the height of the first internet bubble, and anything internet was valued at crazy prices by the stock market. AOL was among the superstars of this period. With its 30 million subscribers, the portal to the internet was made famous for its e-mail services with movies like You’ve Got Mail, a romantic comedy starring Tom Hanks and Meg Ryan.
AOL’s hot valuation made it possible for it to acquire Time Warner, even though it was a long-established company with extensive holdings in cable, movies, and publishing. Its iconic brands included Time magazine, CNN, and Warner Bros. studios. The theory was that the two would combine into a $350 billion mega-corporation with vast production capabilities and new technology-age distribution methods. It was to be the media model of the future.
When the AOL Time Warner merger was completed in January 2001, AOL shareholders owned 55 percent of the company while Time Warner shareholders owned 45 percent. Steve Case, Chief Executive Officer of AOL, became Chairman of the new company; Gerald Levin, Chairman and CEO of Time Warner, was named its CEO.
Whether real synergies and cost savings would have occurred is unclear because, just months later, in the spring of 2001, the stock market began an internet correction. Dot-com stocks tumbled. AOL Time Warner’s losses on paper were formidable. Infighting between management spilled out into the public as Levin complained that Time Warner was dragged down by an internet flash in the pan. He was replaced by the company’s president, Richard Parsons. It was a surprise move; many had expected the job to go to Chief Operating Officer Bob Pittman. His eventual departure created further chaos at the company. The problem was made worse by the fact that AOL continued to provide dial-up services while emerging broadband technology was making it irrelevant.
By 2002, investors had had enough and were selling off stock as fast as they could. In 2002, AOL Time Warner reported a quarterly loss of $54 billion, the largest ever for a U.S. company. But nine months later, it topped itself and announced a $98 billion annual loss. At this point, executives were headed for the door, Case was forced to resign, and Ted Turner voluntarily resigned from his post as Vice Chairman in disgust.
The company, which dropped AOL from its name, took several years to stem its losses, but it was still weakened from the merger. Vultures began to circle, and famed corporate raider Carl Icahn acquired a stake in the company. By 2006, he was agitating to break up the company to create more value for shareholders. Icahn was temporarily held off, but significant restructuring ensued.
In 2009, AOL was spun off into its own company. It floundered and was eventually bought by Verizon in 2015 for $4.4 billion, a tiny fraction of its worth at the height of the internet bubble. Time Warner was also broken down into components. In 2009, it successfully spun off its profitable cable division into its own company, while a greatly weakened Time Inc. was also spun off into a debt-laden media property.
Blunder #4: The Sale of Manhattan Island
Manhattan is considered the cultural, financial, entertainment, and media capital of the world. It hosts the United Nations Headquarters and Wall Street. Many multinational media conglomerates reside in Manhattan, and it’s been the setting for many books, films, and tv shows. The value of the island of Manhattan, including all of its real estate, exceeds over three trillion dollars.
An often-repeated story throughout History is that the Dutch bought the island of Manhattan from the Native Americans. The price paid was $24 worth of beads, trinkets, a jar of Mayonnaise, two pairs of wooden clogs, a loaf of wonder bread, and a carton of Quaker oats. It is considered one of the biggest business mistakes in History.
On May 4, 1626, Peter Minuit arrived in New Amsterdam (modern-day NYC) as the new director of the Dutch West India Company (DWIC). The Dutch West India Company was a charted company of Dutch Merchants. Its goal was to expand the Dutch trade to reach globally. It immersed itself in trading many goods, including participating in the Atlantic slave trade. Minuit had been sent to diversify the trade coming out of New Netherland (Modern-day New York), they traded in mostly animal pelts then. Minuit was authorized by the DWIC to settle any disputes with any local Native American tribes over trading and land rights. Soon after Minuit’s arrival, he agreed with a local tribe for the land rights to Manhattan. There is no proof of an original title deed.
A historian in 1846 calculated that 60 guilders were equivalent to $24 for that time. This $24 figure has been frozen in time and is where this part of the story originates. Modern historians have calculated that 60 guilders were equivalent to $951.08 in that time frame. Now $951 is much better than $24, but it’s still too low for the whole island of Manhattan.
One thing the correspondence doesn’t cover is what Native American tribe or on whose behalf was a deal with Minuit made. A Historian named Nathaniel Benchley found that Minuit was dealing with the Canarsees, a Lenape tribe primarily located in south Brooklyn. Benchley claims that the Weckquaesgeeks, a closely related Wappinger tribe, actually occupied most of the mid and Northern Manhattan, so the land is more theirs. But, Minuit made a deal with the Canarsees.
If you think about it, it explains the low price because Manhattan was never the Canarsee’s land to sell away. They were traveling through Manhattan and were approached with an offer they couldn’t refuse. They were happy to agree to anything the Dutch proposed. The Canarsees happily took the goods which were more than just trinkets and beads and went back to Brooklyn.
Blunder #5: Xerox Gave up the First GUI OS to Apple
In 1979, Steve Jobs and a few of his executives went to the PARCs Labs, which was in the Research Wing of Xerox conducting a “tour” and ended up seeing a lot of things but, the things he liked the most was the Xerox Alta, PARCs personal computer. During the presentation, Xerox gave on the computer. Steve seemed excited and wanted to innovate the computer to make it better at Apple. So, they canceled the current project that they had with the computer they were building and decided to change courses. Steve wanted to add windows, menus, and a mouse.
Xerox gave this information out so freely because they lacked the initiative and resourcefulness to do anything with it. While they did release it commercially at one point in 1981 before the IBM PC release. It was too late.
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