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Summary:

As the tech world gets itself in a tizzy over Google saying its 5 percent stake in AOL might be impaired — basically it may now be worth less than they thought it was — we thought we’d revisit some of the most notable tech writedowns […]

As the tech world gets itself in a tizzy over Google saying its 5 percent stake in AOL might be impaired — basically it may now be worth less than they thought it was — we thought we’d revisit some of the most notable tech writedowns in history. Under U.S. accounting rules, once something’s impaired, it can’t be marked up again, which typically leads to a write-off. The write-offs on our list aren’t necessarily the largest, but we think they exemplify a certain point in time in the fizzy world of technology valuations that’s worth remembering, but not worth repeating.

So far this year we’ve seen one of the largest corporate writedowns ever, that of Sprint-Nextel shaving $29.7 billion in value off its $35 billion merger with Nextel Communications. The writedown led to Sprint-Nextel posting a fourth-quarter loss of $29.9 billion, and the company is still dealing with the aftermath of its push-to-talk love affair. At the time of the merger, cell phone deals were the thing to do, but mismatched networks and customer bases doomed this one from the start.


Another relatively recent write-off occurred when eBay woke up next to Skype two years after it offered up to $4.1 billion for the peer-to-peer voice provider and realized it paid waaaay too much for the privilege. It wrote off $900 million, which is small potatoes compared to some of the other writedowns listed here, but worth mentioning as a case of new technology feeding off an old-school web giant’s desperation.

AOL’s purchase of Time Warner back in 2000 was spectacular both for its $106.2 billion price tag and its almost instant failure once the deal closed. By that point, the tech bubble had burst and in 2002 the combined company wrote down $54 billion thanks to the evaporation of AOL’s value. Even the easy money economy of the previous few years has yet to see a deal of such awesome valuation, something for which we can all be thankful.

The dot-com crash was followed by another wave of writedowns related to the companies that had banked on the Internet infrastructure rush, such as Qwest Communications, which spent $36.5 billion on U.S. West in 1999, only to turn around and write down $24 billion of that in 2002.

I’ll put Google’s possible impairment on here simply because it’s amazing that AOL has managed to convince two companies to overpay for it, even as it does its own dubious buys. Since many financial experts are predicting a new wave of impairment charges, perhaps Google’s taking one of the first steps toward write-offs in the tech sector based on the Web 2.0 boom.

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  1. 8 Stock Portfolio Friday, August 8, 2008

    While the amount won’t be great relative to their size, will Microsoft be writing down their Facebook investment one day?

  2. David Mullings Friday, August 8, 2008

    Microsoft paid for the right to serve ads on Facebook just like Google paid for the right to serve ads on MySpace. Getting 1.5% was added bonus and everyone has admitted that the much hyped $15b valuation is significantly more than even Facebook investors believe but the media seems to love the hype.

    I have never seen an Fb investor trying to convince anyone that it’s worth $15b. Will Microsoft end up losing money on their Facebook advertising deal just like Google is on the MySpace one? I’m pretty sure, but that is far different from a write down.

  3. 5 Most Screwed-Up Tech Buys | WebLaunches Saturday, August 9, 2008

    [...] thought it was — we thought we’d revisit some of the most notable tech writedowns in historyread more | digg [...]

  4. Didn’t everyone expect the devaluation of AOL?

    I think facebook is on a different level than myspace in terms of innovation and what is in store for them in the future.

  5. Sprint Might Unload Nextel to Latin American Carrier – GigaOM Friday, October 3, 2008

    [...] be worth it for the carrier. The deal to acquire Nextel back in 2005 for $35 billion was one of the largest screw ups in corporate history. In February, Sprint wrote down almost $30 billion from the failed deal. If Sprint can somehow walk [...]

  6. Time Warner Gives Up on AOL Thursday, May 28, 2009

    [...] huge user base that gravitated toward its content. The 2000 buy was mocked from the beginning, and led to a $54 billion write-down two years [...]

  7. Sprint Going LTE Makes Sense, But Not a T-Mobile Merger Tuesday, July 13, 2010

    [...] Sprint Going LTE Makes Sense, But Not a T-Mobile Merger By Kevin C. Tofel Jul. 13, 2010, 2:32pm PDT No Comments       Sprint is embracing WiMAX for now, but is considering a change over to LTE for its future next-generation mobile broadband offering, the carrier’s CEO, Dan Hesse, told the Financial Times. Sprint’s comments about a potential move to LTE are also spurring more commentary on a future merger with T-Mobile, as the smaller carrier will eventually have to offer something beyond HSPA+. A merger with Sprint would create a sizeable new carrier but also bring back shades of issues from the Sprint-Nextel deal which ultimately resulted in a $29.7 billion writedown. [...]

  8. An AOL and Yahoo Merger: Failure Squared?: Tech News « Thursday, October 14, 2010

    [...] quickly started to hemorrhage billions of dollars in market value, making it arguably one of the worst business deals since the dawn of recorded history. A combination of AOL and Yahoo may not be quite that bad, but taking two old and faded Internet [...]

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