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Friday, January 18, 2013, 12:13 pm PT (03:13 pm ET)

Account sheds light on how Apple conducts buyouts, Steve Jobs's negotiating strategy

A new report reveals how Apple proceeds when buying a company, as well as how late company co-founder Steve Jobs liked to close out deals.

Aubrey Johnson, previously a lead designer at Color and Twilio and currently Designer in Residence at Science, published her account of the dealings surrounding Apple's 2009 purchase of music startup Lala. The designer painted Lala as a struggling but middlingly successful company — one that had managed to get its song listings into the top spot for Google song search results.

That achievement, in combination with Lala's partnership with Google's Music Beta, sparked a bidding war among Google, digital music industry leading Apple, as well as Nokia, which hoped to use Lala to breathe new life into its struggling mobile OS.

iTunes Match

Apple purchased streaming music service Lala in 2009, paving the way for iTunes Match.


Nokia and Google reportedly lowballed Lala founder Bill Nguyen in bidding for the company, and Johnson characterized Nguyen as "absolutely disgusted" by Nokia's $11 million offer. Nguyen then contacted Apple's leadership, securing a dinner with Steve Jobs, Tim Cook, and Eddie Cue.

Jobs is said to have led the acquisition discussions while eating a beet salad, eventually passing Nguyen a slip of paper with a figure written on it, saying "if you like it, let's do it and just be done with this whole thing. Okay?"

The figure was around $80 million, with another $80 million in retention bonuses for Lala's remaining employees. Nguyen agreed to the deal.

A number of notable Lala employees left the company with Nguyen following the purchase, leaving millions of dollars in options on the table. Johnson points out that some of those same engineers returned to Apple when the company bought much of Color's talent for $7 million last year. Johnson sums up the Apple-Lala-Color transaction thusly:

"Apple obtained the same employees for pennies on the dollar. This time with even more experience and startup life under their belt. Paying twice was genius."