Behind the Scenes of Steve Jobs Acquiring Lala

Aubrey Johnson, a former employee at Color, a company which offers users the ability to share photos and live video on Facebook, according to its Twitter page, has an interesting story about the classy style with which Steve Jobs, then Apple’s CEO, acquires a company. The story goes back to 2009, when Apple bought a small startup called Lala, led by Bill Nguyen.

What exactly happened behind the scenes? How did Lala find itself a member of the Apple family, and why was the tech giant interested in purchasing it in the first place?

While making its way in the music industry, Lala scored several wins: it bought digital radio stations, a CD swapping business, and it streamed music. But its biggest win–-from Apple’s perspective-–was its partnership with Google for Google’s Music Beta, which placed Lala on the top position when users Googled a song.

To fully understand Apple’s interest in Lala, we must note that Apple’s iTunes business generates roughly $12.4 billion per year, with music accounting for about 66% of its sales.

Now, with a song search resulting a Lala result, each click that leads to Nguyen’s startup was stealing a potential buyer from iTunes. Even worse, Lala was often a better deal, thanks to its partnership with Google.

Despite its success with search results, Lala was struggling and with industry players noticing the opportunity, Nguyen began to receive offers for Lala.

The first player in the bidding war was, interestingly, Nokia, which expressed its plan to breathe new life into its mobile OS by creating an edge for itself in a major aspect of mobile devices: music.

But the offer was too low for Nguyen, so he contacted Google for an eventual acquisition deal. The search giant blew the opportunity by making a low-ball offer.

Soon after Nokia’s failed offer, Nguyen found himself sitting at the dinner table in Steve Jobs’ home on Waverly Street. In Palo Alto–with Apple COO Tim Cook, senior vice president of Internet Software and Services Eddy Cue and other company executives present–Steve led the conversation while eating a beet salad, Johnson writes.

“I’m going to give you a number, Bill, and if you like it, let’s do it and just be done with this whole thing. Okay?” Bill agreed.

Jobs passed a piece of paper to Nguyen and Bill nodded.

And with that, the deal was done.

Apple acquired ownership over Lala for a purchase price of roughly $80 million, and for an additional $80 million in retention bonuses for the remaining employees, valuing the entire deal at around $160M.

[Via: Aubrey Johnson]

Written by Istvan Fekete, Edited by Mike Crook