When I first heard the rumor yesterday that Samsung might buy Research In Motion, my cortex snapped, momentarily throwing me back to the mid 90’s. As the sounds of INXS wafted thru my head, I re-visited a previous episode where Samsung attempted to buy and turn around another failing company.
AST Research was a PC maker whose story was taken right out of the best “rages to riches” narrative America has to offer. Started in a garage in 1980, three immigrants, Albert Wong, Tom Yuen, and Safi Qureshey built AST into a Fortune 500 company and the 4th largest computer maker in America by 1993.
At its height AST was doing $2.5 billion dollars in annual revenue and being visited by then President George Bush Sr.
Unfortunately AST did not respond to the changes in the computer industry and soon began a long descent that would culminate with Samsung picking up their broken pieces.
It’s failure to recognize the movement towards commoditization of the PC was its downfall. AST stubbornly insisted on developing and using its own components in the PC’s it produced, instead of those of specialized OEM’s. In fact, a common saying used at AST to dismiss other computer companies like Dell was “the best technology they have is a screwdriver.”
As AST began to have its first losing quarters in 1995, Samsung in an attempt to get a foothold in the PC market, bought 40% of the company for $378 million dollars. As AST’s fortunes faded, Samsung continued to pour money into the company and finally bought it outright for cash and debt assumption in 1997.
When the dust had cleared Samsung had dropped over $1 billion dollars into AST who at the time the deal closed had 11 consecutive quarters of losses.
Samsung was eventually forced to close the company and sold AST’s name and service contracts to various independent vendors.
This cautionary tale serves as a warning in a number of ways should Samsung or any other company in fact decide to purchase RIMM.
Technology moves fast, (faster now than in the 90′s), and if you don’t stay on the cutting edge of it you’ll get left behind.
Once a “break” in a former market leader starts, its downward momentum can prove to be the self-fulfilling cause for its ultimate demise.
And although large mature companies like Samsung have tremendous money and resources, they often don’t understand the dynamics of a smaller company, nor are they nimble enough to save them once they have gone past a certain point.
Times have changed and Research In Motion might in fact prove to be an asset to somebody. But if I was the lead man on the deal team, I would take a quick trip up to Samsung’s lower Siberian office, and at least have a “chat” with the man there who once stated “I am making the decision that we will buy AST Research.”
(Note: If you are new to my blog, I post about all sorts of things. Sometimes it involves something extremely personal, like creating a 30K baby or my Monster Trades. Other times it deals with hot ex-porn stars who trade stocks. And sometimes it’s about how to avoid “suicide”. But a good place to start is The Best of bclund. If you like what you read, please tell a friend. If you don’t, please tell two friends.)