The technology industry is a volatile one. If you're not a market leader, your company is always playing catch up investing money in developing gadgets that others pioneered. If your firm tries to lead the way with innovative tech, you'll be spending money developing a lot of ideas that don't make it off the drawing board. No wonder companies implode from time to time when they can't keep up with the market or they try too hard to be ahead of the curve.
The Learning Company
Mattel bought The Learning Company for $4.2 billion in 1999, then they sold it for $3.6 billion a year later after the educational software firm that created popular titles like Myst, Reader Rabbit and Where in the World is Carmen Sandiego? lost almost $200 million in its first few months under Mattel ownership. The American toy company thought they were buying a tech firm that could help boost its fledgeling software offerings but in fact, all they acquired was a company that hadn't developed a new hit in many years.
This firm had the right idea but they had it too early. They were the first to offer customers online grocery shopping that was delivered straight to your door. The only problem was that when the service launched in June 1999, not enough of the American marketplace they were serving was online. The firm raised $800 million in investment capital and a further $375 million in an IPO. The firm started in San Francisco and rapidly expanded even when the demand was not there. An investment of $1 billion in state-of-the-art warehouses in 2001 which was meant to help them launch into 26 new markets caused Webvan to sink into bankruptcy.
At the height of its popularity, 80 million users visited Napster every day but once the Recording Industry Association of America sued the firm for copyright infringement, the resulting litigation was enough to bring this tech firm crashing down to earth. In 2001, the site closed down following a series of legal injunctions from the likes of Dr. Dre and Metallica, who found an unreleased demo on the site along with their entire back catalogue. In July 2001, Napster shut down to comply with court injunctions. Although the brand survives today, the site is a subscription-only platform that doesn't attract internet users in anywhere near the sort of numbers it used to.