The Canadian Investor - The 20 Biggest Tech Acquisitions

Episode Date: March 31, 2022

In this episode of the Canadian Investor Podcast we take a look back at some of the largest tech acquisitions in history and give our take on them. We finish the episode by going over some stocks on our watchlist. Our Website Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

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I am Brayden Dennis, as always, joined by Simon Belanger. Now, I apologize to you in advance, Simon, because you have to deal with, on a Zoom call, looking at a guy who's literally shirtless right now doing a podcast. So apologies in advance for that. It's all good. It's all good. I mean, I feel like you don't have any air conditioning. Is that it? It's not that. So for those who don't know, we're doing the gauntlet of recording here so I can have some days off. I'm currently in the sunshine state. It is 30-something odd degrees.

Dude, I could be a retired snowbird and still not know Fahrenheit, so it's all good. It's hot, and I went for a run and didn't time things correctly, so here we are just sweating. It's just sweaty for the podcast. But yeah, no. Okay, let's get into it. We got a fun episode. for the podcast. But yeah, no. Okay, let's get into it. We got a fun episode. We are looking through the 20 hugest, biggest tech acquisitions we could find. And I think it makes for some

really interesting discussion. Now, before we do that, let's give some shout outs to the supporters of the show. If you have not checked out the Canadian investor podcast.com, our website, you can find it in the show notes, the Canadian investor podcast.com. There's a link to support the show there in terms of purchasing coffee for us. Okay.

So here we go. Let's rifle through these. Colin bought a coffee and he said, thanks guys. I've been listening since near the start and find the information you're putting out there is great. Steven said, thanks guys. Love the show. Devin said, great show guys. I've been listening to you since the beginning and it's my favorite podcast. I appreciate all the hard work that goes into each show and we appreciate that you think it's your,

it's your favorite podcast. I mean, we love that. Mike, he said, as a young investor, I love the pod. Appreciate the time you guys put into your research. Also, dot, dot, dot, dot. Whose favorite player is Rick Nash? Laughing emoji. Now, Mike, that is a good question because perhaps the hottest take ever is having your favorite hockey player,ick nash but the reason is he plays hard and his highlight reel is low-key unreal look it up on youtube highly underrated and when he laced up the jets for international play when he stepped on the ice for for team canada that guy was on another level so i really like watching him play uh do you want to finish these off here? Yeah. Barbie bought us a coffee, says cheers. Dennis and Jill Bilodeau bought us coffee.

Dennis says my wife and I listen to your podcast while driving. We're developing our financial acumen, and the podcast is very helpful to grow our knowledge base. We enjoy the podcast and listen regularly. Thank you. Well, thank you, Dennis. And then Gaetan, who bought us a coffee as well. I mentioned in French that he loves the podcast, listens to it regularly. Gaetan, merci beaucoup pour le café. Oh, I love that. That was great. Okay, let's get into it. Let's look back at some of the largest tech acquisitions in history. I believe, if I remember correctly, you thought of this idea,

which was a great idea to do this show because the reason, the inspiration that sparked it was Microsoft buying Activision Blizzard for an egregious amount. We'll get to that one after. And I'm like, we should go through some old tech acquisitions. I think it's important to note, we did skip over some or some we had no insight to speak at, you know, like $10 billion deal here, $10 billion deal there. But there are some huge tech acquisitions through the years. It's been fun to reflect on what has worked and what has frankly been a disaster in capital allocation. Do you want to start us off here with a smaller one for Google? Yeah, definitely. And also just add to what you're saying before I get started,

is that some of the best deals did not make the list because they were actually small. And I'm thinking here like YouTube, for example, because YouTube was much smaller deal, right? I think it was a billion, if I remember correctly around there. So let's just keep that in mind. And Instagram too. Instagram was a billion deal right i think it was a billion if i remember correctly around there yeah so let's just keep that in instagram too instagram was a billion right yeah exactly so this one the first one on the list is the acquisition of fitbit by google this happened in 2021 so google had been struggling with their watches to compete with the iwatch from apple so in 2020 they announced that they were acquiring fitness tracker favorite Fitbit for a $2.1 billion deal. The deal closed in 2021. With the deal,

Google was absorbing 29 million active users who currently wear Fitbit held tracking devices. And I'm surprised. I don't know about you, Brayden. I'm surprised I don't know about you Brayden I'm surprised that this went through with regulators being that was Google yeah I'm not as surprised given that like there's already so much competition in the space and it's not like I don't really see it as like anti-competitive this one this one I this one I guess I think probably got a the green light pretty easily yeah fair enough and just for additional context here, according to Forbes, the breakdown of the smartwatch market in Q1 of 2021 was as follows. So Apple was like way at the front. They had 33.5% of the market.

Huawei had 8.4%. Samsung, 8%. iMu, I've never heard of that. I have no idea what that is. iMu, 5.4%. Samsung, 8%. iMU, I've never heard of that. I have no idea what that is. iMU, 5.1%. Might be like, I don't know, maybe a Chinese one, potentially. I think it sounds like it, to be honest. And then Fitbit had 4.2% and the rest at 40.8%.

So clearly it shows that Google was in that other category, which wasn't even high enough to be mentioned here. Now with Fitbit, they have a bigger share of that market. I think they probably still have a lot of ground to make up if they want to be relatively close to Apple. I mean, Apple just has such a massive share of the market and people are so loyal to their product that i don't know how much they'll be able to eat into it but it'll be interesting because it definitely enhances the google ecosystem it's really hard and we're going to talk about this on the next one it's really hard for these other tech companies on the hardware space and wearables fits in that category to compete with Apple because their ecosystem is just like, dude, the moat on it and the switching costs for a lot of people just seems impossible. Like if you already are in their smartphone world, where do you go? Now, I do think that

Google has a huge opportunity here with the Android software operating system. I think that that kind of connectivity is part of this other bets string of ideas that they can do. I have been yet to be convinced that they can execute on it correctly, to be honest. I have been yet to be convinced on that. They can connect this ecosystem. We'll see. But I think that it's a top priority for them. Yeah. And let's be honest, 2.1 billion is like pocket change for Google. So I think they'll survive even if it doesn't work out. Yeah, they make that in free cash flow before breakfast, man. Exactly. Now, the next one here, Apple buys Beats by Dray for

3 billion. That happened in 2024. The deal looks small compared to the size of Apple. Even back then, Apple was still a pretty big company, obviously nowhere near close to what it is right now. To me, this one is a success because they don't break down specifically the Beats segment, but the Apple's wearable segment, which the Beats fit in on their financial reports, last year represented $38 billion in revenue. That's really insane. It has been growing very rapidly. Actually, one of their fastest growing segments too. So I can only assume that they were able to leverage not only the brand, but some of the technology behind

Beats by Dr. Dre. So I think in my opinion, it's a pretty big success because we've seen AirPods, for example, come afterwards. So I have to assume they'd use some of that tech. It's hard to fathom how important this segment has become for Apple. They did $14 billion in sales for the wearable home and accessories segment in their fiscal Q1. While they don't break it out further from what I can see on their statements, but it is estimated from what I've seen online, they sold 85 million pairs of AirPods last year and 100 million pairs of AirPods in 2020. So for the Beats acquisition, it's hard to say how integral this acquisition was for them improving their audio game. It's hard to really know for sure, but it is obvious enough that

bringing in that talent and tech on board surely helped them secure that lead in their segment. Not to mention what I was talking about before, this Apple ecosystem of devices, they just have this distribution advantage and that sure helps a heck of a lot as well. Yeah, yeah, exactly. I totally agree with that. So I'll let you go with the next one. So Google acquired Nest for $3.2 billion in 2014, quote here. Nest was a Google shop from the get-go former exec Tony Fidel co-founded Nest in 2011 with backing of Google Ventures. Three years later, Google bought the Nest in-house with a $3.2 billion deal. Now, I still think it's hard to say for a lot of these line items on other bets or these other types of acquisitions. This kind of just feels like

it's just part of that small circle over on their statements. And it doesn't even matter. When the core Google business segment being as profitable as they are, like you said, they make that free cash flow before breakfast. Growing at the pace they are with the core biz, the moat competitive advantages that they've established, it sure gives them some time to integrate everything I'm talking about. Among those integrations is this smart home and other long list of initiatives, but they want to have smart infrastructure. It's really sad. Toronto actually was set up to have a smart city development on the lakeshore east end of Toronto and Google pulled out. I think they pulled out last year

and the thing was kind of falling apart. They want to have this like really smart AI, internet of things, connectivity among their everything. And this is one of them inside the home as well. Yeah, I think I agree with that. Again, I'm not familiar enough with how big of a segment it is for Google right now, like what that Ness acquisition represents. But of course, it shows that they wanted to put emphasis on that Google Home. And I think there's still a pretty decent player, right,

in market share. I know like the HomePods or whatever you want to call them. You have Alexa, Google, and I guess Apple's pretty behind on that one. I believe Google Home owns the market share, like owns the most market share. Really? Okay. With Amazon behind them. Again, I'm spitballing here but i think that it's a big market right like the smart home is a huge market and they've already made such a like they've already kind of entered in there they get like you know there's alexas and the google homes they're like 30 40 bucks i would be i wouldn't be surprised if they don't make any money on that. They're just trying to get in the home, right? Like they just want to start, you know, land

grabbing, no pun intended, literally land grabbing. Yeah. Yeah, exactly. Now moving on, PayPal acquires Honey for 4 billion in 2019. So with that acquisition, PayPal also acquired the 17 million active users at the time. I think the deal made sense considering that it does allow PayPal to leverage its merchant base here with targeted deals for Honey users. It also ensures that PayPal becomes a top payment option when someone is using that Honey service. So for those of you not familiar, Honey is just a way to you know scour the internet to find like the best deal possible for an item that you're looking for yeah the value prop is supposed to be like when you're on checkout the honey extension recognizes you're on checkout and

throws you a coupon code if it's available i don't know what the unit economics are of this business i don't know if it's disclosed anywhere. I will say anecdotally, I have had this extension installed on my Chrome for like a year and never gave me one single discount. I've talked to some friends and they've said it's great. And maybe it is great for some sites, but the places I shop online, like in the algorithm I live in, I had literally zero success using it. So I take that for what it's worth, which is probably nothing. Yeah, no, that's a good point. I've never used it myself, so I just kind of know how it works, but that's about it. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using

Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense, and with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly.

Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. Now moving on to Microsoft. Oh, there's going to be a lot of Microsoft acquisitions on here.

Some good, some bad, and some ugly. And we'll see kind of a pattern, too, happening with when the bad acquisitions were made. Yeah, when they stopped, too. Steve Ballmer. So the first one here, it's Microsoft $6.3 billion acquisition of AQuantive in 2007. of AQuantive in 2007. It's probably one of the worst deals of the Steve Ballmer era, where essentially Microsoft just a few years later in 2012 wrote down almost the entire value of that deal. The history behind that deal was Microsoft was trying to compete with Google in the ad search market. It's also just a bit before that acquisition a couple years before they launched

Bing. And so I think it may have had something to do with that. So from what I saw, Microsoft did a really poor job here of integrating a quantitative at the time and overpaid to essentially make sure that it wasn't being acquired by competitors. We're going to be talking about a lot of Microsoft acquisitions on this list. Because after all, the investment thesis is very simple on Microsoft. It is a two and a half trillion in market cap tech company that is still allowed to do acquisitions without any pushback. Meanwhile, Mark Zuckerberg can't even buy a gift company. So take that for what it is. There is a very clear distinction from when Balmer was CEO and when Satya comes in. So stay tuned for as these deals start scaling and which

ones start working. Hint, there's someone different at the helm making decisions. I just wanted to add quickly, maybe, you know, the reason that Microsoft is allowed to still do deals today is because regulators just look at past deals that were made by Steve Ballmer. They're like, you know what, let's just let them. They'll probably screw it up anyways. I would say sure. And then you look at the amount of deal flow that Satya has done since he became CEO. Like, it's actually crazy. And right on Microsoft's website, you can Google search in Microsoft acquisitions. It's all tracked on and deal size on Microsoft's website. So it's not like some other outside source. And you'll see there's some you we don't even know

about because they're small. These guys are tacking on lots of businesses. All right. In 2020, Intuit acquired Credit Karma. It was a bit goofy, though, because the U.S. Justice Department said that to permit the merger, they had to divest of Credit Karma's tax business. And that business was sold to Square. Okay, interesting. And they paid $50 million for it. So I know what the comments I'm about to make are not really specific to Credit Karma. I think it Okay, interesting. And they paid 50 million for it. So I know what the comments I'm

about to make are not really specific to Credit Karma. I think it's maybe interesting. They're already big players in personal finance, Intuit is, with their Mint product and a few other things. However, I wanted to use this as a time to talk about Intuit's acquisition strategy, because they've been sneaky, sneaky good. In 1999, they bought computing resources, which allowed them to start offering payroll on QuickBooks. Nice little buy on the tech instead of building it. And they've done tons of stuff like this. They've done over 60 small acquisitions that you don't really know about because it just bolters on. They're like, oh, we need this

feature. QuickBooks will be way stickier if we have payroll on it. Let's buy payroll tech. And so then they kind of integrate it really well. So they've been really good at that. It's just kind of like buying features, right? It's that kind of strategy. However, in a new kind of wave, they bought MailChimp last year for 12 billion, which wasn't even on this list because it was outdated because it's so new. But hey, that's pretty significant. So shout out, by the way, shout out MailChimp for sponsoring this show. Trust me, if you are not using email marketing, just talking to you like man to man or man to woman, the MailChimp software is solid. And if you are not doing email marketing,

you're literally shooting yourself in the foot just as a pro tip because that's where a lot of sales come through. So especially for online businesses, you got to be doing that automation, man. Yeah, now moving on, not too much to add there. So we'll move on because we have quite a few to get through

and we don't want this episode to last two hours. So Bradden can go enjoy the florida sun dude i can't wait all right now another disaster from microsoft so microsoft paid 7.2 billion for nokia in 2014 it's actually considered to be steve volmer's 7.2 billion goodbye present to Satya Nadella, who took over as CEO in early 2014. That's a hilarious way to frame it. By the time the deal closed in 2014, Ballmer was obviously gone. A year later, Microsoft wrote off most of the deal and announced 1,700 job cuts. The Nokia deal was really a relic of that Steve Ballmer era. And essentially, he said, apparently in 2007, that the iPhone had no chance of gaining market share.

Let's just say there's been better CEOs than Steve Ballmer. I'll just say that. It's hilarious how rich he is. It's crazy because he just racked up so much Microsoft stock because he worked there for, I think like 30 years. Correct me if I'm wrong. Yeah, he worked there for a while. Yeah. Yeah. He worked there for like ever, climbed his way to the top. I'm sure he was a smart guy and a really good executive, just not the right guy for the throne. Not the right guy for the throne, you know, not the right guy for the throne. So the Satya era is a lot better. All right. Speaking of said era, Microsoft acquired GitHub

for seven and a half billion in 2018. GitHub is the largest host of open source code in the world. If you are not familiar, if you're not a developer, just recognize that GitHub is literally one of the most important businesses in the world. Seriously, it is. GitHub is a top 10 biz model in the world, from my opinion. I actually mean that this will absolutely turn out to be one of the best acquisitions of all time. In my opinion, this is my opinion. I'm calling it now. I think we will look back as GitHub as one of the best acquisitions of all time. This is incredible business. Yeah, yeah, I think I agree with you. it's a really interesting business that they acquired and i think it fits well with the whole microsoft ecosystem so not not much more to add there

they acquired so much of the developer ecosystem and so that kind of happened like overnight and now it surprised a lot of people uh more microsoft acquisitions here they acquired xenomax for seven and a half billion last year. This is part of a string of IP and game development studios they've been buying up. Obviously, the latest with the blockbuster purchase of Activision Blizzard. But this game studio has some pretty big games. Elder Scrolls, Fallout, Doom, Quake, Dishonored, to name some. Many years back, Simone, my brother and i spent hours that

should never be repeated playing the elder scrolls games morrowind oblivion skyrim those are the ones i think those like number two three and four i may be getting that wrong great games and just so nostalgic thinking about playing those games. So Microsoft owns that those series are worth a ton in terms of IP. Yeah, I used to play, you know, the first Doom back in the day where you were definitely too young for that because it was on a way on a disc on a floppy disc if I remember correctly, but the Quake franchises I played quite a bit too when I was younger and played online when it was like dial up modem. You'd like skip and try to shoot someone.

It was like almost impossible. Those were those were big, big games back in the day. Yes, you're right. They are a little before my time. But for you, I mean, that would have been the bread and butter. Yeah, yeah, exactly. Now, moving on to another Microsoftrosoft acquisition again a lot of microsoft acquisition this one was under steve ballmer so it's microsoft buying skype for 8.5 billion

it's actually probably one of the better ones in my opinion i know there's a lot of people that will disagree with that but one of the better ones from a Steve Ballmer perspective. Wherever that bar is set, yeah. Exactly. So the deal closed in 2011 and essentially has since integrated video chat services across its business and consumer app portfolio. Of course, people, I think, still use today the word Skype. I'm going to Skype you or something like that, almost as a verb. I am aware that they've phased out Skype for Business.

Now it's Teams. And I believe even the personal version, they're also phasing out, if I remember correctly. But at the same time, I have to think that they used a lot of that talent, but also technology to build Teams. And Teams is a very popular platform for enterprises. We use it at my job, and I know tons of other people that use it at their work as well.

Yeah, when I was on the Microsoft ecosystem at work with my corporate job, Teams was kind of integral. Now, you're right. This deal gets dunked on a lot as a bad deal for some reason. And sure, maybe financially, if you looked at what the unit economics of Skype brought in, maybe that's true. But if they didn't have that in-house tech and talent,

would they have been able to build teams with the correct agility to deliver it at the most important time of remote work taking off. That's really hard to say. And if my speculation is correct, then it's a damn good deal because Microsoft ate tons of market share during that time when Teams was the biggest competitor to the Slack and Zoom ecosystem. It's kind of like you're either in Microsoft using Teams and all their Office 365 stuff, or you're using Mac, Slack, and Zoom. That's kind of the other tech stack that a lot of people are using. And so it's really hard to say, but I have a feeling they would not have been able to pull that off with the correct agility in 2020 like they did. And it was super important for them. Yeah. Yeah. No, I agree with that. We'll go on to our next one.

Google bought Motorola Mobility for $12.5 billion. Google's biggest ever acquisition turned out to be a misfire, to say the least. The deal closed in 2012 for this Motorola Mobility business. Apparently, yeah, so here I have the notes here. Google then sold it to Lenovo for just under $3 billion while holding on to those patents. So this was 10 years ago. And to be completely honest with you, I don't know a dang thing about this deal. However, I'm going to repeat myself here, which is typically when a company spends $12.5 billion on an acquisition, it is a colossal failure and they bury their own grave. Do you think that's a fair sentiment? $12.5 billion on a shitshow of an acquisition is typically a way to bankruptcy?

Not if you're Microsoft or Google. Google shares are up 800% since then. They'll just be all right. They're on another level with just another blip. And when you're producing that much cash flow, you can afford to make these kinds of mistakes. Yeah, no, exactly. Not too much to add there. It's kind of fascinating how companies were just going after phone makers back then. But that uh but it makes sense right like hindsight what if you won yeah yeah it would have been at the time obviously apple wasn't as dominant

with the iphone and i guess android was starting to emerge i'm trying to i think so around that time like it was still a little later blue ocean it was still a blue ocean for someone to come in and win at that point. So, I mean, the risk rewards maybe seem to make a lot of sense. All right. Amazon bought Whole Foods for $13.7 billion. Now, this is an interesting one for us to throw on the list because Whole Foods, of course, is not a tech company. It's a grocery store. But I think that it's important to show that technology across every single industry is needed. It's not just a nice to have. Every industry needs tech to keep up.

And Amazon wants to revolutionize that grocery store in-person experience. Have you seen those cool stores where you just put it in the, you put it in the cart and knows exactly what you bought. I've heard of them, but I've not, I've seen like videos. I've never stepped foot. Yeah. No, I've never stepped foot. Yeah. So they want, I mean, they have like their eyes on a big prize here with some of these like brick and mortar plays and they see a lot of them as let's use our tech expertise and revolutionize the grocery store experience, just like we revolutionize the retail business.

And so these things kind of seem to all become connected. And this is just the start of, if you are not on the forefront of tech, doesn't matter what your industry is. When you're at that scale of like trillion dollar assets, you can't fall behind or someone, some Stanford engineer will come eat your lunch. And so I think that that's important to think about. Yeah. And I think Amazon still getting flack for that acquisition, because I think it's not a lot of investors are not seeing how it's still kind of helping the business and they yeah they still only have a fraction of the market share when it comes to grocers in the u.s i think it's like very low i'm going on memory here but i remember

seeing something where it's like low single digits if not well think about two percent it's a completely different customer base of who's shopping there, right? So that's why it was a bit of an interesting takeout target for grocery stores because it's just serving a specific type of customer. But maybe that's what they're doing, right? Because they're investing all this infrastructure. Probably the high luxury type customer set are the ones that maybe are going to appreciate that. I don't know. Yeah, I guess it's like very similar to Trader Joe's, right? I guess they're more competitors in that space.

Yeah, you walk out with a lot less money than you previously owned after you go to Whole Foods. Yeah, yeah, exactly. Now, moving on to our next one, Microsoft acquires Nuance for $19 billion. That's actually 2022, I believe it's closing. This year it just closed, if I remember correctly. Just closed, I believe. Yeah, I think it closed like two weeks ago or something like that. A little more, but yeah, recently.

Yeah, recently. And then Microsoft spent $19 billion to buy Nuance. It's a Massachusetts-based company that supplies virtual assistant speech recognition technologies to hospital, banks, and retail business. By buying Nuance, Microsoft is aiming to expand its presence in the enterprise software market, including the lucrative healthcare sector. And Satya Nadella did mention that AI is technology's most important priority and healthcare is the most urgent application. So for me, I guess I'm not super familiar with Nuance. I had heard of this deal, but aside from that, I guess it remains to be seen. But I mean, Satya Nadella, I'll give him

the benefit of the doubt. I'll just say that. He has to make a lot of mistakes for me to lose trust in his capital allocation decisions that's all i'll say facebook we haven't had a big facebook acquisition on this list really because they are not allowed to make acquisitions the ones they did that are not on this list instagram like you mentioned those were not that expensive and baby what a good acquisition and they bought oculus too which is now like the whole their business right like they're going full in on the metaverse so yep facebook's most expensive acquisition was neither instagram for 1 billion nor oculus for 2 billion but the 22 billion dollar deal to buy messaging app whatsapp many of you know what that is,

probably have it on your phone as it is the largest messaging app on the planet. The price tag ballooned to $22 billion by October 2014 when the deal closed. Man, it's been a while now since they've owned WhatsApp. This deal closed in 2014. I am going to be retired on a beach, which I'll be there very shortly after recording this, but however, not retired. I'm going to be retired on a beach somewhere and I'll say, Seymour, one day, one day they're going to monetize WhatsApp. I mean, it's worth a ton of money. This asset is worth tons of money. This is the largest messaging platform on the planet, has tons of upside,

but clearly monetizing it has not been Zuck's main priority with this asset. So it's still one of those huge, how do you value this sum of parts? You have Reality Labs, you have Facebook Blue, you have Marketplace, this huge business. Now you have WhatsApp. They say Instagram, probably not. And so it's a really a sum of parts analysis on the valuation of Facebook these days. And I'm losing faith in the fact that like, how do you really value this thing? Like what has to happen for them to start monetizing it? I don't know. I haven't heard of anything about it in years at this point. And still talk about it like one day they're gonna monetize whatsapp like sure maybe they will yeah maybe zuckerberg will monetize whatsapp in the meta who knows yeah

messaging in the metaverse but then if I can just teleport virtually to be beside you, what's the point of WhatsApp? Just saying. I mean, this story has become so confusing, to be honest with you. Yeah, exactly. And I mean, look, we'll see where it goes. I'm like you, I'm not sure exactly how they'll monetize it. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want.

And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going

to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. Moving on. So HP's infamous 25 billion deal for Compaq in, I put 2021 here, but I believe that was a typo. I think it's 2001. No, I think it was earlier than that. Maybe you can check when I'm reading this. Yeah, I'll check while you're reading out here.

Yeah. So it's widely considered to be one of the worst mergers in history. I remember back in the day, Compaq was pretty big. And of course, you had HP as well. That was pretty big. And they had to write off, I think, a big part of that business. They paid $25 billion for essentially what was just a computer manufacturer, right? It's just one I wanted to add because just the price back in the day, can you imagine what it would be in today's dollars? It would probably be double that value

if we think about it. Yeah, like at least, right? I just found a really awesome hp.com press release from actual HP. And it says here, September 3rd, 2001 press release, Hewlett-Packard and Compaq agreed to merge creating an $87 billion global technology leader. It's aged like milk. It's really hard to think back, especially when that was like the wild wild west and tech adoption and you know valuations in tech too hardware was really not defensible at all and that's what compact was hardware pcs not defensible tech change too quick only a few players really stuck it out and so this one did not age good at all as is an understatement. Yeah, and it happened, you know, not that far. That's kind of when the tech bubble kind of ended, right?

Yep. 2001, right around. So good timing there at an HP buying compact. Yeah, like valuations literally imploded shortly after, right? So, oof, that's a tough one. Should we move on to LinkedIn here? Yeah, let's do it. LinkedIn was purchased for $26 billion in 2016 from none other than Microsoft. They bought LinkedIn for what I remember, if I'm remembering correctly,

a 50% premium from what LinkedIn shares traded publicly on the public markets. And I remembered thinking to myself, Simon, what a goofy purchase. Boy, was I wrong. Like, you know, like that was just such a silly reaction. LinkedIn revenues just passed $10 billion and they were on their most recent quarterly results grew 37% year over year on the top line revenue. Sure, LinkedIn may be the cringiest place on the internet, but everyone has it and everyone uses it. It really does. I haven't said this about a tech company in a while. It really does have almost perfect product market fit, which is really rare to find that for a social network. For social network, especially product market fit is like so hard to find.

And LinkedIn literally has perfect product market fit. Yeah. Yeah. People who use it really love it on a regular basis. Obviously companies use it to attract new talent. People use it to find jobs. People use it to promote their business, to keep up their network of people up to date. And you know, it's really used very often. I don't use it all that much because, you know, I don't want to be thinking about work all the time. And I find LinkedIn just kind of, you know, it gets you back in that atmosphere. But I know a lot of people I work with, they do use it very often. And I know that staffing and talent acquisition for businesses now, they rely on LinkedIn very heavily. Yeah, it's become important for that.

It's become important. It's another marketing platform too, right? It's another top of funnel marketing platform. All right. This is a good one here. Yeah. Salesforce buys Slack for $27.7 billion. That happened in 2021. It closed in 2021, but it was announced in 2020. So the acquisition

of Slack, the idea behind it, it was to combine Slack with Salesforce customer 360 CRM to create the operating system for the new way to work and to compete obviously with Microsoft Teams. I think it was a pretty smart acquisition from Salesforce to give that alternative to the Microsoft ecosystem like you'd mentioned previously. So I think it was a good acquisition. It wasn't cheap, but they did buy it

when Slack had been a bit on a drawdown, I think it was a good acquisition. It wasn't cheap, but they did buy it when Slack had been a bit on a drawdown, I think at that time, right? Slack had not been loved by the public markets since its IPO. I forget, I'm making this out like 2018 at IPO, I'm just spitballing a number here, but in that area. And the market just didn't really love it for whatever reason. I always thought it was heavily under-earning. Dude, I use Slack every single day and I don't pay a dollar. The freemium plan, they seem to really be under-earning. And of course, this is a strategy from people way smarter than me, but they are under-earning earning and i think that the potential for slack is it's dude the product is just it's it's unbelievable i use it ever i use it literally

eight hours a day do you like it more than teams you've used yes well here's the thing you need to use slack pretty much with another video typically you'll be yeah typically you'll be on like either the zoom stack or the google meet stack like you'll be like in the google ecosystem and you can combine it with slack versus microsoft it's all like kind of integrated with teams which is good i guess like i still think as a pure chat platform slack works the best without a doubt in my mind after using both of them for a long time okay no i was curious because i've never used slack i've seen how it looks but i've never experienced it

myself so that's good to know it's crisp i like it i just threw this one in here with no notes just s&p you know they've finally completed that merger with ihs market so the two of them have these like data software service applications as well among all of their other businesses that they have and so i thought this was pretty big because this is a 44 billion dollar tuck in from but it's basically a merger for s&p global and ihs market that just closed here in 2022 and my goodness that, that's a big deal. $44 billion. Yeah. Yeah. Now I don't have too much to add there. I didn't know you added that one. So I'll just leave it at that. Okay. Sounds good. Last one on the slate here, Simon. Cap us off.

Yeah. So this one, we actually talked about it recently on one of our news earnings releases, made news around the world, basically around the investing world at the very least. Microsoft buys Activision Blizzard for $69 billion. This one has not closed yet, but it's a massive acquisition. I think it's the biggest of all time if we're just looking at the acquisition costs. Obviously, it may not be if you're looking at inflation adjusted numbers, because clearly a huge acquisition 20 years ago might be worth a lot more in today's dollars. But I think this one has a lot of potential for Microsoft. Again, Satyan, I think we have to trust that he knows what he's doing when he does acquisition, but really getting Microsoft's ecosystem, especially when it comes to gaming, clearly even more entrenched.

And I think it's going to open a lot of doors for the meta, whatever the meta will look like. No one really knows, but I think it's a solid acquisition for Microsoft. acquisition from Microsoft and they bought it at a pretty reasonable price I think too because Activision Blizzard was just immersed in scandals to say the least. Activision Blizzard was not a liked company on the stock market for the past two years at least. Great compounder before then but then yeah not so much and so they purchased it at an opportunistic time for one. And the IP on these games is ridiculous. Call of Duty obviously has the staying power of just forever at this point. So they purchased it for 69, nice, billion dollars.

They purchased it for $69 billion. And if you look at their presence in gaming, it just makes a lot of sense for them to continue to tuck in this IP. And they have a ridiculous scale distribution advantage by owning the hardware. We know how important that is. We know how important it is from a distribution perspective in tech to also own the hardware. Apple has now written the book on that and they own the Xbox. So this is very important, I think, for gaming moving forward. They're the biggest gaming company in the world now, I guess just behind Tencent maybe. Yeah. And think about it too,

with now the catalog of titles that Microsoft will have, like they will have a very attractive library of games and titles if they want to create. For a subscription offering. Exactly. And probably be able to have different tiers charge a pretty, pretty good prize, but it will probably still be very good value for gamers so i'm thinking that'll be very interesting to watch in the upcoming years following the closing of this acquisition what they do with that subscription service yeah that like xbox live i forget what's dude i don't play console games but we had talked about it. I think. Yeah. Yeah. That subscription offering is just from what I've read about it is just a no brainer.

If you plan on playing any of those games. Yeah. You know what I mean? Like it's just seems like so much value. So yeah, I think that's good. We just rifled through 20 odd names. So that was pretty cool. Yeah, it was fun.

Let's move on to stocks on our watch list presented by our friends at EQ Bank. If you have not checked out EQ Bank or in past episodes, we talked with them directly on how to start doing digital banking correctly. how to start doing digital banking correctly. If you're a Canadian, digital banking makes a lot of sense and EQ Bank is the best platform. Dude, I got so much good things to say about their platform. All right. So let's, you want to kick it off here with stock on your watch list? Yeah. The one I have on my watch list is more one that I'm intrigued about. I'm not necessarily looking at pulling the trigger. The name is Cargojet, ticker CJT on the TSX. So Cargojet is a Canadian-based cargo airline. It does cargo shipments primarily in Canada, but also has some international routes. It's still a

relatively small company here, $3 billion of market cap. Cargojet has been in a nice growth trajectory. They've been benefiting from the switch to e-commerce over the years. It's grown the top line by more than 18% on average over the past five years. They've released recently their annual result, and it looked pretty good. However, the stock has taken a hit since. If I had to guess, there's two main reasons here. First, there was a lot of growth pulled forward here for Cargojet. Of course, pandemic, e-commerce was a big boom, especially when you look at their financial and you see that

their revenues increased 38% from 2019 to 2020 and then increased by 13% last year. The 13% is actually not bad compared to where growth was at pre-pandemic level. The second reason I think is probably pulling on it even more so is the increase in oil prices and the impact that it will have on their profitability. For those who are not aware, Jet Fuel is made out of oil. And of course, oil prices increase, their expenses will increase, and that's a big part of their expenses. It's a big part of the expenses for any airline company. Again, here they do pay a small dividend. And I think there's still a strong case that e-commerce will continue growing for years to come. The stock is down about 15% now over the past six months.

It's one I am keeping an eye on. I just want to see mainly those expenses. I want to see how it's trending. The revenue growth, I'm not too concerned. But the expenses, I think it's a bit of a concern and especially can they increase the prices or will they put a surcharge for gas prices? I'm not sure. So something to keep an eye on here. Cargojet had quite the run up. And I believe that this sentiment has been fairly negative ever since Air Canada entered the space in a major way, saying that they wanted to do more of this business and compete with Cargo Jet. So I think it's been kind of unloved ever since that announcement. Yeah, yeah.

And Air Canada, when we did the earnings, I looked at their cargo increases, and that was one of the bright spots for Air Canada. So I can definitely understand that sentiment. But yet, you know, their growth has been good. So I think to me, it's definitely the oil prices that are the biggest factor in my view. Yeah. Yeah. With this segment, we're trying to find, you know, good fundamentals, pretty good businesses with just unloved stock prices. I'm going to rifle off three names here that are all on rare 20% drawdowns. And I say rare, I've been saying that a lot lately because it's true. If you look over the past few months, one, 2022 has not been a good start for stocks. It's been one of the worst starts for stocks. I think it's the fourth worst year for stocks since 28. So

it's considerable. These three names don't draw down this much very often. Intuitive, These three names don't draw down this much very often. Intuitive Surgical, Accenture, and ASML. First off, ticker ISRG, Intuitive Surgical. The robotic assisted surgery business. They're gaining ground on hospitals as they seek better outcomes for patients. The DaVinci system is the best robotic assisted system. Holy, these are hard words to say. Robotic assisted surgery system. Once planted in a hospital, Simone, Intuitive continues to make money off instruments and accessory sales. Competition is so far behind them. It's ridiculous. Johnson & Johnson, they're trying to get something together. Medtronic, they're coming along, but they are behind 21 years on intuitive surgical. Really like the name. Accenture,

ticker ACN. This is a business I've been talking about a bunch lately. They are the tech consulting business. They had a great quarter. Revenue's up 24% in USD. Double digit growth across all geography groups, all industry groups, lots of growth still coming ahead in digital transformation and cloud computing. And last one here also on a more than 20% drawdown, ASML, I'll keep this one short. They have a monopoly on extreme ultraviolet lithography, aka EUV. EUV machine costs $150 million to make. It's core to how chips are made today. It is a bottleneck in the semiconductor business. ASML is a complete bottleneck, needs to be used, wonderful business, monopolistic on the EUV business.

Three very large caps, Intuitive Surgical is falling off a bit, but ACN, ASML, Intuitive Surgical, all large, huge companies listed in the US, rare 20% drawdowns, long-term compounders. I like them all quite a bit and that's why I'm talking about them now. No, that's good. Those were three good names. I think, did you have anything else or I think that's a wrap up for today? I think it's time for me to grab a beverage, walk out into the sun and take a few much needed days off. And so we appreciate you, Simon, for being flexible over the last couple of days. Very appreciated. Yeah. I mean, I'll also go walk in the sun, but I'll need to be bundled up pretty nicely. That's

the only difference. Do you have any vacations planned for the year this is you're getting a live look at us trying to figure out recording schedules do you have anything booked in the calendar right now no not yet no not yet we were waiting until the pre-arrival tests were going to drop just because it would create some issues with our work but now we still haven't made up our mind just yet but definitely take some time this summer yeah get something in Yeah. Get something in the calendar. Get something in the calendar. You deserve it. All right, guys. Thanks so much for listening. As I mentioned before, thecanadianinvestorpodcast.com is our website and you can go on there and support the show. Get a shout out like you did in the beginning. That was 20 big tech acquisitions.

a shout out like you did in the beginning. That was 20 big tech acquisitions. Stratosphereinvesting.com, the data visualizations that we launched yesterday are supreme. Literally, they're gorgeous. They're beautiful. I love them. Go check that out. That's stratosphereinvesting.com. We'll see you in a few days. Take care. Thanks so much for listening. this is the largest podcast for the investing category in canada and top five solidified in the business more people listen to us than tim ferris in canada simone you know tim ferris is you mentioned him i've heard the name but i don't know he's a huge podcaster he's like okay he's like yeah like i'm not trying to say we're like big shots now but that literally makes no sense to my brain given who he is he wrote the like four hour work week no oh yeah okay yeah yeah i googled it while you were talking about it i heard the name before but yeah i just uh he's that guy wasn't that familiar but yeah i recognize you've been doing this for a

long time so i mean hey we we keep compounding, baby. Thanks for listening so much. We appreciate you. Take care. See you in a few days. Bye-bye. The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast.

Always make sure to do your own research and due diligence before making investment or financial decisions.