How Apple’s Acquisition Of Lala Happened

Posted Jan 18, 2013

In December 2009, Apple acquired  Lala was a music streaming startup that was founded by Bill Nguyen and was funded partially by Warner Music Group.  Lala’s strength was that when you searched on Google for a song, Lala was one of the first results instead of an iTunes result.  Lala ended up partnering with Google for Google Music Beta.  Apple’s Eddy Cue felt threatened by Lala so a bidding war was starting to heat up.

Nokia executives started preparing an offer for Lala first in order to help with the development of Nokia’s mobile operating system.  When the Nokia offer came in, Nguyen called Google and said that they were talking to Nokia about an offer.  He was supposedly disgusted with Nokia’s $11 million offer.  Nguyen told Google what number they would accept, but Google ended up low-balling them to find out if Lala was bluffing or not.  Nguyen ended up setting up a meeting with Steve Jobs, Eddy Cue, and Tim Cook at Jobs’ house in Palo Alto.  Steve Jobs led the conversation while eating a beet salad.

?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?? said Jobs.  The number on the paper was $80 million plus $80 million in retention bonuses for the remaining employees.  Nguyen and several employees left Apple to start a new company called Color.  Crazy enough, those former employees even left millions in options at the $196.48 exercise price they had from their sales and retention bonuses in 2009.  Some of these engineers ended up back at Apple against after Color was acquired by Apple for a small price.  These same employees were brought back to Apple for “pennies on the dollar,” according to Aubrey Johnson, a former design exec at Color.