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How Steve Jobs Buys a Company and Why Apple Bought Lala

Aubrey Johnson, a former Color employee, shares two stories behind the scenes at Apple’s acquisitions of both Color and Lala — both firms were founded by Bill Nguyen before being acquired by Apple for two very different reasons.

Like Pandora, Lala’s music was streamed from the internet rather than stored locally. This allowed users to listen to a catalog of over 7 million songs for free as a stream over the web — much like Pandora or Spotify today. Songs could also be purchased and downloaded, typically for a lower price than iTunes was offering.

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Johnson writes that Lala’s biggest strength was that it was at or near the top for many Google searches of particular songs, thanks to a search placement deal with Google. As a result, the firm was siphoning sales away from iTunes. As well, Google and Lala had partnered on Google’s Music service. Both Nokia and Google made lowball offers for the firm, and Nguyen headed to Apple to see if they’d be interested in buying his company.

In late November [2009], Nguyen was seated at the dinner table in Steve Job’s home on Waverly St in Palo Alto. Also present were Eddy Cue and Tim Cook and other Apple executives. Steve 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?” Bill agreed.

Jobs passed a piece of paper to Nguyen and Bill nodded. The deal was done.

After the acquisition, a number of Lala employees left the company with Nguyen, leaving millions in options on the table. Later, Apple apparently bought back some of those same engineers when the company purchased the remnants of Color, getting more experienced personnel for a significant savings.