Apple's Color Labs Acquisition Involves Only Color's Engineering Team

[MacRumors]

Late yesterday, The Next Web reported that Apple was finalizing a deal to acquire Color Labs, the video streaming service and app founded by Lala Media veteran Bill Nguyen. The report came at the end of a confusing day in which an internal memo indicated that the company was being shut down, only to have the company deny those claims.

AllThingsD now provides significantly more clarity to situation, revealing that Apple is only acquiring Color's 20-member engineering team for a relatively small sum.

What's really happening is that Color's engineering team -- about 20 people, comprising almost the entire company -- is being "acqhired" by Apple at what's being called a "nominal" price of something like $2 million to $5 million, according to multiple sources familiar with both sides of the situation. To repeat, there are no "double-digit" millions involved, according to many people familiar with the deal.

Apple is not buying Color's technology, intellectual property, domain names or liabilities. Those are being left with the company, which still has considerable cash in the bank -- something like $25 million -- and is going to be wound down.

Apple is reportedly bringing Color's engineers on board to work on cloud-related projects.

The report notes that there is a significant amount of bad blood between the various parties involved at Color and even Apple, contributing to the mass confusion yesterday about what exactly is happening with Color. Apple and Color have yet to comment on the deal.

Article Link: Apple's Color Labs Acquisition Involves Only Color's Engineering Team

[abhishake]

Dang, they must have some skillz.

[jessica.]

Originally Posted by abhishake

Dang, they must have some skillz.

Serious? This is the best you could come up with?

I have a feeling that we're going to see a social media YouTube-like site coming from Apple. Between this and Particle, it seems possible.

[everything-i]

Looks like some kind of iCloud based video offering is on the cards, will be interesting to see what they are up to with the recent HTML5 and video acquisitions.

[The Phazer]

Originally Posted by everything-i

Looks like some kind of iCloud based video offering is on the cards.

But designed by an engineering team who don't seem to have ever put together something anyone liked :-(

[samcraig]

Originally Posted by The Phazer

But designed by an engineering team who don't seem to have ever put together something anyone liked :-(

But if Apple releases something designed by the team it will be MAGICAL - no worries, The Phazer

[JAT]

OMG! They are buying people!

[Saladinos]

Originally Posted by JAT

OMG! They are buying people!

Almost literally. If I were on that team, and Apple paid $2-5M for the team, I'd want a share of that cash.

Between 20 people comes out to between $100K - $200K each.

[Krazy Bill]

I know profits are <cough> tight these days but perhaps Apple can grow the OSX team from 2 people to 3 now?

[JAT]

Originally Posted by Saladinos

Almost literally. If I were on that team, and Apple paid $2-5M for the team, I'd want a share of that cash.

Between 20 people comes out to between $100K - $200K each.

The use of the term "acqhired" suggests they get it. Also, those pesky laws about it.

[Zunjine]

Originally Posted by The Phazer

But designed by an engineering team who don't seem to have ever put together something anyone liked :-(

There's a difference between a bad product and a bad business model. By all accounts Color's engineering team is packed with talent. The business wasn't sound and this hampered adoption and utility due to frequent, unsuccessful pivots.

[KdParker]

Originally Posted by JAT

OMG! They are buying people!

Is apple getting to big to fail.

[topmounter]

Originally Posted by Saladinos

Almost literally. If I were on that team, and Apple paid $2-5M for the team, I'd want a share of that cash.

Between 20 people comes out to between $100K - $200K each.

So what you're saying is that... You want to get paid to disembark a sinking ship and board a ship that is not sinking?

[bedifferent]

"'Color Labs' is people!"

http://www.youtube.com/watch?v=8Sp-VFBbjpE

Originally Posted by JAT

OMG! They are buying people!

[ddehr026]

Originally Posted by topmounter

So what you're saying is that... You want to get paid to disembark a sinking ship and board a ship that is not sinking?

I'd venture a guess that a company that has roughly $25M in cash on the books with total employees of <30 is hardly sinking.

[paul4339]

Originally Posted by Saladinos

Almost literally. If I were on that team, and Apple paid $2-5M for the team, I'd want a share of that cash.

Between 20 people comes out to between $100K - $200K each.

I guess it depends what the deal was and how much the employees got out it... There's not much to stop Apple from saying to all their employees: if all 20 of you quit and join us, we'll give a $150k sign-up bonus to each (maybe throw a million to the company as goodwill, so they won't put up a fuss).

... sorta like an employee Groupon: buy all 20 and the deal's on!

[tbrinkma]

Originally Posted by Saladinos

Almost literally. If I were on that team, and Apple paid $2-5M for the team, I'd want a share of that cash.

Between 20 people comes out to between $100K - $200K each.

Not even remotely literally. Color had a software engineering division. These employees worked for that division. Apple acquired the division. These employees still work for that division. (They have the same option to leave during or after the acquisition as they did before the acquisition.)

The difference between doing things this way and individually hiring the employees amounts to both parties getting to ignore any non-compete agreements the engineers may have signed, and a simplification of the paperwork involved for each employee brought over this way. (At the expense of a single set of additional paperwork for the acquisition itself.)

It boggles my mind that people either don't understand this (or simply don't know what "literally" means), but feel the need to make broad, unfounded, rediculous statements anyway.

----------

Originally Posted by ddehr026

I'd venture a guess that a company that has roughly $25M in cash on the books with total employees of <30 is hardly sinking.

Given that they supposedly had a $41M initial round of venture capital, if they aren't actively sinking, they certainly seem to be taking on a lot of water.

[mightymike107]

It's worth mentioning, since I didn't see it elsewhere, that Lala (Bill Nguyen's previous venture) was also purchased by Apple back in 2009

[8ate8]

Originally Posted by mightymike107

It's worth mentioning, since I didn't see it elsewhere

Like in yesterday's news post perhaps...

[Saladinos]

Originally Posted by tbrinkma

Not even remotely literally. Color had a software engineering division. These employees worked for that division. Apple acquired the division. These employees still work for that division. (They have the same option to leave during or after the acquisition as they did before the acquisition.)

The difference between doing things this way and individually hiring the employees amounts to both parties getting to ignore any non-compete agreements the engineers may have signed, and a simplification of the paperwork involved for each employee brought over this way. (At the expense of a single set of additional paperwork for the acquisition itself.)

It boggles my mind that people either don't understand this (or simply don't know what "literally" means), but feel the need to make broad, unfounded, rediculous statements anyway.

----------



Given that they supposedly had a $41M initial round of venture capital, if they aren't actively sinking, they certainly seem to be taking on a lot of water.

Erm... I know exactly what 'literally' means.

Apple didn't buy the company - none of its products or fixed assets were of value. What was valuable were the people. If those people didn't want to move and quit, the division would have no value. Those people don't belong to the company; they have no obligation to remain with that division.

Apple is quite literally paying for the people. It's their personal qualities and talents that give the division such a high value. Like I said, if it were me I'd want some personal reward for my personal contribution to that sales price. I think that would be much, much fairer than the alternative.

Actually, your notion that non-compete agreements are valid in California is 'rediculous'.

Originally Posted by Wikipedia

Non-compete agreements are automatically void as a matter of law in California, except for a small set of specific situations expressly authorized by statute. They were outlawed by the original California Civil Code in 1872.

Exceptions - valid non-compete agreements in California
There are limited situations where a reasonable non-compete agreement may be valid in California.
1. If an owner is selling the goodwill in their business.
2. When there is a dissolution or disassociation of a partnership.
3. Where there is a dissolution of a limited liability company.

None of those special situations apply here. In fact, several SV companies (including Apple) have been investigated for so-called "anti-poaching agreements"; essentially gentlemen's agreements that have the same effect as a non-compete. These practices are extremely detrimental to employees and the economy in general (like anybody needs less freedom to find work). They're illegal almost all over the globe.

As regards exception #3 (here), it expressly states that these you must agree to a non-compete "upon or in anticipation of a dissolution of, or the termination of [your] interest in, a limited liability company"

Anyway, it isn't my problem. Would that it were.

[illegalprelude]

I wonder why there is "bad blood" between the two companies

[Renzatic]

Now that Apple has bought the greatest color team in the industry, they'll get to work inventing a new color, fyornk, that'll be the most innovative, magical color in the rainbow.

Samsung will, of course, copy. But all they'll be able to produce is a cheap off-yellow color that only poor people will buy.

[Boatboy24]

Originally Posted by jessica.

I have a feeling that we're going to see a social media YouTube-like site coming from Apple. Between this and Particle, it seems possible.

Yep. Think about how shared photo streams work in iOS 6. As soon as I saw that, I thought they might be moving in that direction. Hopefully, it'll be better and more useful than Ping.

[MacinDoc]

Originally Posted by Renzatic

Now that Apple has bought the greatest color team in the industry, they'll get to work inventing a new color, fyornk, that'll be the most innovative, magical color in the rainbow.

Samsung will, of course, copy. But all they'll be able to produce is a cheap off-yellow color that only poor people will buy.

ROFL - your post made my day!

[Dorje Sylas]

Originally Posted by samcraig

But if Apple releases something designed by the team it will be MAGICAL - no worries, The Phazer

Sorry, this made me laugh. I'm assuming a note of sarcasm, correct? Apple has "magically" botched online and cloud things before. It's one of their weakest areas in the whole UI world.