Mattel paid $3.8 billion for Kevin O'Leary's company. Then lost $601 million.
In December 1998, Barbie's maker Mattel agreed to buy The Learning Company, the software firm behind Reader Rabbit, for $3.8 billion in stock. Kevin O'Leary had co-founded it as SoftKey and ran it as president.
The bet went wrong almost at once. TIME later reported that the unit lost $200 million in the second half of 1999. O'Leary left about six months after the merger. In February 2000, chief executive Jill Barad was forced out, CBS News reported.
Mattel's 2000 annual report put that year's loss on the software business at $601.1 million: $126.6 million in net losses from running it and $474.5 million lost on the disposal. In October 2000, Mattel sold the unit to an affiliate of Gores Technology Group for no disclosed price, in exchange for what its filing calls "future consideration."
In 2018, O'Leary told Selling Power it was his most memorable sale. "I'm not going to achieve that again," he said.
For anyone running an IT acquisition, that split is worth a look: in 2000, the loss on getting out was bigger than the loss on running the business.
AI-generated illustration with narration by an AI voice.
Have you seen a software deal unwound faster than this one?
What the captions say
- This is the story of how Mattel agreed to pay $3.8 billion in stock for Kevin O'Leary's software company, then let it go.
- Long before Shark Tank, O'Leary started a software venture called SoftKey with $25,000, plus $10,000 from his mother.
- O'Leary ran it as president. In 1995, SoftKey bought The Learning Company and took its name.
- Its titles included Reader Rabbit and Myst. In 2000, its next owner called it the second-largest consumer software company, after Microsoft.
- On December 14, 1998, Barbie's maker Mattel, led by chief executive Jill Barad, agreed to buy it for $3.8 billion in stock.
- It turned sour fast. The Learning Company lost $200 million in the second half of 1999, TIME reported.
- About six months after the merger, O'Leary and his co-founder were gone in a management shake-up.
- Barad was forced out as chief executive in February 2000. On the way out, Mattel's board agreed to pay her nearly $50 million, CBS News reported.
- In March 2000, the board decided to sell. That year, Mattel booked $601 million in software losses.
- That October, Mattel sold it for no disclosed price. TIME later wrote that Mattel gave most of it away for free.
- O'Leary later blamed the tech meltdown and a culture clash, TIME reported.
- Years later, the Shark Tank star called it his most memorable sale. Mattel had lost a chief executive, and $601 million in 2000 alone.
