The story
Founded by Kevin O'Leary.1
In 1986, Canadian businessman and investor Kevin O'Leary along with John Freeman started SoftKey Software Products, Inc. in O'Leary's basement with a loan of $10,000 from his mother. He convinced other companies to bundle SoftKey's products with their own, later licensing software from other firms, which proved more cost-effective than internal development.
In 1993, SoftKey International was created out of a three-way merger between SoftKey Software Products, WordStar International, and Spinnaker Software. Shareholders of Softkey Software represented about 53 percent of the new company's shares. After the merger, the company moved to Spinnaker's offices in Cambridge, Mass.
MECC and the Learning Company
In October 1995, SoftKey initiated a bidding war against Broderbund for Learning Company, launching a hostile offer valued at $606 million. SoftKey also announced it had agreed to buy the Minnesota Educational Computing Corporation (MECC) for $370 million, throwing a wrench into Broderbund's offer. O'Leary commented, "They're working on the economics of yesterday", stating that "Learning's premium-priced products were out of step with trends in the market."
After the acquisition of the Learning Company, SoftKey changed its name to "The Learning Company". A substantial percentage of the staff were let go, reducing it to a skeleton staff. MECC' senior vice president of product development Susan Schilling stated: "[O'Leary] had an interest in earning money. I'm not sure he had a desire to help children learn."
Acquisitions from 1994 to 1998
On September 14, 1994, SoftKey acquired privately held Software Marketing Corp., Phoenix, for about 600,000 shares of SoftKey common stock and the assumption of $1.6 million in long-term debt.
On November 30, 1995, the original Learning Company announced that it had sued the Tribune Company for violating securities laws as a "strategic partner" of SoftKey International. The next day, SoftKey agreed to acquire Compton's New Media from Tribune for stock valued at $106.5 million. Compton's New Media was a publisher of encyclopedia CD-ROMs, and was originally a unit of Encyclopedia Britannica.
In 1996, SoftKey International acquired EduSoft, a French education software developer and publisher, for $14.3M USD.
In March 1998, Softkey, now called the Learning Company, acquired Mindscape Inc. from Pearson PLC for $150 million in cash and stock. Broderbund's Red Orb Entertainment was moved to Mindscape.
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In June 1998, Learning Co. agreed to buy rival Broderbund Software Inc., publisher of the blockbuster game Myst, in a stock deal valued at about $416 million.
In December 1998, the Learning Company acquired Palladium Interactive.
According to Information technology consulting company Booz Allen Hamilton, two of SoftKey International's acquisition deals rank among the ten worst U.S. acquisitions during 1994–1996 as measured by shareholder value two years after the deal.
Sale to Mattel
In the fall of 1998, Mattel agreed to acquire the Learning Company in a stock-for-stock merger valuing the company at approximately $4.2 billion. The merger was finalized and unanimously approved by both companies' boards of directors on December 14. On May 7, 1999, shareholders of both companies voted to approve the merger. The merger was completed on May 13, 1999. Jill E. Barad, Mattel's chairman and chief executive officer stated "This merger gives Mattel a $1 billion software division with an unparalleled portfolio of branded content and profit margins exceeding that of our traditional business," The company was placed under Mattel's new Mattel Interactive division.
Aftermath
The sale proved to be fraught. A report from the Center for Financial Research and Analysis a few weeks after the merger highlighted the "lack of proper due diligence by Mattel during the Learning Co. acquisition," and listed numerous systemic problems with The Learning Company. A few weeks later O'Leary, who had been hired as president of Mattel's new TLC digital division, sold his stock in the company for $6 million. In the fourth quarter of 1999, Mattel reported a loss of $184 million, reportedly due to poor sales and inventory problems. The stock price valuation of Mattel dropped $2 billion in one day. Michael Perik and Kevin O'Leary, founders and heads of the Learning Co, left the company.
The Telegraph deemed it "one of the worst takeovers in recent history". Toy analyst Margaret Whitfield of Tucker Anthony Cleary Gull called it "a disaster for Mattel". Bloomberg, Businessweek, and CNBC all described it as one of the worst mergers of all time.
In January 2000, Mattel brought on software executive and former Sega of America president Bernie Stolar to assist with their financial troubles. On February 3, 2000 Chairman and CEO Jill E. Barad resigned from Mattel. The 1999 Annual Report began, "The bad news for 1999 unfortunately has overshadowed the good news. We are all painfully aware of the negative effect the acquisition of the Learning Company and its subsequent performance had on our results for 1999"
The acquisition saw the end of the mid-1990s edutainment boom. Former Learning Company educational design department manager, Toby Levenson, said that edutainment had become "a toxic word". Blake Montgomery of EdSurge wrote, "For many years, people making educational products didn't want them to be entertaining because that could be called "edutainment" and that would hurt your funding.”
Sale to Gores Technology Group
On April 3, 2000, Mattel announced its plan to dissolve its assets related to the software business. Gores Technology Group acquired the Learning Company for $27.3 million plus a profit-sharing agreement with Mattel, to create their entertainment, productivity and education divisions, which became GAME Studios, the Learning Company, and Broderbund respectively. GAME Studios was sold to Ubisoft in 2001. Gores subsequently sold most of the other holdings – including the edutainment series and the brand name the Learning Company – to Irish company Riverdeep Interactive Learning, which later became Houghton Mifflin Harcourt. Harcourt released several book sets under the Learning Company brand umbrella, including Oregon Trail Adventures, The Little Box of Love, and The Little Box of Laughs.
As of April 2018, Houghton Mifflin Harcourt has ceased using the Learning Company brand.
From Wikipedia’s article on SoftKey, shared under CC BY-SA 4.0.4