Walgreens buys Amazon-backed Drugstore.com

Walgreen Co. announced this morning that it’s buying Drugstore.com for about $409 million. Awesome news for the former dot-com darling, as Walgreen’s purchase price represents a 113% premium over Drugstore.com’s closing price yesterday.

And it’s really great news for holders of Drugstore.com stock (did you even know that exists?!), which surged 117% today after the announcement.

But it’s not such an awesome reminder for Amazon, which lost big on its early stake in Drugstore.com. As our own Paul LaMonica notes via Twitter, Amazon’s initial investment was worth $500 million, and it owned nearly half of Drugstore.com. As of today, Amazon’s stake has been diluted to 12%…and it’s worth only $50 million.

Oopsie.

But let’s travel back in time, shall we? To a time when the tech field was feeling bubbly … when valuations were soaring sky-high … Erm, well, anyway. Come back to the ’90s with me, when I was about 11 and experimenting with the flannel-shirt look.

Drugstore.com was a hot commodity when it launched in February 1999, smack in the middle of the dot-com boom. The story of its funding reads like one of today’s startups: It received early financial backing from Kleiner Perkins Caufield & Byers (now heavily invested in Twitter and others), and Amazon acquired a chunk of the company.

As a CNET article noted back then, Amazon and Drugstore.com did lots of cute things for each other as a result of the pairing: Amazon included a link to Drugstore.com from its home page, and Drugstore.com gave a free first aid kit to customers who came to its site via Amazon.

Everything was sunshine and sprinkles, and 11 months later Amazon plunked another $30 million into Drugstore.com (bringing its stake to almost 28% at the time).

Just a month later, in March 2000, the tech-heavy Nasdaq dropped 9% in less than a week; the tech bubble had officially burst. “Growth over profits” didn’t seem like a feasible biz strategy anymore, nor did completely ignoring P/E ratios.

Like many other dot-coms, Drugstore.com never reached its ultra-hotshot potential. The company has never posted a full-year profit, and its shares have fallen 53% in the past 12 months.

Maybe Walgreen can be the site’s knight in shining armor. The acquisition is expected to close in June, and Drugstore.com’s board unanimously backed the deal. Smart move, guys. -Julianne

Amazon snaps up the European Netflix

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Amazon announced this morning that it’s buying LoveFilm, a DVDs-by-mail and online streaming site that operates in the U.K., Germany, Sweden, Norway and Denmark.

The two companies have history together: In 2008, LoveFilm bought Amazon’s European DVD rental business. As part of that deal, Amazon became LoveFilm’s largest shareholder. Today’s deal (financial terms not disclosed) solidifies LoveFilm’s place in Amazon’s portfolio.

The move comes as Amazon is taking the Web by storm with a promotion leveraging another site it owns a significant chunk of: Groupon rival LivingSocial. Amazon spent yesterday selling $20 gift cards for $10 through the daily-deals site.

So will LivingSocial eventually go the way of LoveFilm and succumb to an outright Amazon acquisition? It’d be a pretty interesting addition to an “experimental e-commerce” portfolio that includes Woot, Zappos and others.

Let’s just hope LoveFilm fares better than poor Amie Street. -Stacy

Andrew Mason on selling out

I sat down with Groupon founder & CEO Andrew Mason in early October for a video shoot, and the subject of selling the company came up. Here’s how the discussion went:

Matt: “Have you had any buyout offers?”
Andrew: *laughter* “Have we had any buyout offers? I’m hoping like McDonalds or Exxon tries to buy us. Like someone totally weird.”
Matt: “Not google or micro-“
Andrew: “No, I want to be part of like GE or something like that.”
Matt: “Would you sell it?”
Andrew: “I would sell it to Exxon. I think that’d be funny.”

At least he didn’t say BP? -Matt

Google is on a shopping spree, making almost as many acquisitions so far this year as it did over the previous three years. CBInsights made a nice chart illustrating the trend.
And what’s Google buying? Almost exclusively, Web companies, especially those with social networking cred. Dave Goldman took a look today at how the company’s “fight Facebook” strategy is shaping up, and at the five social networking companies Google snapped up last month. -Stacy

Google is on a shopping spree, making almost as many acquisitions so far this year as it did over the previous three years. CBInsights made a nice chart illustrating the trend.

And what’s Google buying? Almost exclusively, Web companies, especially those with social networking cred. Dave Goldman took a look today at how the company’s “fight Facebook” strategy is shaping up, and at the five social networking companies Google snapped up last month. -Stacy

Amazon buys, kills Amie Street

Amazon had some M&A bombs during the dot-com era (the lowlights were Pets.com and Kozmo), but it’s also made some very prescient buys over the years, including Zappos, IMDB, Audible and ABEBooks. Lately, it’s been scooping up experimental e-commerce sites like Woot — and today it added Amie Street’s online music store to its portfolio.

And killed it. The site is currently “down for maintenance,” but a letter to customers sent out this morning warned that the site will basically go dark Sept. 22. Links will redirect to Amazon’s MP3 store, and customers have till then to use or lose any credit left on their account.

It’s less a takeover than a winding down; terms weren’t disclosed. Amazon was already an Amie investor, having ponied up during the site’s first fundraising round in 2007. The site drew notice for its dynamic pricing model, under which more popular songs were more expensive, but lately its leaders’ focus has been on the Songeza streaming media service Amie bought in 2008. That will continue, independently from Amazon. -Stacy

On what’s shaping up to be a quiet pre-holiday Friday, Fortune’s Adam Lashinsky speculates on one of Silicon Valley’s favorite cocktail conversations: What will Oracle buy next? After all, it’s been just over a year since the company’s last pricey buy, of Sun Microsystems. Larry’s crew gets antsy when they’re not out shopping
But Oracle isn’t the only tech giant with billions burning a hole in its pocket. The biggest cash stash belongs to Cisco — which would be a great strategic fit with Skype, but faces one giant obstacle to getting  that deal done. -Stacy

On what’s shaping up to be a quiet pre-holiday Friday, Fortune’s Adam Lashinsky speculates on one of Silicon Valley’s favorite cocktail conversations: What will Oracle buy next? After all, it’s been just over a year since the company’s last pricey buy, of Sun Microsystems. Larry’s crew gets antsy when they’re not out shopping

But Oracle isn’t the only tech giant with billions burning a hole in its pocket. The biggest cash stash belongs to Cisco — which would be a great strategic fit with Skype, but faces one giant obstacle to getting  that deal done. -Stacy