Wacky Apple Acquisition Targets
October 28th, 2010The other day, Sony’s stock price soared several percent amid clearly unconfirmed rumors that Apple would make a bid for a hostile takeover. This would be an ironic development, in light of the fact that Steve Jobs said some years back that he wanted Apple to be more like Sony, not to mention his high admiration for the original Sony Walkman.
Certainly, the iPod become the modern day Walkman, quickly supplanting the sales rate of the original. By adding more consumer electronics gear to their lineup, Apple began to seem more like Sony, rather than just a PC maker with a predilection for building elegant products.
Nowadays, Apple boasts higher sales than Sony, and a far greater market cap. With over $51 billion of cash hanging around in the bank — or in investments — Apple is perfectly capable of buying up Sony, although the cash reserve after the transaction will be far less.
When making predictions, or spreading rumors, the tech media ought to use a little more common sense. You see, they should be examining Apple’s acquisition history, which doesn’t include purchasing sprawling multinational corporations. Instead, they focus on small companies that have developed technology or services they not only admire, but feel they could utilize for their own products.
So buying an online ad company begat iAd. The original purchase of NeXT gave us Steve Jobs in the executive suite of Apple all over again, not to mention Mac OS X and the salvation of the company. Buying P.A. Semi gave Apple the chip technology and the engineering talent harnessed to build those A4 chips in the iPhone 4, iPad, and other products. Indeed, iTunes is the direct result of another acquisition, an app known as SoundJam, acquired from a Mac utility publisher.
These clever strategic acquisitions were relatively inexpensive as such deals go, involved small groups of employees, and did not engender the severe issues that arise when two large companies combine into one, not to mention all those layoffs.
It makes no sense for Apple to buy Sony, a consumer electronics company whose best days are behind them. It’s not as if Sony has some fantastic invention that Apple craves, and, if they did, I suppose they could always offer to buy the rights for that alone, rather than a large company they don’t need, which would surely create problems that would dilute the combined firm’s value, not to mention the future prospects.
For the same reason, it makes little sense for Apple to buy up Adobe — although it would be a whole lot cheaper — or Face-book, Disney, or any of the other companies frequently mentioned as takeover targets.
I’d sooner believe that a couple of brilliant engineers in a garage, or a startup company with innovative technology, would stand a far better chance of receiving a phone call from Apple with a generous buyout offer.
On the other hand, picking a company that might be a little down and out and targeting it as a potential merger opportunity for Apple sure keeps traffic floating to certain sites. It’s also fun to talk about, though at the end of the day, you don’t see much logic behind these tall tales.
Of course, when Apple was suffering serious sales and profit shortfalls in the 1990s, there was loads of speculation that one of the larger tech companies, such as Sun Microsystems or IBM, would acquire them and fold their technology within a vast corporate bureaucracy.
If that were to occur, however, the impact would be very much the same as other mergers. Some of Apple’s assets would survive, but others would vanish, not to mention loads of employees who suddenly found themselves without jobs, or couldn’t tolerate their new bosses.
Take a look, for example, at Adobe’s merger with Macromedia. Flash was in, FreeHand was out, and Adobe fights to this day to justify spending billions of dollars to acquire an aging technology and make it relevant for smartphones.
There’s even some talk of a combination between Adobe and Microsoft, the better to compete with Apple, but that makes even less sense. If a company isn’t doing so well separately, such combinations rarely improve the situation.
Do you remember HP’s controversial acquisition of Compaq? Other than having another brand name with which to sell generic PC boxes, where was the advantage? Indeed, the executive credited, or blamed, for this merger, Carly Fiorina, was subsequently ousted from HP, and is now busy justifying that failure to potential voters in California, where she’s running for U.S. Senator.
The political implications, however, are beyond the scope of The Tech Night Owl. The point is that large corporate mergers seldom succeed. Focused acquisitions of smaller companies with products, services or technology that will advance the buyer’s portfolio and sales, are usually the most successful.
Apple knows that, which is why they will definitely not squander their huge cash reserves.
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And large corporate mergers attract the attention of the kind of agencies that are on the lookout for monopolies. If the developer of Aperture were to purchase the developer of Photoshop, for instance, that might get the Feds’ attention (although, oddly, when the cuurent owner, if not the developer, of GoLive acquired the developer of Dreamweaver, they got away away with it). On the other hand, as Apple’s cash reserves keep growing and growing — about 50 billion by now, if I’m not mistaken — sooner or later the company is come under huge pressure from AAPL shareholders to do SOMETHING with all that obscenely large and ever-growing amount of money (which is far greater than is needed to protect Apple from any unfriendly takeover attempt). Which means either start paying dividends, which Steve absolutely refuses to consider, or making investments. And investing in new startups wouldn’t put much of a dent in its current reserves. Buying an established corporation would. But what one? Of course, it wouldn’t necessarily have to be a tech company. Some kind of entertainment company might do.
I admit, there’s part of me that would love to see Apple buy Adobe – mainly because they’re a company I used to love that’s gone in a direction I really dislike over the last few years, and I have hopes Apple would be able to turn them around. Ghu knows I want *someone* to step in and lay the corporate smackdown on the people responsible for turning the Creative Suite into the equivalent of MS Office – trying to impose their own interface instead of the platform native one, software bloat, etc.
Apple appears to be a lot smarter as to how they’re spending their money. Unlike the folks at Redmond that due to their unending flow of income just like to throw it away. The last attempt was to buy Yahoo! at around $40 billion. Now, they’re building their stores to nowhere.
If any part of Sony at all would be of value to Apple, I think it might be their camcorders and cameras. Only because Apple doesn’t make any of those products and yet they’re easy fits into the iTunes and iLife infrastructure. The game division would actually be a bad fit because Apple already has its own game platform. They would just buy it to kill it.
@Al, Apple does make cameras and camcorders, only they are embedded in the iPhone and iPod touch. Next year’s iPad will like have built-in cameras too. So there’s little benefit to Apple there.
More to the point, what other Sony products would Apple need — and wouldn’t it be possible to acquire a single product line rather than mess with a tired, old company and waste billions of cash?
Peace,
Gene