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Summary:

The tech industry has a new favorite sport: guessing who Apple will buy with its $50 billion-plus cash hoard. Since Steve Jobs mentioned the company was keeping its powder dry for possible deals, speculation over potential Apple acquisitions has run rampant and even includes household names.

cash

When Steve Jobs said his company was keeping its powder dry for possible acquisitions, a new favorite tech-industry pastime of guessing who Apple will acquire next was instantly created.

But much of this speculation has been pretty wild-eyed. Jobs himself can be blamed for the hysteria, since his words were highly suggestive. And let’s face it, $50 billion dollars is a whole lotta cash.

Blockbuster deals are out of character with the company’s conservative acquisition history, but it does pay to analyze the last few years when examining what makes Apple tick when it goes shopping:

The table above shows the last seven acquisitions by Apple, breaking down the company type and summarizing what Apple gained in the deal. In looking at the patterns in the list, you can start to uncover some possible motives:

Control. Apple likes to control its own destiny, which means controlling more links in the product roadmap. Because of this, the company bought both PA Semi and Intrinsity, which gave it, theoretically, more control over their mobile processor development.

Creatively monetizing market position. Apple has wisely looked to fully leverage its market positions through additional avenues of monetization. By buying Quattro Wireless, it was able to delve deeper into the well of advertising revenue made possible through mobile apps.

Product differentiation/creation. The leading consumer and personal technology company in the world today will, time to time, buy IP that can translate into new products and features.

Google. Let’s face it, much of what Apple does nowadays is in reaction to Google. Not only did Quattro Wireless put Apple into the mobile ad game, it was also in part due to Google’s AdMob buy. You could say Lala.com, Placebase and Siri also were partially motivated by the other big, fast-moving tech giant.

But what does this all mean for the future? Well, if we take the above motives and apply them to some of the current names being tossed about, it would look something like this:

My feeling is that any of the deals above are unlikely, but I do think Twitter and Spotify could make sense. Twitter because the price, while high, is digestible and Apple/Twitter is a highly disruptive pairing, mostly due to the possibilities it opens up for Apple’s growing interest in advertising monetization; Spotify because it would help boost the company’s push into streaming and subscriptions, though admittedly the technology could likely be built by Apple and Spotify’s existing label deals could be negated by acquisition.

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Source: flickr user Ben Chau

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  1. If buying a TV manufacturer is in the cards and there is a need for a similarly anal-retentive culture, instead of Sony, how about Bang And Olufsen? Less than $500 million takes it. 1% of Apple’s cash. Maybe those guys have enough juice to develop and get a white iPhone manufactured?

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    1. There’s a slight fit from a product sensibility standpoint, but Apple tends to both avoid a) hardware acquisitions and b) the very high end of product spectrums, which is what B&O is. I think they like volume more than the like selling small volumes of expensive products, which is what they would do with B&O speakers.

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    2. Very cool idea. Some overlap, but probably zero flexibility, on the design aesthetic that drives B&O sales, though, and Apple probably has the brand credibility to build its own audio/TV products now.

      If you break down Apple’s needs, they probably fall into core feature enhancements/defensive moves to support their mobile platform (unified comms) and iTunes (streaming).

      Other companies might go for CE manufacturers to broaden their brand, or large pools of users to increase the value of their Apple IDs, but Apple seems committed (and able) to build these internally. Despite this, Skype looks pretty attractive for a number of reasons, especially with their new sold-out-to-the-carriers stance.

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  2. what about netflix?

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    1. Another good one.

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  3. I highly doubt they will buy anyone on that last.

    They are more likely to buy ARM Holdings or Imagination Technologies. They already own a stake or have owned a stake in the past. Their hardware is currently used in both the iPad and iPhone.

    The other likely candidate is Akamai. Akamai’s CDN is already used by Apple. Apple already owns a stake in Akamai. This would be a great strategic investment for them to beef up the iTunes music store, MobileMe, and any other future streaming content (eg. LaLa).

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    1. @Praveen – Akamai is definitely interesting. Maybe they could see the value in investing in a big content delivery infrastructure if they could see return in the long run from better overall control of content services and through cost-savings. CDNs are low margin, though, so I’m not sure if they’d want to buy when they can essentially “rent”.

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  4. While we are at it, why not Akamai? They get to control more of the content delivered around the world.

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    1. Akamai is managing most of the web’s content.There is a chance of it.But it won’t help much to Apple.

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  5. Apple acquisitions have been about vertical integration. Anything that is a commodity part they would buy from the open market, but the vital (and high margin) pieces they like to own. Apple is now a big fish in the sea, so these small acquisitions just won’t improve Apple as much now a days.

    Apple buying Sprint and Clearwire would be my wild guess. With $30 Billion in cash they own their own wireless service destiny and a bunch of spectrum. Apple would have money to restack Sprint (turn off IDen ASAP) and convert to the Sprint and Clearwire networks to LTE within a 3.5 year span.

    ATT is already addicted to the iPhone drug today and Verizon will be in early 2011. Apple would continue to sell the iPhone on ATT and Verizon (don’t want any antitrust issues to creep up), but slowly Apple would have an integrated wireless network through Apple Wireless (iWireless???). Having a nationwide network is valuable to Enterprise customers and the Enterprise sector is a future growth opportunity for Apple.

    With Clearwire, Apple could undercut all the local service providers for home internet. With Apple Wireless offering home internet, the cable providers should be scared.

    Of course doing this would cement Android as the premier mobile phone operating system (on ATT and Verizon), but owning the network increases the revenue pie for Apple.

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    1. BrianB,

      I agree with you. Apple believes in vertical integration and makes sense if it could buy a wireless broadband provider. It has the content through iTunes and devices such as MacBook, iMac, iPod, iPad need connectivity to get the content delivered.

      I too thought about Sprint but another interesting company could be Comcast. Apple is struggling to get into the living room and Comcast has a good penetration into the living room. Additionally, it can provide wired and wireless broadband. There is a downside to the theory – it is opposite to what Apple TV does. Apple changed the music distribution and could possibly change television distribution too. Subscription model?

      Alternatively, Apple could continue to acquire small companies for their intellectual property like it did in the past.

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  6. I don’t know if any of these purchases helps to accomplish any of Apple’s goals. Social networks haven’t proved to have a long lifespan. If Apple buys Spotify, another solution will pop in it’s place eventually. Apple cound make their own subscription service. Disney is always the first to join any of Apple’s new ventures and Japan may never allow Sony to be owned by an American company. iOS is already the premier non-dedicated mobile gaming device platform so there is no reason to buy EA.

    Apple will probably keep doing what they are now: buying up companies with emerging technologies that makes it’s way into iOS products.

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    1. @David – I don’t really disagree with you. I think the odds of any of the above being purchased are low. Just basically dissecting the various companies being bandied about as targets.

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  7. I’ve always liked the potential of TiVo-Apple. I don’t know whether I’d checkbox it as “new product” or “monetize existing position,” but it’d definitely be a shot at Google. Lock up that homescreen UI.

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    1. @David – agreed, good one, for UI and patents.

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  8. It’s fun to think about how others should spend their money. About a week and a half ago I wrote what I thought would be the best target: Bloomberg.

    http://brianshall.com/content/steve-jobs-should-instead-have-dinner-michael-bloomberg-then-buy-bloomberg

    Won’t come cheap. Close to $25 billion! But, high-value content, global access, entry into Fortune 1000, sell a ton of iPads, iPhones, etc.

    I see little value for Apple in buying Twitter. And, with their new cloud center near completion, I’m not sure I see the sense in Spotify either, when they could do all that themselves.

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    1. Interesting thoughts, Brian.

      I am not sure if Apple would ever make a big content play – they are honey to content providers, particularly information and news providers like Bloomberg. In other words, these types of companies come to Apple, whereby Apple benefits through apps, advertising and hardware monetization. I am not sure why Apple would need to buy a Bloomberg, when I’m sure Bloomberg is working overtime to make their content available in everyway across iOS devices.

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  9. To counter Google, Apple should buy Yahoo. Then make the new Apple search engine(iSearch) the sole search engine allowed on iPhones. Instantly boosting Yahoo into one of the most popular mobile search sites. Which then all of Yahoos Ad revenues become Apples revenues and they instantly become the 2nd largest search engine in the USA with 75,000(25% of 300,000 iOS devices) new customers each month. To make it even more successful in the search industry they should by Ask.com too and use their search algorithms and ditch the deal with Bing. They’d get rid of the #2 and #4 search providers, they’d gobble up Yahoos 14.28% marketshare and Asks 2.28%. 16.56% is far from Googles 71.59% share, but with all the Apple Fanbois out there they’d all bail from Google to the new iSearch.

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  10. How much for Google?

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