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Could Apple’s Past Help Us Predict Who It Acquires Next?

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When Steve Jobs said his company was keeping its powder dry for possible acquisitions, a new favorite tech-industry pastime of guessing who Apple (s aapl) 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, 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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37 Responses to “Could Apple’s Past Help Us Predict Who It Acquires Next?”

  1. If you look at where Apple’s brand positioning is, there is a clear case to be made that it could improve the quality of the content in its offer – literally lead a move away from MP3 to FLAC or some other lossless format of music. A good acquisition candidate might be Olive Media, which make audiophile digital music servers.

  2. Just to speculate – how about the micro-blogging site Tumblr? They are an interesting foil to Twitter who has gotten so big and is starting to march down the path of “let’s sell advertising to make some money” and may begin to annoy users. Tumblr seems to be catching on, and I think its creative user base matches well with the Apple brand. Something to noodle on –

  3. Just a thought, but I just don’t feel that Apple hired an M&A specialist just to continue its past pattern of relatively small acquisitions. So I don’t think that history necessarily tells us anything. Also it seems like Steve Jobs words at least hint at thoughts of a different type of acquisition. (larger)
    There are always issues behind the obvious so it’s hard for us meer mortals to sort out. I think we need to look at not only what a company could bring to Apple but what Apple’s style of management could do for another company. I like the THOUGHT of Netflix just because Apple’s video content offerings are so poor. But honestly I have no clue.
    Just for a lark I say let Apple keep holding on to its $$ until they reach 100 billion! Just to really blow people’s minds!

  4. Hugh Watkins

    Interesting list but I’m surprised that Netflix was not on the list. With the new Apple TV, Jobs is still trying to figure out how to turn the TV hobby into a real business.

    Netflix has done an amazing job of getting their player installed on the most consumer devices, this is going to be very tough for anyone to replicate soon. The iTunes content library with the distribution portals created by Netflix would be powerful

      • I think you could include Netflix, certainly, but the question to me is what are they getting? It would be a likely $10 billion purchase price, a price for which they’re getting 20 million subscribers (many of which probably already have billing relationships with Apple/iTunes). It seems pretty rich for an aggregator with limited geographic reach and one that, quite honestly, has a very limited streaming library.

      • A Netflix purchase is counter to Apple’s closed platform policy. Netflix is available on a wide variety of hardware/OS. If Apple purchased Netflix and tried to close down or restrict access to Netflix, I think they would invite antitrust concerns. If Apple can’t block out competitors, why waste $10 billion when the Netflix service is already available on the Apple TV and iPhone.

  5. They need to buy a good website software company. Their IWeb is a toy and is costing them money in web page ranking and lose of Apple ad revenue from it.

    They need better web site creation software for their growing ads. Better SEO and meta tags will get better placement in Google search.

    Maybe RapidWeaver?

  6. Let’s throw in some names:

    Unisys (Enterprise Support/Sales)
    Joyent (Cloud/SAAS) – Young version of Sun minus the hardware)
    Adobe (Creative Market)
    Nvidia (Video Cards) – Perhaps to renew the Intel licensing deal, they went with Core 2 Duo over newer parts because they prefer Nvidia over integrated intel video for reduced size and better performance. A new SOC built around the A4 (or future version) with an Nvidia GPU would be possible. Boosting Mac 3D capabilities with the latest video cards is another plus.

    For a high end production suite TheFoundry (Nuke/Mari),
    Side Effects Sofware (Houdini) and Luxology (Modo) would be cheap. Newtek os another option.

  7. “Let’s face it, much of what Apple does nowadays is in reaction to Google.”

    There is so much wrong in this statement… not sure where to begin. Apple was already close to buying AdMob when Google swept in at the last moment and got the deal with a higher offer. A very sneaky move. So Google reacted to Apple, not the other way around. Apple had to then settle on the second best option.

    What else did Apple do in reaction to Google? iPhone 4? iPad? New Apple TV which is nothing like Google TV? Macbook Air? Moving to Verizon? Fortune’s latest article shows that Apple rejected Verizon in 2005 but by 2007 they restarted negotiations and the 2011 release will be the result of their thaw from 2007 long before Android became popular.

    • Even if Google was reacting to Apple’s pending buy of Admob, Apple counter-moved once Google trumped them. Act-react; its a chess game.

      And if you look at much of their acquisition activity in recent years, much of the buys are in spots where Google can be considered a leader: maps, search, cloud. Not sure how you could rule out that Google’s positions in these markets didn’t weigh into their decisions.

  8. deraildoax

    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 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.

  9. 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.

    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.

    • 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.

  10. David Card

    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.

  11. 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.

  12. 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.

    • 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.

  13. 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).

    • @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”.

  14. 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?

    • 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.

    • 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.