The “Apple Should Buy This Company” Report
November 17th, 2016At one time, tech pundits wondered what company should buy Apple, and it’s true that, in the 1990s before Steve Jobs returned, that was not beyond the realm of possibility. In early 1996, Apple evidently negotiated with Sun Microsystems — do you remember them? — to sell itself. This came in the wake of the news that Apple lost $69 million in the December 1995 quarter.
In previous years, such tech companies as Hewlett-Packard, IBM and Oracle were also named as potential suitors, but negotiations reportedly went nowhere. One press report that covered the alleged negotiations with Sun claimed that, “Apple’s options are clearly narrowing.”
But Apple CEO Michael Splindler couldn’t make such a deal happen. Shortly after the talks with Sun failed, he was replaced by Gil Amelio, who actually tried to rebuild the company. So Apple went operating system shopping, trying to acquire technology to replace the aging Mac OS. The company’s own efforts, which included the failed Copland project, couldn’t bring its crown jewels up to modern standards that included advanced multitasking and memory management.
At first, it appeared that Apple would acquire the fledgling BeOS, which held promise. The company was run by former Apple executive Jean-Louis Gassée. But there was another, more intriguing possibility: Steve Jobs’ NeXT. As with Be, efforts to sell its own hardware didn’t gain traction. The Unix-based operating system garnered rave reviews, but not enough takers.
NeXTStep had the advantage of being processor neutral, meaning that it could be made to work not only on the PowerPC, but Intel too. That ultimately led to a decision that, when Apple went to Intel in 2006, really helped make Mac sales soar.
So Apple acquired NeXT in an approximately $400 million deal that brought Steve Jobs back to the company he co-founded as a sort of advisor. It didn’t take long for him to stage a palace coup and take over the company, first as “interim” or iCEO. The rest is history.
As Apple’s prospects improved, rather than seek a merger partner, Apple went shopping, buying other companies or products largely for technology. In 2000, Apple purchased SoundJam MP, an MP3 app, from Casady & Greene, an independent software developer. The creators of the app, which included Jeffrey Robin, came along for the ride. As most of you know, SoundJam morphed in iTunes. One of its lead developers, Jeffrey Robbin, is Apple’s Vice President, Consumer Applications, and has been the lead developer for both iTunes and the iPod.
Over the years, Apple has purchased lots of companies. The 2008 acquisition of PA Semi, for $278 million, helped deliver the technology to create cutting-edge chip designs. That purchase and other technology acquisitions, led to the launch of the A-series chips, based on ARM technology, which powers the iPhone, iPad and the iPod touch. In a surprising development, the Touch Bar in the new MacBook Pro uses a T1 chip and a mini-OS derived from the Apple Watch. So in a sense, these new notebooks have two different processors and two different operating systems.
The purchase of Beats Electronics didn’t just give Apple access to high-end, or at least high-cost headphones, but the streaming services Beats Music, which was the forerunner of Apple Music.
So it’s clear why Apple buys companies. It’s not to achieve imaginary “synergies” or put a competitor out of business, which is what most mergers are about. Apple’s purchases are meant to expand the company’s technology portfolio. The 2010 purchase of Siri, a mobile assistant app, led to the introduction of the legendary personal assistant that debuted on the iPhone 4s in 2011. The 2012 purchase of AuthenTec, a company specializing in fingerprint recognition technology, resulted in the introduction of Touch ID in the iPhone 5s the following year.
All right, you get the picture. Despite the claim that Apple takes a “not invented here” approach, the facts are otherwise. If Apple doesn’t invent a technology, it buys it.
But as Apple’s cash hoard has grown, demands have grown for Apple to buy another large company outright. Why? Well, because they can I suppose. So Apple has been asked to buy Tesla Motors, the cutting-edge electric car company. With Project Titan’s uncertain path and future, that move would get Apple into the auto business in a big way.
But why? As I write this, Tesla has a market cap of $27.93 billion dollars, meaning it would probably cost at least double that for Apple to acquire the company if it was even for sale. Tesla has a multibillion dollar investment in plants and technology, and why would it want to sell out to Apple anyway? Maybe if it were in danger of folding and needed an immediate sale to someone to survive, but why would Apple buy a potentially failing company? You’d expect other car makers would be after Tesla if it were available.
Just the other day, Samsung announced the $8 billion purchase of an old-time audio manufacturer, Harman International. It’s more than five years since the death of its founder, audio industry legend Sidney Harman. The company continues to build home audio equipment under such legendary brand names as AKG, Bowers & Wilkins, Harman/Kardon, Infinity, JBL, Lexicon, Mark Levinson and Revel. And some of those brand names were, themselves, acquired over the years.
Now the theory goes that Samsung is primarily interested in Harman’s car audio systems, which are found in vehicles from a variety of manufacturers that include BMW, Chrysler, Jaguar, Rolls-Royce, Toyota and Volkswagen. It already has a thriving business, but I’ve read more than one blog suggesting Apple was foolish in not buying the company.
But why?
Does Apple need to get in the business of building home audio systems? Remember that the purchase of Beats Electronics was mostly about the streaming music service. Creating infotainment systems for car makers? How does that serve Apple?
True, Apple might be developing an autonomous driving platform to license to car makers, but that’s hardly just another commodity product. That is, if it doesn’t just build cars outright. But remember, there are hundreds of manufacturers of audio gear. Where does Apple benefit to sell AKG headphones and Infinity loudspeakers or any other mass produced consumer product that it hasn’t introduced itself? Well, except for Beats headphones of course.
The problem with those critics is that they evidently failed to realize that Harman International was not primarily a car technology company. So should Apple buy Bose if it was put up for sale? Remember founder Amar Bose died three years ago, so wouldn’t that create the climate for an eventual sale? Well, obviously not, since he gifted a majority of the company’s shares to MIT in 2011. That’s where he worked as a professor for over 45 years and developed the loudspeaker technology that resulted in the creation of the company.
Do I have to go on?
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