

Apple Has $51 Billion and a Shopping List. Is Facebook On It? - portman
http://mediamemo.allthingsd.com/20101018/live-apple-earnings-call-2/

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hop
List of mergers and acquisitions by Apple:
[http://en.wikipedia.org/wiki/List_of_mergers_and_acquisition...](http://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Apple)

Looks like they go after companies mainly for talent and IP. Facebook's
biggest asset is their network effect and 500M eyeballs, not the software or
talent, though I'm sure they have a lot of talent. Now that they are designing
their own chips, after the PA Semi and Intrinsity buys, maybe silicon would
fit the bill as a big aquisition for them - AMD (4.7B) or Nvidia (6.5B).

~~~
wtallis
I could easily see Apple wanting to buy or closely partner with AMD in a few
years, if things go well for AMD. Certainly, their graphics business is going
quite well these days, but the future of their CPU products is uncertain. If
both their Bobcat and Bulldozer architectures are successful, then Apple might
well be willing to risk alienating Intel. (Not that Intel has been showing any
sign that they care if they alienate Apple.)

There would still be the problem that AMD always lags behind Intel in fab
technology, which is why they have trouble going after the highest-performance
and lowest-power segments. No matter how much cash you have on hand, there's
no quick fix for that. At least with Intel CPUs, Apple products can generally
match the performance of any competitor, and any price premium can be
attributed to the better industrial design, integration, and software. If
Apple switched to AMD processors, most of their computers would now be
afflicted by a performance deficit in addition to the existing "Apple tax".

NVidia doesn't seem like a tantalizing acquisition for anybody except perhaps
Intel, if they can admit that they don't know how to make a good GPU. NVidia
has been mostly squeezed out of the chipset and integrated graphics markets by
Intel's shady tactics and the awkwardness of AMD now owning ATI, and the
discrete graphics war hasn't been going well for NVidia for quite some time,
with no respite in sight. (This month, AMD will be releasing their third
consecutive generation of GPUs that soundly beat the competition in
price/performance comparisons at most price points. NVidia can't really do
anything about it in the short term, because their chips are simply bigger for
the same performance, so their profit margins are lower. They've been trying
to mitigate this by focusing on HPC, but that's not catching on quickly
enough, either.)

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Tamerlin
"If Apple switched to AMD processors, most of their computers would now be
afflicted by a performance deficit in addition to the existing "Apple tax"."

Apple could potentially transition parts of its line to AMD processors,
without completely abandoning Intel.

It seems likely that Sandy Bridge will be the CPU of choice for workstations,
while Bulldozer will be the throughput winner (hence server oriented), and
Bobcat the performance/watt featherweight. Of course, none of this is certain
until the actual products are available.

Bobcat might not have the performance to match up to Sandy Bridge, but having
an AMD/ATI graphics processor could potentially make it a good choice for a
souped up AppleTV product aimed a little higher. Ok, quite a bit higher.
Serious 3D gaming higher. And I'm pretty sure that AMD would LOVE a design win
like that!

The competition from AMD plus the the narrowing margins in CPU's is part of
what's leading AMD and Intel toward system on a chip solutions, but although
that's bad for the likes of nVidia, it's good for OEM's like Apple.

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defen
By my calculations they could buy the following companies for cash at a 20%
markup to become totally vertically integrated on a scale not seen since the
days of Standard Oil:

ARM - Market cap 8.3B

CableVision - Market cap 8.13B

EA - Market cap 5.21B

Netflix - Market cap 8.01B

Sprint - Market cap 13.64B

Of course it will never happen but it's fun to think about.

~~~
lzw
I really think they should buy ARM. People say there would be a conflict, but
ARM licenses architecture and designs, rather than selling chips, and the
existing licensees would surely continue, and there's nothing stopping apple
from selling new licenses. But having the ARM design team available to task
for custom designs for apple (to be licensed as well to others, or not) would
be worth about $8B, in my opinion. (given the size of the iOS market already.)

The rest of those are bad choices for Apple. Apple is what it is because it
focuses. I think none of those companies are in Apple's focus.

However, Apple could buy Clearwire- Clearwire has very valuable spectrum
licenses in the USA. This might be justified, but since Apple is a global
business, it isn't a slam dunk, as whoever controls WiMax spectrum
internationally would need to be contended with. On the third hand, they could
use that spectrum to create their own LTE network in the USA, and still have
enough spectrum on the side to create a parallel high bandwidth data-only
network.

Hmmm.... Clearwire's market cap is $1.6B. They might need to buy sprint too
(and then spin out the telecom business) to get full rights to the clearwire
spectrum. (not sure about what the agreement is.)

Netflix is a great company with great management. But the streaming rights
won't transfer thru an acquisition, I'm pretty sure. However, giving netflix a
spot in the iTunes ecosystem seems like a good deal, maybe take an equity
stake in the process, sure.

EA- no need to buy them, balloons headcount, very different business. EA will
either put out the apps for Apple's devices, or other companies will beat them
to it. Apple's in a strong position.

I'm not sure about Cablevision.

I think Apple should buy Adobe, though. I'm sure they still have some talent
left, and owning what's left of the desktop software market would be good for
Apple.... but that is a "mac primacy" play, and I think Steve and the rest of
Apple is focused on iOS exclusively, so I'm sure they won't buy Adobe.

PS-- I realize your point was that they have the capital to buy all those
companies if they wanted to, but I'm looking at it as a shopping list.

I'm pretty certain Apple has plans for the $51B. They could spend some of it
buying back their stock, or as a dividend, but both of those are non-growth
company strategies, essentially giving the money to investors and saying they
can't manage it well.

I think Apple has its eye on some very big opportunities.

I think one of those opportunities is putting $10B-$20B into a vertically
integrated automated manufacturing facility.

They cannot continue to scale their business on the backs of foxconn. At some
point, this is becomes the biggest inefficiency, even though Chinese labor is
inexpensive, it won't always be, and when it becomes as expensive as korea or
singapore or even japan, where will foxconn move?

I think pure automation is the solution. Foxconn needs to be able to build
anything, Apple just needs to build the products it desgins. There is a
position to squeeze a lot of cost out.

And the other argument? Apple did it before. The Macintosh factory was a
wonder of its age, and extremely automated. IT was designed along with the
macintosh.

I think Apple is learning from foxconn, but eventually will need to build
their own manufacturing base. Simply because you cannot keep doubling your
device numbers forever.... foxconn will still build a lot of stuff for apple,
but I'm waiting for Apple to take over a chunk of it.

~~~
wtallis
Apple already has CPU design teams, from their acquisitions of Intrinsity
(designers of what's now known as the Apple A4), and PA Semi. The Intrinsity
acquisition in particular should have guaranteed that Apple has full licenses
to all ARM tech (though given Apple's history with ARM, they probably already
did). Since they've already got one of the best ARM design teams around, and a
bunch of other experienced CPU designers, they probably wouldn't gain much
from ARM itself. It certainly wouldn't be worth the trouble of getting the
deal through regulators.

~~~
masklinn
I'm still waiting to see PA Semi put to work though. We've seen Intrinsity's
marks on the A4, but still nothing smelling like PA Semi stuff. It's annoying.

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grinich
_We know if we need to acquire something – a piece of the puzzle to make
something big and bold – we can write a check for it and not borrow a lot of
money and put our whole company at risk... The cash in the bank gives us
tremendous security and flexibility..._

 _You never know what opportunities are going to be around the next corner. We
are a large enough business now that, in order to really move the needle, we
have to be thinking pretty bold -- pretty large._

\--Steve Jobs

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mattmaroon
I really don't see Apple buying Facebook. It's just too far away from what
Apple does best.

Unless they're planning on buying Wal-Mart, they probably will end up
dividending pretty soon. There's nothing better to do with that much money.

~~~
petercooper
_I really don't see Apple buying Facebook. It's just too far away from what
Apple does best._

I can't say your opinion isn't rational, but.. Apple is weird. The iPod was
far away from what Apple _did_ best too. As was the iPhone. As was the iPad. I
admit, they're all at least hardware, but Apple is pretty diverse and I can at
least _imagine_ them taking such a leap (see Logic, iTunes, iWork for software
examples).

~~~
mattmaroon
The iPod maybe, the other two not at all. Apple saw that iPods were going to
be subsumed by phones so they made a phone that was the best iPod ever. They
saw the notebook market was going to be cannibalized by the low end so they
took that over.

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jfb
Speaking as a former Apple employee, let me answer TFA:

No.

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dstein
There's a decent chance they'd buy ARM Holdings ($8.4B).

They could bring the processor design in-house. ARM chips already power all
the IOS devices and could also power their server farms. They could also be
planning for iOS/ARM systems to eventually replace their entire desktop and
laptop lines.

~~~
megablast
ARM started out as a joint venture between Apple and Acorn. They would not be
able to stop producing chips for other companies, so why would they do that?
They already get everything out of ARM that they want, there would be very
little benefit to this.

~~~
dstein
You're right, it may not be necessary. But there is speculation that ARM is on
sale and Apple could be planning to expand beyond their current markets.

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gallerytungsten
Maybe Avid, although there might be some antitrust issues.

Possibly Quark, to ramp up a full publishing assault against Adobe.

Or maybe even Adobe as a defensive move against Microsoft.

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smhinsey
Why not wait a few more years and buy Disney? There's a relationship there,
and it gets them a whole range from content providers to broadcasters.

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agaton
I don't think Apple is interested in Disney. But a company that fits Apple and
their revenue streams is Spotify. Many similarities between the companies as
well, with focus on design and user experience rather than features.

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petenixey
I don't know the figures of running a telecom but buying a carrier would make
a lot of sense. There is a lot of Apple-cash that's being pumped into AT&T.

I've thought that would make sense for Google to do but it would presumably
alienate the other carriers and destabilise Android. Apple however doesn't
have any such conflicts.

I don't see them wanting to buy Facebook and moreover I can't possibly see
Facebook selling to Apple. Their ideologies and goals are far too different.

~~~
aberkowitz
Apple is not going to buy a mobile phone carrier. They are interested in a
product or service that they can shutdown and relaunch into an Apple product
as quickly as possible.

Mobile phone companies are not a unique market for Apple that can be i-stamped
and sold. All carriers support competitor's products which cannot be easily
removed.

~~~
petenixey
Maybe but when they announce iTunes in the cloud there's going to be a massive
youth sector for whom mobile access will be a killer feature and who won't be
able to get it affordably or reliably from the current carriers.

If Apple were to buy a carrier they could relaunch it with dataplans focussed
on kids and transition a massive younger section of the market across to them.

Ten years later that youth market grows up to become the adult market and all
of a sudden Apple dominates the carriers too.

~~~
aberkowitz
Apple is not known for affordable products, nor can they magic a phone carrier
towards reliability.

AT&T is a massive company that cannot "relaunch" due to contractual
obligations. Even if they did, carriers already offer "kid friendly" plans -
unlimited data/text that Mommy and Daddy can pay for.

So the kids transition toward adulthood and iAT&T transitions back towards
their successful business model of offering plans for everyone?

~~~
petenixey
Your point about reliability is fair although doubling the capitalisation of a
carrier would make a significant dent. However I think you overestimate the
inertia of the status quo.

1\. Apple doesn't need to relaunch AT&T, Sprint or any other network it simply
launches a supplementary branded network like Virgin mobile.

2\. The current unlimited data plans are only unlimited in the face of limited
data utility. Where people can use massive amounts of data (i.e. the iPhone),
unlimited comes at a premium.

3\. Although Apple is revered for its high end products its iOS marketshare is
41% iPod touch and most of its device sales come from low end products like
the iPod touch and the nano. It's now no stranger to mass market
affordability.

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code_duck
Ludicrous. FB would be a terrible investment for Apple. It doesn't match their
business at all.

They'll pursue more vertical integration in their hardware and network
businesses.

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gamble
The Blofeld option: wait until they have $100B, buy Verizon, cancel Droid. =)

What they will do: start buying web/cloud companies so that they can offer a
credible set of online services to complement the iOS devices. Apple prides
itself on an 'integrated experience', but right now that implies an iOS device
paired with a PC. I expect them to eventually offer a broader, more Googlian
set of online services with tight iOS integration.

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JunkDNA
It makes no sense to me. If Apple thought Facebook's terms for Ping
integration were unreasonable, the terms of a deal would likely be even more
disagreeable. But even that aside, look at where Apple lacks control
currently. They would likely want to plug a shortcoming there. The two places
that leap to mind are manufacturing and wireless service. Jobs must be so
annoyed that they have to depend on contract manufacturing. One of the primary
reasons they didn't move more product this quarter was supply. The Apple of
old did a lot of their own manufacturing. Likewise, dealing with wireless
network providers has got to be a drag. But buying Clear or Sprint doesn't
help internationally as others point out.

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teehee
What about Nintendo? Same color scheme, gets them in the gaming console
business.

~~~
Keyframe
Not likely. Bill Gates offered 'name your price' and a golden pony to them,
but old Yamauchi declined the sale. Apparently, japanese companies tied to
national identity are impossible to buy (for foreigners at least).

~~~
jdavid
link? i'd love to see the journalism on this.

~~~
Keyframe
I remember this: [http://www.theinquirer.net/inquirer/news/1027928/how-
nintend...](http://www.theinquirer.net/inquirer/news/1027928/how-nintendo-
boss-silenced-steve-ballmer) it's humorous, but not true - although it was
widely reported.

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gojomo
Tivo? Hmm, that's just a rounding error ($1B) for Apple's cash balance.

Netflix? Quite affordable: $8B.

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mikeryan
No.

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og1
Fun to speculate, maybe clearwire? Or enter a new market and buy whirlpool and
make iMicrowaves?

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clistctrl
i realize iMicrowave is a joke, but honestly its brilliant. Imagine a line of
custom kitchen appliances running iOS. Apps for your oven.

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jeffffff
no one is going to buy facebook because anyone with enough money to offer a
deal that zuckerberg would accept is smart enough to know that it isn't worth
that much

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abraham
That would be one method of solving the Facebook/Ping conflict.

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Dramatize
Could they get into the car industry?

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jdavid
(jk, but) Apple buying Tesla, would be bold, big and .... very interesting.
BMW would shit their pants. Which would you rather have, an Apple Power
Roadster, or an M5?

