Apple getting aggressive with competitive new acquisition tactics
Apple has hired its first dedicated mergers and acquisitions expert and has initiated -- in some cases -- a three hour window of opportunity for acquisition targets in its tough new efforts to win deals away from rivals such as Google and avoid publicity that could sour deals.
According to a report by Bloomberg, Google has announced nine acquisitions so far this year. Last fall, Google chief executive Eric Schmidt announced plans to inhale a new startup company every month.
Apple hasn't made a similar announcement, instead preferring to keep its plans secret even as its executives described the company's cash pile as being useful in making strategic purchases as opportunities become available. But after making four iPhone related acquisitions in the last six months, Apple has analysts talking excitedly about a buying frenzy between it and Google.
Bloomberg cited analyst Charlie Wolf with Needham & Co. as saying, "It looks like there?s an acquisition frenzy going on between Google and Apple in the sense that there?s an increasing urgency on Apple?s part to stay even if not ahead of Google in the phone space and apps space."
Last year, Apple "hired a Goldman Sachs Group Inc. investment banker, Adrian Perica, to help the company develop deals, people close to the company said earlier this year," Bloomberg stated. "They say they believe Perica is the first dedicated M&A specialist on Jobs?s staff."
"To avoid publicity and possible rival bids, Apple in some cases has offered a target only a three-hour period in which to accept the terms of a sale, according to one executive with knowledge of the situation," Bloomberg noted.
Apple's cautious, strategic acquisition history
In the last decade, Apple has largely only purchased a series of strategic, small software companies in its efforts to build a development team to create its suites of pro apps and iLife titles.
Between 2000 and 2006, Apple bought Astarte and Spruce (DVD Studio Pro), Nothing Real and Silicon Grail (Shake), Emagic (Logic Pro), Prismo (Motion), Silicon Color (Color) and Proximity (Final Cut Server).
The company also bought PowerSchool for its student information system software it later resold, and Zayante, a FireWire chip and software developer.
Apple's Mobile acquisitions
However, starting in 2005, Apple began buying companies to help it enter the mobile market related to its growing iPod business. It snatched up the assets of FingerWorks, which had developed multitouch technologies later used in the iPhone, followed by PA Semi in 2008. Apple chief executive Steve Jobs said PA Semi would be building chips for iPhone and iPod devices.
As Apple's mobile business has exploded, so has its strategic shift toward mobile-related acquisitions. Last summer, the company appears to have acquired Placebase, suggesting that Apple might build its own mapping service to reduce its dependence upon Google.
Last winter, it made subsequent efforts to buy mobile advertising company AdMob. When Google stepped in with a winning counteroffer, Apple bought the competing Quattro Wireless instead. Apple then bought music streaming service LaLa, which had been in serious talks with Google.
In April, Apple bought Intrinsity, which developed chip technology used in the iPad's new A4 processor, followed by Siri, a mobile search applications developer.
Apple ready to buy
Rather than just trying to keep pace with Google, it appears Apple is trying to prevent Google from buying up key mobile assets; Google appears to be doing the same thing. After Apple lost out to Google in buying AdMob, Jobs complained to his employees at at company event that Google "snatched them up because they didn?t want us to have them."
Apple now has around $41.7 billion in investment assets it can "liquidate in a day," according to the report, compared to Google's cash pile of $26.5 billion.
Apple's chief financial officer Peter Oppenheimer recently reiterated that the company's investment strategy continues to prioritize "preservation of capital, which has served us well in the current environment."
That has some investors, including Michael Obuchowski, the managing director at First Empire Asset Management, recommending Apple put its cash to work. ?I want them to reinvest their cash in the business,? Obuchowski said. ?They are sitting on more than $30 billion in cash that is earning close to nothing.?
According to a report by Bloomberg, Google has announced nine acquisitions so far this year. Last fall, Google chief executive Eric Schmidt announced plans to inhale a new startup company every month.
Apple hasn't made a similar announcement, instead preferring to keep its plans secret even as its executives described the company's cash pile as being useful in making strategic purchases as opportunities become available. But after making four iPhone related acquisitions in the last six months, Apple has analysts talking excitedly about a buying frenzy between it and Google.
Bloomberg cited analyst Charlie Wolf with Needham & Co. as saying, "It looks like there?s an acquisition frenzy going on between Google and Apple in the sense that there?s an increasing urgency on Apple?s part to stay even if not ahead of Google in the phone space and apps space."
Last year, Apple "hired a Goldman Sachs Group Inc. investment banker, Adrian Perica, to help the company develop deals, people close to the company said earlier this year," Bloomberg stated. "They say they believe Perica is the first dedicated M&A specialist on Jobs?s staff."
"To avoid publicity and possible rival bids, Apple in some cases has offered a target only a three-hour period in which to accept the terms of a sale, according to one executive with knowledge of the situation," Bloomberg noted.
Apple's cautious, strategic acquisition history
In the last decade, Apple has largely only purchased a series of strategic, small software companies in its efforts to build a development team to create its suites of pro apps and iLife titles.
Between 2000 and 2006, Apple bought Astarte and Spruce (DVD Studio Pro), Nothing Real and Silicon Grail (Shake), Emagic (Logic Pro), Prismo (Motion), Silicon Color (Color) and Proximity (Final Cut Server).
The company also bought PowerSchool for its student information system software it later resold, and Zayante, a FireWire chip and software developer.
Apple's Mobile acquisitions
However, starting in 2005, Apple began buying companies to help it enter the mobile market related to its growing iPod business. It snatched up the assets of FingerWorks, which had developed multitouch technologies later used in the iPhone, followed by PA Semi in 2008. Apple chief executive Steve Jobs said PA Semi would be building chips for iPhone and iPod devices.
As Apple's mobile business has exploded, so has its strategic shift toward mobile-related acquisitions. Last summer, the company appears to have acquired Placebase, suggesting that Apple might build its own mapping service to reduce its dependence upon Google.
Last winter, it made subsequent efforts to buy mobile advertising company AdMob. When Google stepped in with a winning counteroffer, Apple bought the competing Quattro Wireless instead. Apple then bought music streaming service LaLa, which had been in serious talks with Google.
In April, Apple bought Intrinsity, which developed chip technology used in the iPad's new A4 processor, followed by Siri, a mobile search applications developer.
Apple ready to buy
Rather than just trying to keep pace with Google, it appears Apple is trying to prevent Google from buying up key mobile assets; Google appears to be doing the same thing. After Apple lost out to Google in buying AdMob, Jobs complained to his employees at at company event that Google "snatched them up because they didn?t want us to have them."
Apple now has around $41.7 billion in investment assets it can "liquidate in a day," according to the report, compared to Google's cash pile of $26.5 billion.
Apple's chief financial officer Peter Oppenheimer recently reiterated that the company's investment strategy continues to prioritize "preservation of capital, which has served us well in the current environment."
That has some investors, including Michael Obuchowski, the managing director at First Empire Asset Management, recommending Apple put its cash to work. ?I want them to reinvest their cash in the business,? Obuchowski said. ?They are sitting on more than $30 billion in cash that is earning close to nothing.?
Comments
?They are sitting on more than $30 billion in cash that is earning close to nothing.?
Bernie will give you 10% if he likes you.
The key is discipline, and not getting seduced or sidelined by a potential large, hard-to-digest acquisition.
But that is precisely where putting an investment banker in charge is potentially problematic -- IBs thrive on getting deals done, the more the better. Perhaps this Perica person will be different.
?They are sitting on more than $30 billion in cash that is earning close to nothing.?
[ View this article at AppleInsider.com ]
Apple can now buy an island and declare itself a nation.
According to a report by Bloomberg, Google has announced nine acquisitions so far this year. Last fall, Google chief executive Eric Schmidt announced plans to inhale a new startup company every month.
Sounds like a very good business strategy.
Buy a company every month just to buy a company every month.
Don't have any idea of where you want to go or what these companies or why you want to buy them.
inhale a new startup company every month.
eh? What?
I get the feeling that Google is gonna choke on what they're 'inhaling'
Apple's 3 hr window is to keep the surprise-value ahead of GOOG
but what a hell of a decision to make.
Here's $100M, you want it, or not?
A 3-hour time frame to decide if I wanted to sell my company? I'd start shopping my company around as fast as I could before I got back to them.
The purpose of the three-hour window is to prevent that very thing, so they don't get into a bidding war.
I think that Apple is on to a sound strategy here as long as they can stay focused (unlike Google, which seems to be straying far from its competencies, and is beginning to look a little scattershot). It often makes sense to do "A&D" (as opposed to R&D) in tech, as companies such as Cisco have successfully shown.
The key is discipline, and not getting seduced or sidelined by a potential large, hard-to-digest acquisition.
But that is precisely where putting an investment banker in charge is potentially problematic -- IBs thrive on getting deals done, the more the better. Perhaps this Perica person will be different.
I completely agree.
I'm increasingly confused about what Google do. Clearly search, but so much seems to make almost no sense.
Google, apart from its technology superiority, ( Servers, Back end Softwares ) aren't good at anything else.
Google Docs, while easy to use, doesn't compare to any other online suit.
Picasa is useless piece of Junk. I use it merely because Google Server is much faster the Yahoo Flickr.
Gmail - It wins because of its Junk Filter ( Back End Tech )
As a matter of fact, Google is only good at English / Global English Search. Yahoo is much better at local search.
Personally i think Google is getting very lost.
If apple actually brought back their shares using the 30 Billion they had when its stock price @ $90 during the Financial Crisis. they would have worth more then any US company by now.
I'm not saying that would have been a bad move, however, technically, in that case they might have a $600 (or something like it share price right now, but that wouldn't put any acquisition money in their pockets per se.
When companies buy back stock, they don't "own" it like shareholders do - it's placed in reserve. In order to benefit from their "investment" in their own shares, they'd have to reissue them in certain size chunks.
If they did that they might raise more capital than they have now, and it would look brilliant in retrospect, but it certainly would have been a higher risk move. They've had, and have brilliantly executed an amazingly solid business plan year after year (a rare feat in corporatedom, especially to keep growing at the rate they have from an already substantial market cap).
However, had anything major gone awry, e.g., a botched launch of the iPhone, the price might have gone down, and there might have been little interest in a reissue of Apple shares, leaving them potentially with less possible capital and no actual rainy day fund.
And after having lived through a near-death experience, I think their actions have been understandably conservative and sound - plus they've likely made more than nearly nothing. I'm sure that money's not all sitting in .07% money market funds.
So maybe a slower ramp-up of acquisitions given the "burnt child fears fire syndrome," than they might have had, but they're adapting to their new status now, and can both buy interesting things and have an enviable reserve which may yet serve them well during a problem period. Nearly all companies have tough stretches eventually.
I also heartily approve their eschewing picking up large acquisitions which would be difficult to mesh with their own corporate cultures. This is what large companies in trouble do - and while they always expect to achieve "efficiencies of scale" more often they end up with two sets of problems and long and painful integration/restructuring problems, witness HP and Compaq.
Picking the cream of the startups makes much more sense as long as they have useful IP and talent to pick from.
The one thing that's a potential bother to me personally is if they start buying companies simply to keep others from getting that IP and talent and then bury them and smother promising technologies. MS has done this on many occasions, especially back in their heyday.
Does Apple even care anymore about their OSX Server offerings or the Xserve? I doubt it. When was the last time Apple made huge strides in the server space? I say it is time Apple licensed OSX Server to OEMs and dropped the Xserve. Let 3rd party server manufacturers progress OSX in the enterprise all the while Apple can pour its R&D into the consumer space for the most part.
"To avoid publicity and possible rival bids, Apple in some cases has offered a target only a three-hour period in which to accept the terms of a sale, according to one executive with knowledge of the situation," Bloomberg noted.
"Hey, we wanna buy you for $XXXX. Wanna be part of super cool Apple? You got 3 hours to make a decision."
That is the craziest thing I've ever heard. This will undoubtedly result in a lot of unmotivated resigning staff members and chaotic short term project management should they accept the terms. I don't think there is ANY way to predict what will happen long term after such an acquisition.
Rather than just trying to keep pace with Google, it appears Apple is trying to prevent Google from buying up key mobile assets
Did anyone else find this statement odd? I saw it in the original Bloomberg report, and there seemed to be no basis for it. The article talks about how Apple is buying companies with some focus and apparent purpose. I'm trying to figure what aquisitions Apple purchased just to block Google--did I miss something?
Who else is brainstorming on creating their own startup in hopes it will get bought out for way more money than it's worth?
Exactly.
That has some investors, including Michael Obuchowski, the managing director at First Empire Asset Management, recommending Apple put its cash to work. ?I want them to reinvest their cash in the business,? Obuchowski said. ?They are sitting on more than $30 billion in cash that is earning close to nothing.
I disagree completely. They are not sitting on them, they have made plenty of strategic acquisitions with a lot of thought and patience, being put into them, intrisity, p.a. semi, and lala have been very wise moves. If they are to weather a crisis, which is eminent in the industry (and actually it's already there with pretty much only apple eschewing it), the capital has to be there, and it has to be available.
Licensing OS X even partly, is a non option to me. Jobs has been there, done that, and more so, seen others do that, and won't go that route. That's not focusing on core competencies, which has led apple so well, so far. It's taking unwarranted risks and setting up themselves for failure imho.
The current mind frame (remember what job said in the keynote about apple's growth, "I can't even believe it, and we don't view apple like that") is sound. Focus on developing great products, push the company forward with these and based on them, then make additions to the arsenal that can expand these products and services, not merely buying pet projects and start ups, to armour up with a dubious arsenal that might or might not work in the long run, but inform all the buying decisions by what is actually currently or in the near future actually required.
And as long as Steve is on the helm, this is the way things are going.
Google shows its young age, by not taking this strategy. Of course they want to and have to grow, but losing focus and throwing their weight and money behind everything that walks, is going to cost them in the long run. Their dominance was established by being very good in something, and focusing solely on that, a great search engine not a f.cking portal, .com bubble, going down the the way that altavista and excite did. Now they are not showing this patience.
You have to wait and see how things play out and buy accordingly, and at the same time, not lose focus on making great products and then support them with new acquisitions, not the other way round.