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Apple may have invested $2 billion to aid struggling display maker Sharp

post #1 of 25
Thread Starter 
Apple's annual capital expenditures report came in $2.3 billion higher than anticipated, which has led one analyst to believe Apple could have put a significant amount of money into key but struggling supplier Sharp.

In an analysis posted on Wednesday, Horace Dediu of Asymco noted that Apple spent one-third more than it expected in capital expenditures in fiscal 2012. And some of the acquisitions made by Apple were made through what he called "uncharacteristic or unorthodox means."

Apple had originally forecast in October of 2011 that it would spend about $8 billion on capital expenditures. But the final number came in at $10.3 billion, with nearly all of the over-spending related to "product tooling, manufacturing process equipment and infrastructure."

Dediu's theory is that Apple may have placed a significant investment in Sharp, which provides display panels for devices like the iPhone and iPad. Sharp has also found itself in financial distress, and earlier this year was in line to take a $1 billion investment from Foxconn ? a payout intended to build a new LCD plant to boost production for Apple products before the deal fell through because of Sharp's poor finances.

Tim Cook at Foxconn

Apple CEO Tim Cook visits a Foxconn iPhone plant in March.


"My guess is that these attempts to shore up Sharp are directed by Apple to ensure both continuity of supply and a balanced supplier base (offsetting Samsung, another supplier)," Dediu wrote. "If Sharp were to enter some form of bankruptcy, the key plant(s) used in producing screens for Apple might be 'up for grabs' by creditors and they might be taken off-line, jeopardizing apple's production capacity, irrespective of contractual obligations."

He hypothesizes that Apple financed the deal in exchange for preorders of new components. In this scenario, Apple may have paid for a Sharp screen production line by prepaying for components from the company ? an investment that would show up on Apple's annual 10-K filing.

Apple's filing, made public a week ago, also revealed that it increased spending on research and development by almost $1 billion. The increase to $3.4 billion in its 2012 fiscal year represented growth of 39 percent from the year prior.
post #2 of 25
Horace Dediu is almost always right.

He's probably someone you shouldn't even call an "analyst"considering all the idiots that inhabit said category that are regularly quoted here.
post #3 of 25
Quote:
Originally Posted by Gazoobee View Post

Horace Dediu is almost always right.
He's probably someone you shouldn't even call an "analyst"considering all the idiots that inhabit said category that are regularly quoted here.

 

He is better than the run of the mill analysts, but here he is totally speculating and I think he is off.

 

Have you seen a Sharp LCD in an Apple product teardown? Ever?

 

Sharp at best is a very small supplier of LCDs to Apple, if any at all.

 

I don't think Apple would risk 2Billion on  a financially shaky, third/fourth source.

post #4 of 25

This makes sense.

But what would make even more sense is for Apple to invest $20-25B (assuming 30-60% premium) to acquire ARM Holdings. That would shake up the market. Heck, I bet Intel might even like it.

post #5 of 25
Quote:
Originally Posted by Snowdog65 View Post

 

...he is totally speculating

 

Which makes it hard to dispute or support. During a period of world wide expanding availability and product upgrades, Apple spends an extra 25% over estimates on capital expenditures. The reason is... [fishes around in butt] Multi-billion dollar investment in Sharp!

 

Plausible, but pure speculation, followed by more speculation on the results of the speculation, which is now reported on an internet rumors site. I guess that makes it an absolute metaphysical certitude. 

post #6 of 25
Quote:
Originally Posted by ankleskater View Post

This makes sense.

But what would make even more sense is for Apple to invest $20-25B (assuming 30-60% premium) to acquire ARM Holdings. That would shake up the market. Heck, I bet Intel might even like it.

Why would Apple spend about 20% of its cash on ARM when it can very easily license the architecture and customize it? Are you thinking a defensive move to keep other mobile concerns from using it? That would seem like a worse deal than what Google got out of the Motorola acquisition. I'm not sure how you see this working out as a profitable and prudent use of cash? And how would Intel benefit from this ? I'm genuinely curious.

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post #7 of 25
Quote:
Originally Posted by Snowdog65 View Post

 

... Have you seen a Sharp LCD in an Apple product teardown? Ever? ...

 

I don't have any comment on the rest, but this part is kinda meaningless.  

If they make 300 million of something and then take apart one or two of them on camera, you can't really say that this is proof of them having no parts from Sharp inside.  

post #8 of 25
Quote:
Originally Posted by Gazoobee View Post

 

I don't have any comment on the rest, but this part is kinda meaningless.  

If they make 300 million of something and then take apart one or two of them on camera, you can't really say that this is proof of them having no parts from Sharp inside.  

 

Well there is also the fact that Sharp doesn't have an IPS technology offshoot. They build ASV displays which is an MVA/PVA offshoot which has more off angle contrast/color loss.

 

Samsung panels didn't start showing up in Apple products until they developed PLS technology which is an IPS offshoot. Soon after Samsung developed PLS, they started showing up in iPad and Retina Macbooks.

 

Sharp doesn't have the tech and has never showed up. So it seems reasonable to assume they aren't in play until there is some evidence to the contrary.

post #9 of 25
Quote:
Originally Posted by Gazoobee View Post

Horace Dediu is almost always right.
He's probably someone you shouldn't even call an "analyst"considering all the idiots that inhabit said category that are regularly quoted here.

 

There's no other analyst worth listening to, IMO.

post #10 of 25
Horace is by far the most intelligent and 'scientific' commenter on Apple matters. And if you read the Asymco blogs you'll find he knows how to clarify and defend his positions.

His footnote to the relevant paragraph: "What follows is strictly hypothetical and based only on pieces of evidence that have become public hinting at an explanation but there is no proof."
Edited by enzos - 11/7/12 at 3:22pm
post #11 of 25
We should prepare ourselves for the possibility Apple will prop up Panasonic in a similar way.
post #12 of 25
Quote:
Originally Posted by ankleskater View Post

This makes sense.

But what would make even more sense is for Apple to invest $20-25B (assuming 30-60% premium) to acquire ARM Holdings. That would shake up the market. Heck, I bet Intel might even like it.

 

Apple will never buy ARM. Their are way too many antitrust issues for such a deal to ever go though.

post #13 of 25
I'll venture this, even though I don't know a damned thing:

IGZO screens are needed in large quantities before they can put a retina screen in their iPad mini. Sharp is where IGZO comes from.
Edited by Flaneur - 11/7/12 at 9:59am
post #14 of 25
Maybe Apple spend $2B to license Sharp's technology to have AUO, LG, Samsung to manufacture the screens.
post #15 of 25
Quote:
Originally Posted by winstein2010 View Post

Maybe Apple spend $2B to license Sharp's technology to have AUO, LG, Samsung to manufacture the screens.

That too. There was talk of AU making IGZO screens, wasn't there?
post #16 of 25
Quote:
Originally Posted by ankleskater View Post

This makes sense.

But what would make even more sense is for Apple to invest $20-25B (assuming 30-60% premium) to acquire ARM Holdings. That would shake up the market. Heck, I bet Intel might even like it.

 

You're high if you think ARM Holdings is worth several billion never mind $20-$30 Billion. No one is going to touch it with a P/E of 64.91.

post #17 of 25
Quote:
Originally Posted by mdriftmeyer View Post

 

You're high if you think ARM Holdings is worth several billion never mind $20-$30 Billion. No one is going to touch it with a P/E of 64.91.

 

The real reason is there is practically no benefit to owning ARM. Apple gets full use of the designs for a fraction of the cost of buying the company. If they buy the company they can't block competitors, because that would be instant anti-trust. So there is no point at all in buying ARM. 

post #18 of 25
Quote:
Originally Posted by mdriftmeyer View Post

 

You're high if you think ARM Holdings is worth several billion never mind $20-$30 Billion. No one is going to touch it with a P/E of 64.91.

 

I may be high. But so is ARMH. Current market cap is > $15B. When was the last time a company was acquired without a premium over the market cap? So, it's not me that thinks ARM Holdings is worth several billions but rather the market itself.

 

Quote:
Originally Posted by Snowdog65 View Post

 

The real reason is there is practically no benefit to owning ARM. Apple gets full use of the designs for a fraction of the cost of buying the company. If they buy the company they can't block competitors, because that would be instant anti-trust. So there is no point at all in buying ARM. 

 

No benefit to owning ARM? Only in unimaginative minds would this be sliver of a thought.

 

As for anti-trust, that's possible. But Intel and AMD would provide ample fodder for Apple to argue its case. They can always agree to keep licensing its designs. It won't be the first time such an acquisition has been approved. But at least this argument is not as brain-dead as the first.

post #19 of 25
Quote:
Originally Posted by Carthusia View Post

Why would Apple spend about 20% of its cash on ARM when it can very easily license the architecture and customize it? Are you thinking a defensive move to keep other mobile concerns from using it? That would seem like a worse deal than what Google got out of the Motorola acquisition. I'm not sure how you see this working out as a profitable and prudent use of cash? And how would Intel benefit from this ? I'm genuinely curious.

 

I will answer in reverse order. Intel will benefit because some Android makers may turn to its processors. Motorola has already started. In fact, for Intel to make progress in mobile, some device makers has to use their processors. Those device makers are happy with ARM, or rather with Qualcomm and Nvidia. So they need a push to consider Intel seriously, Apple's ownership of ARM would provide such impetus.

 

"Profitable" use of cash? Not sure what that means. But prudent? Spending $20B is never a prudent thing. But this is not about direct profiteering or prudence. This is about control of technology. Apple has already invested in ARM development. If they are serious about deploying this beyond iPhone, iPod and iPads, they may need to better control the design of the core architecture. Furthermore, they can more closely tailor the architecture for their vision of iOS and iDevices. This can affect the competition even without cutting off their licenses. Finally, acquiring ARM gains Apple more engineering talent around the world, which is something Apple loves to do.

 

More on prudent use of 20% of cash: this kind of investment sure pays off more than dividends or share buybacks.

 

Yes, as mentioned above, anti-trust is an issue but it is not insurmountable. Apple may not try this because overcoming this type of anti-trust concern requires serious lobbying, which is (used to be?) beneath Apple.


Edited by ankleskater - 11/7/12 at 5:21pm
post #20 of 25
As much as i would like Sharp to succeed. They are just a poorly run company. And Apple seems to have a hand in helping, shaping, or an expectation of how others should and run the company for them. They are not stupid enough to invest 2B in sharp when they are on the verge of bankruptcy. At least i hope they dont.

There are only two kind of people in this world.

Those who dont understand Apple and those who misunderstood Apple.

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There are only two kind of people in this world.

Those who dont understand Apple and those who misunderstood Apple.

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post #21 of 25
Quote:
Originally Posted by ankleskater View Post

 

I will answer in reverse order. Intel will benefit because some Android makers may turn to its processors. Motorola has already started. In fact, for Intel to make progress in mobile, some device makers has to use their processors. Those device makers are happy with ARM, or rather with Qualcomm and Nvidia. So they need a push to consider Intel seriously, Apple's ownership of ARM would provide such impetus.

 

"Profitable" use of cash? Not sure what that means. But prudent? Spending $20B is never a prudent thing. But this is not about direct profiteering or prudence. This is about control of technology. Apple has already invested in ARM development. If they are serious about deploying this beyond iPhone, iPod and iPads, they may need to better control the design of the core architecture. Furthermore, they can more closely tailor the architecture for their vision of iOS and iDevices. This can affect the competition even without cutting off their licenses. Finally, acquiring ARM gains Apple more engineering talent around the world, which is something Apple loves to do.

 

More on prudent use of 20% of cash: this kind of investment sure pays off more than dividends or share buybacks.

 

Yes, as mentioned above, anti-trust is an issue but it is not insurmountable. Apple may not try this because overcoming this type of anti-trust concern requires serious lobbying, which is (used to be?) beneath Apple.

 

As far as crazy ideas like cutting ARM away from competitors, yes that is an insurmountable antitrust issue. It would be the most abusive anti-competitive move in my lifetime. Only a simpleton would think you could get away with that.

 

You also seem to be unaware that Apple has a full developer license for ARM already, they can make any changes to the architecture they want, customize it any way they want. The A6 has a unique customized core designed by Apple. It isn't and A9 and it isn't an A15.  So again no benefit they don't already enjoy.

 

Silly idea, not worth wasting another electron on.

post #22 of 25
Quote:
Originally Posted by ksec View Post

As much as i would like Sharp to succeed. They are just a poorly run company. And Apple seems to have a hand in helping, shaping, or an expectation of how others should and run the company for them. They are not stupid enough to invest 2B in sharp when they are on the verge of bankruptcy. At least i hope they dont.

 

Agreed. If Apple pumped 2Billion in, why did they warn just a couple of days ago that they are on the brink of collapse. That 2Billion should have been cushion for quite some time.

 

I credit Tim Cook for being a lot smarter than to invest 2Billion in a company circling the drain.

post #23 of 25
Quote:
Originally Posted by Snowdog65 View Post

 

As far as crazy ideas like cutting ARM away from competitors, yes that is an insurmountable antitrust issue. It would be the most abusive anti-competitive move in my lifetime. Only a simpleton would think you could get away with that.

 

You also seem to be unaware that Apple has a full developer license for ARM already, they can make any changes to the architecture they want, customize it any way they want. The A6 has a unique customized core designed by Apple. It isn't and A9 and it isn't an A15.  So again no benefit they don't already enjoy.

 

Silly idea, not worth wasting another electron on.


Good attempt at using condescension as a supporting argument. It doesn't work when you're full of shit and can't even read.

post #24 of 25
Sharp makes nicer TV's IMO compared to Samsung's offerings.
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post #25 of 25
Quote:
Originally Posted by ankleskater View Post

I will answer in reverse order. Intel will benefit because some Android makers may turn to its processors. Motorola has already started. In fact, for Intel to make progress in mobile, some device makers has to use their processors. Those device makers are happy with ARM, or rather with Qualcomm and Nvidia. So they need a push to consider Intel seriously, Apple's ownership of ARM would provide such impetus.

"Profitable" use of cash? Not sure what that means. But prudent? Spending $20B is never a prudent thing. But this is not about direct profiteering or prudence. This is about control of technology. Apple has already invested in ARM development. If they are serious about deploying this beyond iPhone, iPod and iPads, they may need to better control the design of the core architecture. Furthermore, they can more closely tailor the architecture for their vision of iOS and iDevices. This can affect the competition even without cutting off their licenses. Finally, acquiring ARM gains Apple more engineering talent around the world, which is something Apple loves to do.

More on prudent use of 20% of cash: this kind of investment sure pays off more than dividends or share buybacks.

Yes, as mentioned above, anti-trust is an issue but it is not insurmountable. Apple may not try this because overcoming this type of anti-trust concern requires serious lobbying, which is (used to be?) beneath Apple.

Interesting. Tough antitrust hurdle but nothing is impossible with enough lobbying. That would be some kind of shakeup of this industry.

But listen, no need to insult others just because you're more knowledgeable or imaginative in your thinking. We are all just speculating and exchanging opinions.
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