by Sarah Cohen
Apple CEO Tim Cook (Image credit: Getty Images via @daylife)
Most of the time, when a company has $137 billion in cash or a market capitalization of $385 billion, it’s natural to assume it’s going to make acquisitions and probably large ones.
But
The banker, who knew Steve Jobs, said the Apple cofounder hated M&A. Acquiring a company was a sign of defeat; an admission of failure to innovate. Though Apple slowly but consistently purchased small companies, transformative deals were not its style. It hoarded cash to weather hard times, said the banker, a winning tactic when the CEO is Jobs.
Even if some had speculated that Apple intended to use its cash on M&A, it dispelled such thoughts on Monday night when it announced a $100 billion cash distribution including a $60 billion share buyback. Nevertheless, it still has plenty of equity to acquire a few companies if it, like most tech conglomerates, sought growth through well placed deals.
It’s fair to wonder if an Apple without Jobs can grow almost exclusively on its own innovation with meager M&A contributions. It’s also fair to wonder if Apple is considering change.
The answer is yes, as we witnessed on Monday. But the path to changing its M&A strategy will be slow. Apple’s lack of M&A aspirations was, for a while, phenomenally successful. It cannot become something new overnight and perhaps does not intend to.
Mainly, I’m told, Apple is going to stay the course. It will make small acquisitions (although another banker noted, Apple’s “small” deals could be a few billion dollars), in the markets it plays in. For the most part, large, transformative deals, areas in which Apple is not the key force of innovation, are unlikely. Don’t think Twitter and
Not only is a long, rich history with M&A missing from Apple’s makeup, it doesn’t have the kind of leadership that frequent acquirers have, noted the industry source. Jobs was the deal-maker and visionary. Tim Cook, Apple’s current CEO, was the supply chain guy. Jonathan Ive, Senior Vice President of Industrial Design, was the product guy.
Here’s what I was told, with some definitiveness, is on Apple’s mind in terms of M&A: Think the “human interface,” said the banker. Apple’s core strength has always been how consumers interact with devices. Think biometrics – recognizing and securing devices through personal characteristics like eyes and typing patterns. Think gesture control – interaction with devices without touching them.
Apple’s already acquiring these kinds of companies and last year, purchased AuthenTec for $356 million to gain finger sensing technology, noted John Hinmon, Senior Vice President of Marketing at biometrics startup Cross Match Technologies.
There is perhaps one situation that might compel Apple to consider a big deal. One which would add an “enriching” ecosystem to an upcoming Apple product: Apple TV. The industry source said it would be a game changer so large that it would probably have to take the form of a merger.
He wouldn’t tell me the name of the company but did say that a merger would also add significant revenue and the deal-making expertise that Apple lacks.
The problem though is that the target doesn’t need to sell, the industry source said. It’s just fine without Apple. And it’s perhaps the one instance in which Apple might have to cop to the fact that, “I need you more than you need me,” he suggested.
Though he was mum about the target, he gave me hints--from what I could surmise, here are a few for you: Think talking mice and magic kingdoms.
