By Greg Mills
The press is full of speculation as to what Apple might be into regarding the acquisitions department. Not many companies have over 50 billion dollars sitting around. While the income from the savings amounts to a lot even at a fairly low interest rate, Apple might make more in a sound investment in the form of buying the right companies.
Sony stock bumped up on the rumor that Apple might buy them. With a market cap of about 35 billion dollars Apple could acquire them but the big question is why? I speculated Sony might be a good buy for Apple three years ago in an article published by MacDailyNews.com. Here is the link to that article. http://www.macdailynews.com/index.php/weblog/comments/15331/opinion/ .
The reasons it might make sense then still make sense today. Sony is now worth about twice what it was during the market crash of a couple of years ago, but the company is still depressed considering its history and potential.
There are a number of reasons a big company like Apple might want to buy a well know competitor, like Sony. The notion of investing in a troubled but potentially profitable company, betting you can fix what is wrong and sell it like a real estate fixer upper a year or two down line, might be valid for a lot of firms. However, Apple is looking at things more strategically. What would make Apple stronger?
Parts companies such as flash memory companies might be good for vertical growth. Make your parts at cost instead of buying them from someone else. Apple now has in-house chip designers. They might be interested in making their own chips and microprocessors. I have read where SanDisk (with a current market cap of about US$9 billion) about might be a possible target for Apple.
A number of the corporate components of Sony are interesting and fit Apple nicely, while some aren’t such a good fit. The TV business is an example. Large screen TVs per se, have become almost a commodity item with most of the profit squeezed out by fierce competition. The margins on standard big screen TV sets is not meaningful to the likes of Apple.
Apple has been looking hard at the living rooms of consumers as a place they want to compete. The Apple TV is a way into that arena. Some sort of value added Apple/Sony big screen or 3D HDTV entertainment system might be interesting.
The Sony patent portfolio is interesting (25,000 US patents) as is ownership of the Blu-ray and PlayStation platforms. The music and movie collection alone are also something Apple could use to stock the iTunes store with exclusive video and music content.
Apple almost fell into the game market with the iOS platform and the iTunes store. Nintendo now considers Apple it’s biggest potential competitor and is struggling to compete with the iOS devices. If Apple bought Sony and fixed the PlayStation hardware and tweaked the darn PlayStation OS it would be an improvement. I have a PlayStation and it has a horrible OS. It takes so many actions to shut it down I commonly just cold cock it by killing the power to it. And it uses something like 80 watts when it is asleep?!!!!
Apple is growing into the biggest source for downloading digital content of all kinds. Owning the Sony Movie library, Sony Music and its studios would put Steve Jobs in the driver’s seat on a ton of new exclusive content. Add his majority ownership of Disney and Steve Jobs would really have a tremendous source of content no one else could match.
Add NetFlix to the mix for is customer base and stand back as Apple stock goes through the $500 per share price point in months. NetFlix is now worth about $6 billion and is “digital video content on wheels.” Apple might be well off buying Sony for content and NetFlix for digital delivery. Steve would kill the “DVD in the mail” thing right off. Even NetFlix plans to go to 100% streaming soon.
From Sony’s point of view, the new management from Apple might be just the thing thing they need to recover their lost business charm. How the Japanese government would view Apple taking over Sony is another issue. Apple could buy (in some fashion that might be creative trades instead of all cash) Sony, NetFlix and SanDisk and still have money in the bank.
That’s Greg’s bite for today.
(Greg Mills, is a Faux Artist in Kansas City. Formerly a new product R&D man for the paint sundry market, he holds 11 US patents. He’s working on a solar energy startup, www.CottageIndustrySolar.com using a patent pending process of turning waste dual pane glass into thermal solar panels used to heat water. Greg writes for intellectual web sites and Mac related issues. See Greg’s art web site at www.gregmills.info ; His email is firstname.lastname@example.org )