Apple's $3 billion acquisition of Beats could be the dawn of a new day for the company as it appears willing to open the wallet for deals.
On Apple's most recent conference call, CEO Tim Cook noted:
"We are not in a race to spend the most or acquire the most. We're in a race to make the world's best products, that really enrich people's lives. And so to the tune that acquisitions can help us do that, and they've done that and continue to do that, then we will acquire."
Indeed, Apple had $41 billion in cash, cash equivalents and marketable securities even after it returned $21 billion to shareholders in buybacks and dividends. The balance sheet is pristine.
So let's spend some of Cook's money shall we? Here's a look at a few deals that may be more strategically sound than the Beats purchase.
Nuance Communications: Nuance is a leader in voice recognition technology and the company is rumored to be a takeout target for Google. The search giant could integrate Nuance throughout its portfolio of products. Apple could do the same and figure Nuance is a twofer: A technology company that brings a strong business and intellectual property. The extra perk would be Apple blocking Google from acquiring that voice technology. Nuance's market cap is just north of $5 billion so wouldn't even dent Apple's balance sheet.
Shazam: Apple wants to be a cloud player yet has a few rough edges. Shazam takes a song and identifies you from its data centers in seconds. Shazam also drives music sales. Apple could add a key feature to its products and put itself in the middle of what could be a neat next-gen advertising play. After all, Shazam, which is valued at about $500 million, wants to do a lot more than music. Also:
Twitter: What?! Really?! Sure, why not. Twitter has the pulse of news and breaking events and has tools to play the advertising and data mining businesses. Apple could become a de facto media and advertising business and Twitter gets them closer to the mark. And remember we're not playing with our money — it's Apple's dough. Much easier to spend, say the $20 billion plus it would take to acquire Twitter.
ARM Holdings: Apple could gain some serious supply chain heft with the purchase of ARM — especially from a patent and intellectual property perspective. ARM's IP powers the mobile processing ecosystem and has a market cap just shy of $22 billion. Qualcomm would also be a fit, but a market cap of $135 billion or so would be tough to digest.
TSMC and/or Sharp: Apple needs a fab. TSMC has the fabs. TSMC also provides instant scale and supply chain heft. Samsung's secret sauce is vertical integration that allows the company to derive nice margins off commodity hardware. Sharp would bring screens, manufacturing and a TV entry.
Previously: How Apple should spend its $90 billion in cash
Nokia: Didn't Microsoft buy Nokia? Well yes and no. Microsoft bought the handset business, but Nokia includes a mapping and geolocation unit. Guess what Apple needs to improve? Mapping. Apple could spin off the Nokia networking business.
Akamai or Limelight: Apple needs a content delivery network to deliver its content and services. Akamai or Limelight offers that expertise. Akamai's market cap is just under $10 billion.
Boingo: Wouldn't it be nice if Apple could provide free Wi-Fi to every customer? Sure would and Boingo could be had for a bit north of $245 million.
And bonus deal: Apple should team up with Microsoft on cloud service delivery. Amazon is an enemy. Google is a foe. Microsoft and Apple are actually good partners. A deal with Apple and Azure would be a next-gen version of the Microsoft Office bailout in Apple's darkest day.