Let's spend Apple's money: 10 acquisitions that make more sense than Beats

Let's spend Apple's money: 10 acquisitions that make more sense than Beats

Summary: Since Apple is opening the wallet for acquisitions let's spend some money. Hello Nuance, Shazam, ARM and a bunch of others. All of those proposed deals could deliver more value than the $3 billion dropped on Beats.

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TOPICS: Cloud, Apple, Mobility
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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.

What a Beats purchase would tell us about Apple 

Confirmed: Apple acquires Beats for $2.6B and $400M in stock

Apple statement

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: The business of Shazam: Why an Apple iOS partnership would be a boon

beats-main-620x399
$3 billion for Beats. Could Apple do better?

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.

Topics: Cloud, Apple, Mobility

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  • Here's what you missed, Larry.

    With the Beats buy, Apple basically added a whole new market that hasn't traditionally been part of Apple's market 'til now. Because of Beats "halo" effect, I'll bet that market will buy Apple products in addition to Beats stuff. More customers, more revenue. Most of the possible purchases you mention would NOT have attracted a new market, but would appeal to Apple's present customer base. Where's the growth in that?
    Userama
    • This was my thought as well.

      This gets Apple into one the fastest growing demographics in the US that is also poorly represented by Apple use.
      Bruizer
      • iBeats

        It is the name. What other name sounds good with an 'i' in front of it. iNuance? iShazam? iTwitter? iBoingo? iBeats sounds much better (pun intended).
        MichaelInMA
      • What is that demographic exactly?

        People with more money than sense or People who like to be seen as hip and trendy
        Blogsworth
        • Those two groups tend to be the same person

          nt
          mattyvx
    • Totally agree

      While many us scratch our heads at Beats and Apple combo. The reality is Apple needs a ethnic market share and Beats gives APPLE a attraction for that ethnic group. They may buy Apple stuff as a result. My own opinion of Beats headphones is they are basically over priced fashion wear much more than good sound. I guess its all in what you want in sound? But then again Apple has never made good earbuds either. So maybe its meant to be.
      JohnnyES-25227553276394558534412264934521
      • fashion

        "Apple buys overpriced fashion-wear company"

        sounds like a perfect match to me :)
        Mytheroo
      • Borderline Racist

        You say Apple bought Beats because they want to capture a more ethnic market then suggest that Beats is overpriced fashion. Are you saying that only "ethnic" people purchase overpriced fashionable items?

        All companies can do more but I don't believe Apple has any significant issues with diversity in their product offerings or marketing.
        MnemonicPoet
      • Beats is over priced.

        Look into it.

        Hi fi aficionados will quickly tell you that you can get better for less.

        Its not up for debate.
        Cayble
    • Plus

      It's a billion dollar business, meaning if Apple preserves the brand (and I gather it will), it will pay for itself in a few years. Beats is also already intersecting with Apple's market sector and brings, as noted, new customers. The real way to look at this transaction is cost per new customer. Down the road, if Apple doesn't find the right balance between its team approach and the two charismatic star leaders from LA, then it may not work out. Still, it isn't exactly a 3 billion dollar gamble.

      I also like that Beats streaming will continue on other platforms. I expect iTunes radio will be rebranded as Beats radio and have a standalone Beats app. (The iTunes Radio standalone app is already a long-standing rumor for WWDC/iOS 8.)

      As for your suggestions, take Fab plants. Were Apple to own them, it suddenly becomes Apple's problem if it cannot fill capacity, whereas now they predict what they need and buy as much production as required. Buying ARM? How much money would being one's own licensor actually save? Hardly as much as the added revenue from Beats. Let's talk about Shazam. An effective cloud music identification service does not address the issues that its customers have with Apple's cloud which are centered on limits and sync that doesn't work seamlessly. Shazam makes an app for iOS, right? Apple's customers have that service available without Apple spending a dime.

      No, your wish list doesn't read to me as being obviously wise acquisitions that add more value than Beats. It looks like a mapping of Apple's "problems" to companies suffused with a joy about spending someone else's money and a premature schadenfreude over the strategic alliance they did make.
      DannyO_0x98
      • "Schadenfreude"

        Great word, thanks.
        Speednet
      • Schadenfreude

        Did you swallow a dictionary or did you just want to come across as well read
        Blogsworth
    • Agreed.

      And are any of the other companies mentioned for sale, or would be willing to sell?
      William.Farrel
    • Here's what you missed, Userama... from a professional audiophile

      Don't get me wrong, no doubt there's some value in brand recognition alone, at least when that brand is mentally associated with "high end".

      It's what's kept Bose alive for years - yes, great patent portfolio, but always cheap middling execution - "good enough" for the non-audiophile demographic they target.
      And what's important there is that to the layman, they hear "Bose" and think "Must be good!" and they buy. That's all that matters from a business standpoint.
      But at least Bose HAS a patent portfolio with some innovative ideas. Honestly, I think that would make Bose a better target than Beats - note that Mercedes and Infiniti aren't marketing "Beats" audio systems in their premium cars.

      What exactly is Apple buying here? A headphone maker. For three BILLION dollars.
      That's lunacy.

      Patented compression technology to simulate bass in a tiny inferior speaker that can't make it? How about a REAL technology, like MaxxBass, that does more than just boost up the bass levels about as badly as every prior driver on every rental car you've ever driven?
      Three BILLION dollars.
      For a headphone maker.

      Hey, everyone whines about how bad Apple's freebie earbuds suck. Is this a three
      geolemon
      • Continued... tapped the tab key

        I was going to say - is this a three BILLION dollar investment to make decent earbuds?
        Apple manufactures in China. A one-hour freebie session with any contract manufacturer in China could get them better earbuds.

        Just a crazy move - Apple must be convinced that the Beats brand is going to keep skyrocketing.
        My opinion is, it's a fad. It's supported by teenagers. Teenagers grow up, what was cool, is no longer. Three BILLION dollar investment in the Hula Hoop.
        geolemon
  • The company that should be #1 on Apple's list

    Nintendo.

    The troubled videogame company is the authority in mobile gaming. Nintendo exclusives on iPhones and iPads would be short of a lethal blow to Android. Both companies are iconic, they know who to perfectly blend software and hardware, and together, they could be invincible.
    YouAreSuperWrong
    • I second this

      I have been waiting to see the day when Apple would either buy Nintendo or part of it so it can bring the brand and best games every age group can play on apple products.
      Imagine nintendo being played on a appleTV or making a mini mac with built in nintendo console.

      One can dream.
      bennyappleseed
    • Apple should buy Ireland

      And then employ all the unemployed Irish just to delete negative posts on the Apple forum.
      warboat
  • Pretty sure this acq proves...

    That Apple is officially out of ideas and clearly misses Mr. Jobs.
    Oknarf
    • Be very, very careful with that claim

      If the standard is alleged to be "oh you don't innovate if you buy someone" you may find that your favoured vendor is a lot higher up the not-innovating food chain than Apple.

      Google and Microsoft have a much longer history of acquisitions than Apple ever has. Personally I don't see anything wrong with it. If you know what you want, and you have the cash... why not?
      Mac_PC_FenceSitter