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As I write this, AAPL is now trading at over $447.00 a share. For the company's 1st quarter, Apple posted $13 billion of profit on record revenue of over $47 billion from its sales of the iPhone, the iPad, and the Mac. Apple now has a market capitalization of over $416 billion and has amassed a huge cash war chest exceeding $90 billion.
Yes, say that again, but with a Doctor Evil voice. NINETY BILLION DOLLARS! Muhahahahahahahah!
Apple could just sit on all that cash, and CEO Tim Cook has said that the company is in no rush to spend it. But the logical thing to do with it would be to make some strategic purchases or expand its infrastructure in order to maintain that growth.
I’ve been thinking about this for a while and I’ve come up with a few suggestions. And no, “Sharks with frickin’ lasers” did not make the list. So without further ado…
Anyone who uses an iPhone or an iPad with 3G and GPS capabilities will tell you that much of the functionality that you get from some of the best apps for these devices come from geolocation and mapping services. However, at the moment Apple currently depends on Google Maps, Google Earth, and Google’s GeoEye-1 satellite to provide this data.
With the strained and cantankerous relationship that Apple and Steve Jobs has now put itself in with Google, it would behoove them to become as independent as possible when it comes to the key services that it needs to offer the core functionality that makes “The Apps for That” actually work.
That includes not only Search capabilities — which it should probably consider building its own engine or perhaps partnering with — GASP! — Microsoft and its Bing! service, but Apple should also consider launching its very own mapping satellite in partnership with one of the major geospatial companies, such as GeoEye, DigitalGlobe and Spot Image, and a major Aerospace company such as Orbital Sciences, Boeing Space and Intelligence or Lockheed-Martin Space Systems.
What does it cost to launch and operate one of these things?
Well, a lot of money. In fact it costs so much that the US government actually financed about half the cost of GeoEye-1, which was over $500 Million in 2008, so Google only gets to use it partially. Apple actually has enough cash that it could easily launch its very own bird and form its own geospatial services firm if it wanted.
It should also be noted that the GeoEye company (GEOY) that provides the mapping services in partnership with Google and the United States government currently has a market capitalization of about $486M right now (about half of what the company was worth two years ago) so the company might not be a bad acquisition target for Apple either.
The iSat-1. Has a nice ring to it, doesn't it?
If Apple’s soaring profits on the iPods and iPad and the recent sell-outs of the new Apple TV are of any indication, much of the company’s future with these devices is going to rely on the sales and distribution of content and applications on the App Store and on iTunes.
As the company grows, it’s going to need to expand its content distribution infrastructure. That means in order to get things like huge, bandwidth-hungry HD movies downloaded to iTunes or even streamed directly to Apple TVs and iPads, it is going to have to get that content in close proximity to the ISPs that provide broadband service to consumers as well to the Tier 1 providers that provide backhaul services to wireless carriers that sell the iPhone and iPad 3G worldwide.
Apple has invested lots of money in new datacenters to house servers and storage that power its back-end infrastructure — its most recent infrastructure expansion project was building a huge, One-Billion dollar 500,000 square foot facility located in North Carolina in order to house the iCloud infrastructure.
Rumor has it that Apple is looking into possibly doubling its size.
However, having huge centralized datacenters isn’t enough. It won’t solve latency issues globally, Apple will need to spend a considerable amount of money connecting these datacenters to the ISPs with high-speed links and possibly even replicate some of that data globally so that the most popular or in-demand content doesn’t overload the centralized infrastructure.
Content Distribution Networks, or CDNs, can solve these problems. Apple could build its own global CDN, or it could purchase an existing CDN, such as Limelight Networks (LLNW) or even Akamai (AKAM). Limelight is currently capitalized at about $347M and Akamai, which is considered the leader in the space, is hovering around a whopping $5.64B.
Both of which should be considered a bargain since that's about half of what they were capitalized at two years ago.