Amid Myriad of Rumors, Could Apple (AAPL) Stay the Course? (SNE, NFLX, SNDK)
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Price: $165.00 -1.22%
Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 0.5%
Revenue Growth %: -4.1%
Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 0.5%
Revenue Growth %: -4.1%
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All the buzz on the Street this week has been about what Apple Inc. (NASDAQ: AAPL) will do with the $51 billion in cash that is apparently burning a hole in the pocket of every speculative source with a voice since CEO Steve Jobs indicated the company will look to make strategic moves with the hoard.
Names that have been thrown out there in the last week have grabbed headlines and moved stock, but nothing has occurred that suggests anything newsworthy will happen.
The names that have been mentioned as possible targets for an Apple purchase are in some cases absurd.
The list (so far) of big name, high cost companies include Netfilx Inc. (NASDAQ: NFLX), Electrontic Arts Inc. (NASDAQ: ERTS), Adobe Systems Inc. (NASDAQ: ADBE), Yahoo Inc. (NASDAQ: YHOO), Sirius XM Radio Inc.(NASDAQ: SIRI), TiVo Inc. (NASDAQ: TIVO), SanDisk Corp. (NASDAQ: SNDK), Sony Corp. (NYSE: SNE) and Disney (NYSE: DIS). And don't forget about Facebook which is privately held.
How many of these even make sense?
Netflix is a strong company, but what does it bring to Apple. The iTunes store offers users media content similar to what Netflix does (albeit on a smaller scale to this point). Apple could spend money to improve its content offerings instead of taking on a big name company, with a current market cap of $9.5 billion. The question is if adding Netflix or adding content makes more monetary sense.
Electronic Arts has been struggling in a video game environment that has been shifting to, you guessed it, mobile games like those offered on Apple's iPad and iPhone. EA could be brought in to create quality games for Apple, but EA makes titles for rivals Nintendo and Microsoft Corp. (NASDAQ: MSFT). Where is the mutual benefit here? Will Apple dictate titles for the Xbox?
Sirius and TiVo are straining to remain relevant in a marketplace where consumers are more than happy to choose alternative products that may be cheaper or even free, so there is a question of the potential value for an acquisition of these companies (Although an iPod with Sirius satellite radio does sound intriguing).
Facebook has yet to show how it plans to sustain revenue generation over the long term, and would take Apple into an entirely new business that is still relatively new.
When rumor of Apple buying Sony surfaced (which were quickly squashed), shares of the Japanese electronics maker jumped 3 percent. But what does Sony bring to the table that Apple needs. Apple has set the standard for electronics devices that are must haves for consumers; wouldn't an acquisition of Sony simply stretch Apple to far and into to many segments? An iAlarm clock radio is not really necessary.
Acquiring SanDisk is not out of the question, given Apple's recent shift to flash memory in its new MacBook Air, but the company remains pricey with a current market cap of $8.69 billion.
Taking an historical look at what types of moves Apple makes, any of these acquisitions would be a stretch (in some cases a complete change in philosophy). Th largest acquisition to date for the company came in 1997 when it bought NeXT for $404 million.
Expect Apple to stay the course that has worked to make the company the Wall Street powerhouse it is. Smaller acquisitions of companies that will improve the quality of its numerous gadgets seem the play here. But don't expect the speculation to temper anytime soon (Wonder what will be reported next?).
Names that have been thrown out there in the last week have grabbed headlines and moved stock, but nothing has occurred that suggests anything newsworthy will happen.
The names that have been mentioned as possible targets for an Apple purchase are in some cases absurd.
The list (so far) of big name, high cost companies include Netfilx Inc. (NASDAQ: NFLX), Electrontic Arts Inc. (NASDAQ: ERTS), Adobe Systems Inc. (NASDAQ: ADBE), Yahoo Inc. (NASDAQ: YHOO), Sirius XM Radio Inc.(NASDAQ: SIRI), TiVo Inc. (NASDAQ: TIVO), SanDisk Corp. (NASDAQ: SNDK), Sony Corp. (NYSE: SNE) and Disney (NYSE: DIS). And don't forget about Facebook which is privately held.
How many of these even make sense?
Netflix is a strong company, but what does it bring to Apple. The iTunes store offers users media content similar to what Netflix does (albeit on a smaller scale to this point). Apple could spend money to improve its content offerings instead of taking on a big name company, with a current market cap of $9.5 billion. The question is if adding Netflix or adding content makes more monetary sense.
Electronic Arts has been struggling in a video game environment that has been shifting to, you guessed it, mobile games like those offered on Apple's iPad and iPhone. EA could be brought in to create quality games for Apple, but EA makes titles for rivals Nintendo and Microsoft Corp. (NASDAQ: MSFT). Where is the mutual benefit here? Will Apple dictate titles for the Xbox?
Sirius and TiVo are straining to remain relevant in a marketplace where consumers are more than happy to choose alternative products that may be cheaper or even free, so there is a question of the potential value for an acquisition of these companies (Although an iPod with Sirius satellite radio does sound intriguing).
Facebook has yet to show how it plans to sustain revenue generation over the long term, and would take Apple into an entirely new business that is still relatively new.
When rumor of Apple buying Sony surfaced (which were quickly squashed), shares of the Japanese electronics maker jumped 3 percent. But what does Sony bring to the table that Apple needs. Apple has set the standard for electronics devices that are must haves for consumers; wouldn't an acquisition of Sony simply stretch Apple to far and into to many segments? An iAlarm clock radio is not really necessary.
Acquiring SanDisk is not out of the question, given Apple's recent shift to flash memory in its new MacBook Air, but the company remains pricey with a current market cap of $8.69 billion.
Taking an historical look at what types of moves Apple makes, any of these acquisitions would be a stretch (in some cases a complete change in philosophy). Th largest acquisition to date for the company came in 1997 when it bought NeXT for $404 million.
Expect Apple to stay the course that has worked to make the company the Wall Street powerhouse it is. Smaller acquisitions of companies that will improve the quality of its numerous gadgets seem the play here. But don't expect the speculation to temper anytime soon (Wonder what will be reported next?).
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