"I believe – although this is impossible to prove – that Apple’s stock price would be just as high as it is today (or more likely higher) had they spent that $100 billion on a combination of smart M&A and smart R&D that would have continued to extend Apple’s lead over other Android phone makers."
Anyone else find this peculiar? A whole article based on the author's hindsight of what Apple's stock price MAY have ever been with no proof/facts.
"Apple’s stock price would be just as high as it is today (or more likely higher)"
How is this hindsight on par? How is he so sure that the stock price would be higher? Hindsight is 20/20 but making BS hypothetical claims with no backing is unprofessional. He's just guessing.
I stopped reading when he started suggesting that they buy Tesla, Twitter, and Pinterest instead. Maybe he thinks Apple should be a non-diversified hedge fund that only invests in popular brand names with meager cash flows, but I think they're doing pretty well as a computer company.
After reading a few articles by this guy, it's obvious that he has a wall street mentality with a little bit of tech twist. and to a hammer everything looks like a nail.
The author simply doesn't get it what focus really means at Apple.
Tim will never buy a compony just for money reasons. There is no point on buying Twitter, Facebook or Yahoo, if they don't have a plan to make a product or integration that have the same user experience high level of other Apple's products.
What the author doesn't get it is that Twitter, Facebook and Yahoo are "crap", they are "bozos" the "b team".
I just put aside Dropbox because it is awesome and Apple actually try to bought it :)
These articles telling Apple what to do are always quite funny, though I think they were even better when Steve Jobs was at the helm.
I think he's right that the $100B spent returning money to investors hasn't bought the company much... while shares have been retired, the market cap hasn't really gone up.
This is consistent with Intel and Microsoft who, for the past 15 years have been spending billions buying their own stock and not having seen much return in share price as a result.
On the other hand, while I think Tesla is an interesting company, cars are completely out of Apple's area of expertise. Why buy a car company?
Twitter is actually similar- yes, it's a tech company, but it's not a company that makes a product and sells it, it's an online advertising play. This is, again, not Apple's business model. Same thing with Pinterist.
Buying Beats gives apple two products that fit its business model: The headphones are hardware that is sold at a nice markup. The audio services is a value add that increases the value of the hardware Apple already sells.
I don't see Pinterest or Twitter increasing the value of the iPhone over where it is now (with Twitter and Pinterest already integrated to iOS).
So, what could Apple buy that fits its business model and adds value to the company?
I think the producers of key ARM IP, and ASICs would be good choices. I think Apple's at a point where it might make sense to, rather than paying Samsung a premium, control its own fab. So, I'd look at buying TSMC, or even Intel. (though not sure Intel is cheap enough yet.) Less radically, I'd buy Imagination (The people who make the GPU cores Apple uses) and, in fact, if it were me, I'd buy ARM itself. Or at least keep acquiring the best ARM design houses.
As an Apple shareholder, I'm thankful Tim Cook is the CEO and this guy is not. What a huge waste of 119 billion that would have been. Apple isn't a hedge fund, and they shouldn't pretend to be one. Yes Alibaba is a great company, but what do they have to do with Apple?
He might have well just cherry picked the companies with the best stock returns over the last 2 years and said Apple should have bought them, why didn't they see this. With the exception of Dropbox, (which they tried to buy) none of those companies really fit well at all. I doubt regulators would even let them buy both twitter and facebook.
There is an important reason that Apple rarely acquires products even if they have difficulty producing a similar product themselves: design continuity.
Apple places an enormous amount of value on this, often more than having the best possible product at the moment. A mature, wildly popular non-Apple product has its own institutional design continuity. This impedance mismatch can be dealt with in one of two ways, either by letting the discontinuity stay in the product mix, which leads to fragmented user experience across product lines, or to break the design continuity of the acquired product, which alienates the users that made the product so valuable in the first place.
A company like Tesla may have a strong focus on good design and design continuity just like Apple but by blending those two companies you create an obvious design dis-continuity in the joined organization which goes against their nature.
If you were not going to blend the companies, like the article suggests, what would be the purpose then? To create an investment company that has a portfolio of design focused companies that never interact with each other? That is not their business domain. And by Apple returning cash to investors, they are allowing investors to do exactly that. I can take my Apple dividend check and buy Tesla stock if I want to.
I think Tim Cook has shown surprising discipline with the cash stockpile Apple has. Apple knows exactly who they are and is not trying to be something outside of that.
The author sets things up so nicely and then veers off into wanting to acquire random companies.
Arguing that Apple could maintain focus by keeping the current management of acquired companies then begs the question: what value is there for Apple to buy a company if they are going to keep operating the same way they would before Apple bought them? But if there are going to be changes, how could that possibly not involve a loss of focus? I don't think there is a clever way to have it both ways.
There's also no coherent strategy for the companies listed: for example, buying Yahoo seems like a move to annoy Google, not a way towards a winning strategy.
As an AAPL investor, I only want Apple to buy companies that help Apple do better at what it is doing (hint: please buy up some companies to help make iCloud better!) not become some sort of Cupertino-based Berkshire Hathaway.
16 comments
[ 2.2 ms ] story [ 47.9 ms ] threadAnyone else find this peculiar? A whole article based on the author's hindsight of what Apple's stock price MAY have ever been with no proof/facts.
How is this hindsight on par? How is he so sure that the stock price would be higher? Hindsight is 20/20 but making BS hypothetical claims with no backing is unprofessional. He's just guessing.
I think he's right that the $100B spent returning money to investors hasn't bought the company much... while shares have been retired, the market cap hasn't really gone up.
This is consistent with Intel and Microsoft who, for the past 15 years have been spending billions buying their own stock and not having seen much return in share price as a result.
On the other hand, while I think Tesla is an interesting company, cars are completely out of Apple's area of expertise. Why buy a car company?
Twitter is actually similar- yes, it's a tech company, but it's not a company that makes a product and sells it, it's an online advertising play. This is, again, not Apple's business model. Same thing with Pinterist.
Buying Beats gives apple two products that fit its business model: The headphones are hardware that is sold at a nice markup. The audio services is a value add that increases the value of the hardware Apple already sells.
I don't see Pinterest or Twitter increasing the value of the iPhone over where it is now (with Twitter and Pinterest already integrated to iOS).
So, what could Apple buy that fits its business model and adds value to the company?
I think the producers of key ARM IP, and ASICs would be good choices. I think Apple's at a point where it might make sense to, rather than paying Samsung a premium, control its own fab. So, I'd look at buying TSMC, or even Intel. (though not sure Intel is cheap enough yet.) Less radically, I'd buy Imagination (The people who make the GPU cores Apple uses) and, in fact, if it were me, I'd buy ARM itself. Or at least keep acquiring the best ARM design houses.
He might have well just cherry picked the companies with the best stock returns over the last 2 years and said Apple should have bought them, why didn't they see this. With the exception of Dropbox, (which they tried to buy) none of those companies really fit well at all. I doubt regulators would even let them buy both twitter and facebook.
Apple places an enormous amount of value on this, often more than having the best possible product at the moment. A mature, wildly popular non-Apple product has its own institutional design continuity. This impedance mismatch can be dealt with in one of two ways, either by letting the discontinuity stay in the product mix, which leads to fragmented user experience across product lines, or to break the design continuity of the acquired product, which alienates the users that made the product so valuable in the first place.
A company like Tesla may have a strong focus on good design and design continuity just like Apple but by blending those two companies you create an obvious design dis-continuity in the joined organization which goes against their nature.
If you were not going to blend the companies, like the article suggests, what would be the purpose then? To create an investment company that has a portfolio of design focused companies that never interact with each other? That is not their business domain. And by Apple returning cash to investors, they are allowing investors to do exactly that. I can take my Apple dividend check and buy Tesla stock if I want to.
I think Tim Cook has shown surprising discipline with the cash stockpile Apple has. Apple knows exactly who they are and is not trying to be something outside of that.
Arguing that Apple could maintain focus by keeping the current management of acquired companies then begs the question: what value is there for Apple to buy a company if they are going to keep operating the same way they would before Apple bought them? But if there are going to be changes, how could that possibly not involve a loss of focus? I don't think there is a clever way to have it both ways.
There's also no coherent strategy for the companies listed: for example, buying Yahoo seems like a move to annoy Google, not a way towards a winning strategy.
As an AAPL investor, I only want Apple to buy companies that help Apple do better at what it is doing (hint: please buy up some companies to help make iCloud better!) not become some sort of Cupertino-based Berkshire Hathaway.