With its mountain of cash, What's next for Apple?

Ed: Apple has 3 businesses, iPod, Mac, iPhone. 

iPod is mature, market leading. Mac and iPhone have huge growth potential. All have high margins - earned from premium brands and residual commerce streams. 

Supply-chain wise, Apple has it's own chip company, OS, Safari browser, iTunes and iPhone App store online, and chain of retail stores. They don't assemble products. They don't sell advertising. 

What's next for Apple?

They don't need low margin, slow growth businesses. That would harm the high capitalization for the Apple stock. 

They don't need a fourth front to distract the company. Longer term R&D for new products does make sense, like the Apple TV product, ebook reader, or a notebook.

Select purchases to consolidate their supply chain make sense. Overall, the strategy is to keep the ship steady as Apple increases share in the two huge markets of laptops and smartphones. 

With its mountain of cash, Apple could buy…

Apple has a lot of cash on hand. $24.5 billion in fact, which is more than even Microsoft now. With it, Apple could buy a whole bunch of things. 24.5 billion things from the Dollar Store, for instance (at least in states that don’t charge sales tax). In one of the great turns of fortune, Apple could even buy computer maker Dell — in cash — as Apple 2.0 noted earlier today.

This must be particularly sweet for Apple because Dell founder Michael Dell famously said 11 years ago that he would shut down Apple and give the money back to its shareholders, when asked what he would do with the then struggling computer maker (this was before iPods, let alone iPhones).

Of course that’s just on paper. Dell’s market cap is $23.48 billion, if Apple actually wanted to acquire Dell (which you can be certain it doesn’t), it would likely take substantially more money. But there are several significant companies out there with severely sunken market caps due to the poor performance of the stock market recently.

Aside from Dell, with $24.5 billion in cash, Apple could now technically afford:

• Yahoo, with its $17.53 billion market cap, and still have about $7 billion in cash left over.
• Sun Microsystems, about seven times over, with its $3.38 billion market cap.
• Sony (at least the part traded on the New York Stock Exchange) with its $21.54 billion market cap.
• Netflix, which arguably competes with the Apple TV — about 20 times over.
• Blockbuster, which arguably competes with no one anymore — nearly 100 times over.
• Xerox, whose early experiments with graphical user interfaces (GUI) and the mouse influenced early Apple, about 4 times over.
• SanDisk, which, like Apple, loves flash memory, over 10 times over.
• PDA maker Palm, about 60 times over
• NVIDIA (which makes Apple’s graphic chips), about 6 times over.
• Chip maker AMD, over 12 times over.
• Texas Instruments, with its $22.14 billion cap.
• It could nearly buy BlackBerry-maker RIMM (one key iPhone competitor) with its $26.13 billion market cap.

ZDNet lays out some other possible acquisitions Apple could make among non-publicly traded companies including TiVo, Pandora, Last.fm (which CBS Interactive already owns) and Hulu (which NBC and Fox own).

TiVo and Pandora are interesting as both could complement or help areas of existing Apple businesses (Apple TV and iTunes respectively), but none seem particularly likely at this time. As are none of the above companies I laid out. Many of the companies know their stock prices are down temporarily, and their shareholders would likely demand a premium on the current stock price to close a deal. Instead, expect Apple to sit on its bags of cash snapping up smaller companies to bolster its future — like its purchase earlier this year of chip maker PA Semi — as it continues to rake in more money.

What Will Jobs Announce at MacWorld 2009?

by Dan Kimerling on October 25, 2008

Amongst many things, Steve Jobs is a master story teller. Every year he delivers two signature keynotes: one at MacWorld in January and one at Apple’s World Wide Developer Conference in June. However, these keynotes are more than just new product introductions. They are true stage craft and accordingly they have become major media events. Job’s keynotes happen so infrequently and are so central to Apple that their importance cannot be understated. A great keynote sets the tone for the year to come. This happened at MacWorld 2007, where Jobs announced the AppleTV and the iPhone. At the same time, a weak keynote can be a significant disappointment. This happened atMacWorld 2008, where Steve showed the world the MacBook Air for the first time. Given how important keynotes are for Apple, and that updated MacBooks and MacBook Pros all but complete Apple’s 2008 holiday product line up, the question now turns to this: What will Steve Jobs talk about during his keynote at MacWorld 2009?

New Apple products depend on a holistic view of the markets, supply chains, and economics.

@Flat panel - makes no sense. Low margin business that does not match Apple’s long term strategy. HP has been struggling as low margin Taiwan makers have become increasingly aggressive.

@notebook - unproven segment. If Amazon Kindle gains traction, look for Apple to get aggressive.

@iPhone nano - if an iPhone clone gains traction, this becomes a defensive product extension. HTC, Samsung, … the Asian gang don’t have the design skills. Short term view of orders versus brand, community building limits their ability to compete. If RIMM thinks cool is adding color casing, they have a long way to go before they can compete. Motorola, Nokia, and Microsoft move too slowly. The old Palm can do something innovative, but they need to re-energize their own employees. Thus, iPhone has clear sailing without the need for price reduction.

iPod has majority share. Laptops have delivered slow, increased share growth. A faster iPhone processor w/ low power consumption makes more sense - particularly for video and multi-threaded use.

Just an opinion.

-DJ
http://telCade.com/
http://adEcon101.blogspot.com/