Now we know what Apple is going to do with some of their $100B cash pile: Pay a dividend and buy back stock.
Facebook's IPO is rumored to go out at about the same amount as Apple's cash pile: $100 billion dollars. No, I am not suggesting Apple buy Facebook. (Zuckerberg has his own path to travel, and it does not go through Cupertino).
But today's dividend announcement did start me thinking about what else Apple could do with that money. The short answer is to buy Twitter for about $10 billion dollars. And if they could make the purchase with a combination of appreciated equity and cash, even better.
Let me state upfront that I believe M&A to be wildly overrated (IPOs as well); most companies do these very poorly and end up unwinding big acquisitions at great cost eventually. (See AOL Time Warner as the poster child). They pay huge iBank fees to conglomerize, and even bigger fees to de-conglomerize. Outside of big resource mergers in oil or minerals, major mergers rarely work out well. So no, I am not a fan of most of these deals.
There are a few exceptions. A handful of firms have made strategic acquisitions an art form. Cisco Systems (CSCO) may be the best tech firm at this; GE may be the best industrial making strategic acquisitions (forget that attempted Honeywell thingie). Oracle makes larger acquisitions that has helped grow their revenues over the years (of BEA, PeopleSoft, Siebel Systems, Hyperion and SunMicro).
And Apple? They primarily do small, almost tactical purchases. Even their biggest buy, the 1997 purchase of NeXT Computer that brought prodigal son back to Apple, was "only" $400m.
Why Twitter?
Apple does software and hardware really well; they do the integration between the two outstandingly. But they haven't really done Social particularly well. In fact, Apple may be the only Tech company without a Twitter account. Go ahead, check out @Apple "“ 0 Tweets 0 Following, 6067 Followers. Their iTunes software is terrific, but the "Ping" social network never caught on. Twitter automagically makes Apple a defactor player in social.
Their biggest competitors over the next decade are not HP or Dell or even Microsoft "“ but more likely Google and Facebook. Which leads us back to Twitter. In the last upgrade, I noticed how tightly integrated "Tweet This" has become in Apple's mobile operating system, iOS. Apple could do a strategic investment in Twitter of $1 billion or more. But why? For less than 10% of Cash on hand, acquire an enormous strategic investor. They could continue to let Twitter operate as a stand alone entity. They then build in Twitter more tightly into their products as their social network.
Ping is replaced with Twitter Tunes; Flickr gets replaced with an Apple Photos; there are innumerable ways a tighter integration can be had between the two companies.
The question is should it? Can Apple achieve its goals without Twitter? Sure. But buying some (or all) of Twitter gets Apple 3 things:
1. Immediate exposure to Social Networking 2. Fixes Ping and other shortcomings; 3. Most importantly, keeps Twitter from the hands of Google, Facebook and Microsoft.
Twitter is an IPO candidate in its own. I suspect Google would be the better fit "“ infrastructure expertise, monetizing search, etc. "“ but there seems to be some estrangement between the two.
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What do you thlnk? Does this deal make any sense?
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
Disclaimer: I don’t use twitter, i don’t care for twitter, i don’t “get” twitter.
All I know is that Steve Jobs was a brilliant marketer and a greedy s.o.b. who went all the way to China to keep profit margins much higher than anyone else in the industry. Oh, and he didn’t like to part with his (or Apple’s ) cash. I don’t think he’d spend an obscene amount of money on a maker of **freeware.**
But Steve is gone and now wee see the investment banker sharks swimming closer and closer… they had snowball’s chance in hell to pitch something like this to Steve Jobs.
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BR: Steve went to China with the rest of the industry — all electronic makers are thee
I usually would never take the opposite side of any trade that Barry is on "“ but Apple's small & strategic acquisitions seem to have served it well. It's hard to get behind an idea that strays from such a successful philosophy. The company clearly has never tried to be all things to all people, and it's hard to make a case for why they should try.
Besides, if they do anything socially (a big "if" it seems to me), it will be on their terms. They will take their time and learn from the costly mistakes of others, then blow us all away with something truly unique. That worked pretty well for their entry into the mobile phone biz.
(Full disclosure: I'm way, way out of the demo of people who find value in Twitter, much less $10 billion worth of value.)
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BR: They want to be in Social — see the failed Ping. This gets them there quickly
“…The short answer is to buy Twitter for about $10 billion dollars…”
Better than the ‘Value’ they’re going to get for the “announced” ‘Stock Buy-back’ … ~~
“…GE may be the best industrial making strategic acquisitions (forget that attempted Honeywell thingie)…”
It was, only, the ‘Politicians’/'Regulators’ that had an ‘Issue’ with that tie-up, no?
past that, Honeywell was worth every ‘penny’, yes?
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BR: Anti-trust concerns stopped the deal. After it fell apart, I bought HON. Worked out very well.
[...] Why Apple should buy Twitter. (Big Picture) [...]
how about they invest in bringing some of those manufacturing jobs to the Americas. how? just tell Foxconn that’s the way it has to be and let them figure it out.
Buying Twitter is better than the brain-dead stock buyback idea.
Furthermore, anyone who thinks some dividends are coming from Apples overseas cash is likely to be disappointed. That is not going to happen in this environment.
Barry, if you had seen Steve Jobs’s 1984 speech, you would never have suggested this :)
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BR: The 1984 Mac speech? I read it.
I’m missing a step. How exactly could Apple use Twitter to make money? They can get all the benefits of Twitter by using the API and integrating it into their system. It’s not as if Twitter is raking in piles of money like some other company I can name. It would make more sense for Twitter to use some of that $10B they are raising and buying Apple stock.
Apple is issuing a dividend and buying back stock to discourage a hostile take over and liquidation now that Steve Jobs is dead and can no longer use his resignation as a threat. You know this business. Run the numbers. Apple has $100B in cash on hand and a huge cash flow. Interest rates are in the cellar. It’s a perfect liquidation target, and one that can be milked over a period of years while basically destroying the company.
I’m not a fan of Apple buying Twitter simply because it would taint the service for all the fandroids and those who want to whinge that OS X is not complicated enough to support their lack of domain skills in anything but operating systems. They are a little like teatards that troll with an exponentially low S/N, making it appear that there are a lot of them, when in fact there are very few.
Even though they don’t ever have much of anything valuable to say, they do keep the race interesting, and like Mike Daisey, tend to help inoculate Apple from bigger fails down the road. It would be a shame if they felt like they had to find some other inferior mouthpiece to froth on, because then we would have to either a) watch them with those inferior tools, or b) that their defection might actually bifurcate the microblog universe, which would equally suck for everyone.
As a guy who has seen cisco’s acquisition process up close and personally, they’re not all that smart about M&A. Tons of cash have been wasted there on acquisitions that went nowhere and were worse than useless a year later.
Apple should not bother touching Twitter. There’s no barrier to entry and no unique tie-in to Apple’s product line.
Apple would be better served buying into a chip company for custom silicon. This would give them a better return on their hardware, both in design turn-around times as well as margins.
A Dividend, when they have to compete with Microsoft? I think this is a mistake. They need to hire more developers. The OS isn’t getting any of the development it deserves.
Moderator is watching my comments and I don’t think I said anything bad in any way. Tried two entries removed the word smell from one, same result. What’s up with that?
Neet apparently word press calls in the moderator anytime one references the term for a jedi apprentice from The Star Wars universe.
padawan
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