my 2 cents
1) I don't care one way or another about the acquisition of the company / talent. I'm sure there is value there. BUT I am concerned at the amount they spent. there are an aweful lot of great acquisitions Apple could make for $3bln.
2) I'm glad they announced it now instead of spending time on it during WWDC. If there are already relevant plans that concern developers then great, that is all that needs to be at WWDC.
Name some of these great opportunities apple has overlooked. To be fair let's limit them to companies with a similar net earnings percentage. I mean Apple could Facebook Flappy Bird for two billion dollars and it would not be as dumb as Facebook facebooking whatsapp.
There are several reasons apple is sitting on a huge pile of cash. One of them is that there are not a lot of relevant billion dollar businesses for sale that make money.
Obviously Apple's massive growth over the last ten plus years has made a deal like this much easier to handle as it is fairly low risk.
One thing I think the detractors fail to recognize is Apple has run counter to the Silicon Valley spending spree ideal for pretty much ever. They have always carefully chosen when and where to invest their money. As the bank accounts swelled it just became more difficult to find opportunities of real value that will provide a tangible return. There are only so many massive pre-orders and investments in partners building out facilities to go around. They have gotten so large that it is a real challenge for them to find worthwhile investments. This certainly bears the hallmark of a carefully considered and financially sound apple-like investment and not at all like a Zuckerberg Hallucination or a Google Screw it we have lots of money so who cares investment.
I do not think people appreciate how hard it can be to find investments that offer a good return while carrying very little risk. When you have a huge sum of money, as a public company, you do have an obligation to try and maximize your return.
Apple has always been financially prudent and careful in investing their cash and this is, again, no exception. I think some people get thrown off a bit due to the actual amount being invested, as three billon dollars is a lot of money by any metric. That being said that does not mean this is not a relatively safe investment with low risk. Back to your proposition, it is not likely there are two, three or ten businesses just sitting out there waiting for Apple to buy them up.
Another misconception I think a lot of people have is that succesful businesses are just looking to be bought up. That is simply not the case. While the adage of everything having its price is absolutely correct, Apple has long demonstrated an unwillingness to overpay for businesses. Given what we know of Beats there is no reasonable economic measurement that would classify three billion dollars as overpaying. In fact it leans much more towards being a great price. So succesful companies making lots of money usually are not looking to sell. There are many reasons for this, but the biggest is you are likely giving up a lot of money in the long run. This is money most savy investors and well qualified business owners and buyers don't pay for. In Beats case they have had an amazing rate of growth. So much so that it is possible five years from now it would have been a huge mistake, financially to sell. However, you don't pay for potential. I can only speculate that personal relationships and a bigger picture is what brought this deal together. There is no evidence that Beats was trying to sell, in fact the exact opposite had just happened as the bought back the piece of the company HTC had purchased.
Since money making machine companies are rarely for sale and if they are they are going to want to be paid a premium, what businesses are out there for sale? One's that don't make money clog up most of the list. It is easy to rattle off the significant number of tech related businesses that have sold for over a billion dollars, in the last five to seven years, that were not profitable at all. Since I have gone on much too long I don't think I need to explain why businesses that only lose money would be much more open and available to companies wanting to buy other companies.
The Motorola deal was flat out bad for google. The Nest deal not as much, at least not now. It is certainly a much more risky expenditure of three billion dollars than Beats is for Apple, but it has some potential (we shouldn't be outlayjng billions on potential). Then you have the total cluster of Whatsapp. Whatsapp could cure world hunger, cure cancer and make people immortal and still be a horrible purchase.
The bottom line is finding companies that are actually worth billions of dollars and provide synergy with your business is beyond finding a needle in a haystack. The reality is there are not a bunch of succesful companies wanting a reasonable price that overlap with what Apple is trying to do.
Someone earlier asked if it was such a great deal why was Google and Microsoft all over it?
Google, Microsoft and Apple are in three different businesses. Advertising, Software and Hardware. They are really not similar at all. So their wants and needs are different. While I have said in the past that Beats makes sense purely as a financial investment, regardless of any other factors. That remains absolutely true. However it does not mean that is good guidance for companies making strategic acquisitions. It was the right fit for Apple. And to be fair there is no evidence that Beats was available to Microsoft or Google. Even at a higher price it might not have been available.
I appreciate and respect the fact that Apple has always exhibited restraint even when faced with the temptation to overpay for toys on the companies dime. They continue to maintain that restraint, including this deal. It is a very low risk investment with a couple wild cards that offer potential huge upside. If the day after the deal closed everything Beats disappeared off the face of the planet, leaving Apple with literally nothing, it would still be a better deal than Motorola or Whatsapp.
Does it come with a free copy of the The Chronic?
