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Apple Has Too Much Cash

Posted on Monday, Dec 17th 2007

Apple has too much cash, says Fortune. $15 Billion to be specific. So what should Apple buy?

Oh, I like the Netflix idea, but perhaps it’s time for some radical thinking.

Why not buy Dell, and take the idea of vertical integration to the extreme? Think about all the enterprise customer relationships, the PC market share, the channels … And think about Michael Dell working for Steve Jobs … Ultimate combination of creativity and operational excellence!

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Sramana,

I think you may be missing a point here…

Apple stands (i think..) for ultimate consumer experience..their products conduct a premium..purely because of their appeal and their oomph factor…
Dell products, though coming from a efficient business model, are boring ..

Apple folks also have big egos and think they can create world class products on their own (they have been successful in some though).

I foresee Apple focusing bringing their own products into new markets.. they are slowly moving to a full fledged consumer electronics company. Whats next ? Maybe a Apple HDTV, Car Navigation system, Next generation 4G phones or Apple Gaming console with Mp3 and itunes playback ..there is a still huge market for Apple to innovate.. 15billion war chest in just fine for that…

Balaji Tuesday, December 18, 2007 at 12:34 AM PT

That would be Awesome! Think about it. Dells running Leopard!?!?!

You know it’s just a matter of time before Jobs has his SUPERIOR OS running on PC’s.

nickthefish Tuesday, December 18, 2007 at 5:34 AM PT

I think Apple should buy Sun and run OSX server on Sun hardware..

J Bovasso Tuesday, December 18, 2007 at 6:47 AM PT

Apple is missing out on the digital home (the living room), there is the the AppleTV a money losing offer. Apple could also leverage TimeMachine… They should acquire TiVo, the only non-game console winner in the digital home/living space. (Winner in the sense of brand leadership, the company is losing in most other respects). How does this play out???

Apple acquires Tivo, merges the Tivo function and the AppleTV/Frontrow experience. (the box that ships looks more like a bigger mini and is a size that looks like the gear that is next to the TV only Apple clean and comes with various face plates (silver, white and black). The interface munges together the Tivo look and sounds with FrontRow… and guess what… TimeMachine can find it and use space allocated. Then Apple does two marvelous things… 1) Apple offers Time Machine for XP (forget Vista) 2) Apple offers remote software to control the AppleTivo from the iTouch (it is the remote with the TV schedule on it) and the iPhone as well as offering access from the internet (afterall I really don’t want to look at the guide on my TV do I) and I do want to make sure I get what I want on my TV where ever I am. All the hardware pieces are in place except one. And that one would be the Slingbox/Sony LocationFree capability (which Sony would license to Apple if they could see a business case to sell Mio’s and PSP’s as clients). By the way, the hardware is really the integration of the mini, the TiVO … that way the box will become the DVD drive as well.

Oh and guess what. Now that the box is sitting in a place where it is always on, with tons of storage, recording TV, serving up files over the internet it is the home gateway. As such it provides the platfore for Apple to connect to the other trend in the home. Home monitoring, securing and energy conservation. Its the Green Apple!

Next, Apple goes after the car. Afterall, don’t people really want the iTunes in their car and not have the wires. Do people want an iPod in the car… no… they want their music and content in the car. Not the divice with wires…. Either apple should license the iTouch/iPhone capability to Toyota, Honda and BMW or they should acquire someone that owns a hunk in that dash board space. I vote for the former. Then when I park my car in my garage my car simply syncs with my iTunes…. all my content is on the system in my car… and the screen in my car (which is bigger, but perhaps not nicer) has touch capabiliy and can be used as my phone interface… it would be safer.

Kirk Tuesday, December 18, 2007 at 8:31 AM PT

What about the old fashion way of distributing corp cash – pay me a one time dividend on my stock….what a novel idea

Ron Tuesday, December 18, 2007 at 9:31 AM PT

Balaji,

Creating products is one thing, and having the channels to sell them and gain market share is quite another, especially when an entrenched OS competitor exists, if not for any other reason but inertia.

Knocking Microsoft off the PC leadership position won’t be so easy by just creating great products, because Gates has built a very smart eco-system which is quite resilient and has, at this point, built tremendous inertia and exit barrier.

Jobs, on the other hand, doesn’t like to partner with people, doesn’t like the enterprise, doesn’t have channels into the enterprise.

It is precisely because of the ego issues at Apple that I suggest that they “buy” a channel, as opposed to trying to partner with others.

I think, it is you who are missing the point of how the PC Market share game works.

Kirk, I do agree, that going after the Digital Home and against SONY is another alternative for Apple.

Car – I am not so hot on that one. I would like to see them win the PC OS game and the Digital Home game, both segments that could use their magic touch of usability badly.

Sramana Mitra Tuesday, December 18, 2007 at 11:30 AM PT

Sramana,

I don’t think Apple wants to go head-on with MS or even dream of trying to knock it off it’s PC leadership position. I think Apple would be happy with any low double digit market share and stay as the niche player. With iPhone yet to penetrate Europe, Chindia and Japan, they have long way to go before they struggle for growth.

But you are also missing the integration issues. Merging two large companies is almost never successful. They are two diametrically opposite business models and culturally so very different that this merger will leave the resulting company without an identity that at least the Apple employees so worship.

Ashwin Tuesday, December 18, 2007 at 11:02 PM PT

Ashwin,

YOU don’t have a clue about Steve Jobs’ thought process. He has EVERY intention of going against MS and PC leadership. It is an unsettled score for him. In his mind, Microsoft should never have won this game, given that he and Woz did most of the invention / innovation.

Integration – it is difficult, but plenty of companies have successfully integrated. Compaq-HP, Oracle-Peoplesoft-Siebel, etc. come to mind. And their cultures have been sufficiently different. I think you are stuck in an era of popular / conventional wisdom, but that era has started changing.

Sramana Mitra Wednesday, December 19, 2007 at 10:18 AM PT

Sramana,

“YOU don’t have a clue about Steve Jobs’ thought process.” … I am sure neither do you.

Steve Jobs is too smart a businessman to let his emotions get better of him to “settle”scores with MS. Apple will continue to focus on its leadership position in ultra premium segments with iPods/iPhones to get into the high end digital experience/lifestyle. In that process if Apple happens to sell more Macs, it will be icing on the cake.

I don’t consider HP-Compaq a successful merger. Look no further than Carly’s fate who spearheaded it. Mark Salvaged what was left of it and cleaned up the company and that’s why HP is doing well … despite and not because of … the merger.

Ashwin Wednesday, December 19, 2007 at 10:01 PM PT

Sramana,

Valid point. PC market has its own dynamics and has burnt many players (even the mighty IBM…)

But why now ?? What is the inherent need in Apple to go on a OS war ? Apple OS has been here for more than quarter of a century and the basic principles have not changed. Quality software but only compatible with Mac machines
Why has Apple OS not penetrated the enterprise market till now ?? Its the compatibility issues, partly due to the stubbornness of Apple management to partner with 3rd party application developers and other software vendors..
Acquiring a channel helps, but enterprise owner and decision makers are not going to jump into an OS unless it well and truly works for them. Windows vista sucks but at least it works and does not have integration issues with any specialized software (ERP!!) a company might already have bought

My initial take on the $ 15 billion war chest was that it might be better spent on creating consumer products which hold the Apple USP… world class products which are simple to use. Digital home seems rational here…

Balaji Thursday, December 20, 2007 at 12:38 PM PT

Ashwin,

I actually do have a clue into Steve Jobs’ psyche. He is COMPLETELY driven by emotions and ego. I am not going to go into why or how I have this clue … but the real question that Balaji asks above is the better one to discuss.

So Balaji,

Why now? What has changed?

  1. iPod has injected HUGE momentum into the Apple brand, and to the company’s health as a whole.

  2. Vista is a bomb, and MS will not be able to deliver another OS for a long time. They will improve Vista over the next 2-3 years, but the enhancement will be marginal and evolutionary. In comparison, Apple has a really great OS going for them.

  3. The Convergence Device movement is full throttle in swing. Apple, again, is considered one of the leaders in that movement. This should cause the PC and the Handhelds to come closer together, offering up discontinuities into the market.

In summary, discontinuities drive change.

In my opinion, one of the changes this scenario offers up is the shift from PC to MAC. Apple’s massively popular television campaign is as clear a signal that they are going after this opportunity as any other. It makes fun of Bill Gates, PC, and Vista with such panache, that this campaign alone should give you, Ashwin, a clue into Steve Jobs’ mind, and what battle he is fighting.

Sramana

Sramana Mitra Thursday, December 20, 2007 at 2:03 PM PT

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