Monday, January 3, 2011

What Does Disney, Netflix, Dell, and Sony All Have In Common?

What does Disney, Dell, Netflix, and Sony all have in common? Well, one way or another, Apple has dealt with them directly as competitors or in cooperation to gain access to media for the iTunes ecosystem.

However, there's one more that these four companies have in common as it relates to Apple.

And what would that be?

They have all been mentioned as takeover targets for Apple at one time or another. But how likely is Apple ever going to pull of a high-profile buyout? Let's examine each company mentioned, analyze what makes sense for Apple and its consumer strategy, and how likely it is to happen if Apple decides to spend its $55 billion or so they've got sitting in the bank.

DISNEY. As you know by now, Steve Jobs is the single largest shareholder of Disney after Disney bought out Pixar. And while that was a marriage made in heaven, the best reason I've heard why Apple should buy Disney is Steve Jobs.

And beyond that, Disney does have a lot to offer. They have a culture and history that promotes "thinking different". And while it'll be a lot to digest, Apple and Disney's culture of creativity and innovation can work well. However, secrecy is Apple's playbook and Disney is not really known for it.

Furthermore, as a takeover target, Disney does have a deep bench when it comes to goods and services that Apple might be interested in. Music, TV, movies.

But this would be an expensive takeover. Even for Steve Jobs, it'll be hard to swallow.

NETFLIX. Don't think that just because Netflix has an app in the app store and sits prominently on Apple TV that it means Apple likes it. Having Netflix apps help sell iOS devices. So Apple is fine with that.

What Netflix has to offer is a streaming infrastructure that many would like to see Apple offer. Remember all those rumors about subscriptions? Yeah, it would instantly be something Apple fans would love to see in iTunes. But a rose by any other name is still a rose.

Whether the rental service is called Netflix or iTunes, it helps sell iPhones and iPads. So why spend billions buying something your users already get when they buy your gears?

Plus, there is a lot of prediction in the financial market that Netflix's good days are numbered as contracts end and Netflix will be forced to pay a lot more for content. It may be messy business and trouble that Apple does not want to go looking for.

DELL. Michael Dell once said that Apple should sell everything and give the money back to its investors. I read this one post once why Apple should buy Dell and it did not make a whole lot of sense to me. But I thought I mention it here just for laughs.

Dell is still the world second largest PC maker and has a lot of enterprise connections. Apple is trying to grow its enterprise sales organically and that's always been how Cupertino like it. And there isn't a need for Apple to waste billions on such a shortcut.

Besides, the Mac is selling very well now and it helps that it can also run Windows. Macs have about 10% of the PC market. Getting to 15% or 20% isn't out of the question. Maybe one day, even more than that. So no need for Dell.

Finally, SONY. If for Macs as a choice, I think Sony is the closest thing in the Windows world that comes to Apple. So what does Sony have to offer Apple?

The engineering, patents, and expertise in the Japanese market is something that quickly comes to mind. In the past, Sony engineers were rumored to have helped Apple develop its Powerbooks. And if you look at the Viao laptops, you know that design is just as important to Sony as it is to Apple. Albeit, Viaos have quite a few more lights and buttons than Apple would ever like to see on the Macbooks.

On top of that, there is the deep media library that Sony has to offer. Music, TV, movies, and video games. Would you want a lot of those PS3 games available on Apple TV?

And there is talk that Apple might be coming out with its own line of TV based on iOS. Well, I can see Sony's patents in TV and display coming in very handy with Apple's own technology and visions for the living room.

Basically, Sony has a lot of parts that will help Apple shore up its iTunes ecosystem, gain a foothold in the living room, and added values in the mobile war with Google and Android.

So the question we come to is how likely Apple do a major buyout? Steve Jobs has indicated that Apple is looking at some companies for acquisitions but history says otherwise. Apple has always bought companies that help it fill holes, never something that values in the tens of billions of dollars.

So while I would not say a hight-valued acquisition is impossible, it's highly unlikely. Disney, Dell, Netflix, and Sony. Only Sony is a better fit for Apple. It's a shame we'll never see it happen.

Note: Apple likely has about $55 billion in cash right now (end of 2010). Spending anywhere from $40-$50 billion might sound like a huge depletion even as competitors like Microsoft and Google have about $30 billion each. Well, Apple will probably generate another $15 billion in cash in 2011 alone. By the end of 2011, Apple will likely still have about $15-20 billion in the bank after a major acquisition.

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