Apple hire hints at strategic acquisitions

Mon, 04/14/2008 - 03:21 — Jonny Evans
1216

 Apple may be preparing to engage in a significant strategic acquisition, at least that's what's suggested by the company's move to hire HP's leading legal corporate buyout specialist, Charles Charnas.

Bear with us. We understand that recruitment isn't necessarily the most engaging story, but let's take a quick look at this. 

Firstly, Apple has hired Charnas to lead its corporate department, filling a role that hasn't been occupied for seven years. In his new post, Charnas will oversee Apple's intellectual property and strategic acquisitions. 

We accept that Apple's IP effort may need an extra hand as the company files patent after patent in order to secure and develop its iPhone.

Consider the experience the newly-appointed lawyer and 18-year HP veteran has: principally, he led the $25 billion merger between Compaq and HP. That he was involved in such a significant business deal lends him valuable experience, and makes it a viable speculation that his role at Apple will be to lead the company in another key strategic bid.

"He's been known as one of the high-profile heavy hitter corporate lawyers in Silicon Valley for many years," Anna Marie Armstrong, a legal recruiter for Mlegal told Law.com. "It seems like Apple's at a point where they want to hire really senior experienced lawyers for their in-house department."

Apple is widely known to be sitting on a huge heap of cash - around $18 billion. The company has used its cash hoard to engage in strategic investments in the past: purchasing huge quantities of flash memory to secure iPod shipments or acquiring audio company Emagic in order to bring market-leading audio application Logic into the Apple fold.

It's no surprise that Apple is preparing to flex a little of its financial muscle in some strategic investments. Apple's Chief Financial Officer Peter Oppenheimer alluded to this when asked what the company planned to do with its cash reserves. Rather than a stock buyback, he explained: "Our preference continues to be to maintain a strong balance sheet in order to preserve our flexibility to make strategic investments and/or acquisitions.”

And it's not just the cash Apple has to hand: the pathways to investment aren't so direct. Should the company want to retain some of its cash, it could ask executive board member Al Gore to put in a word for the company at venture capital firm, Kleiner Perkins Caufield & Byers, where he has a seat. (So it's no surprise that particular VC firm is handling the $100 million iPhone development fund). Given Apple's track record across the years, the company would have no problem finding venture capital firms and other investment partners should it want to punch above its weight in an acquisition. 

Certainly that Apple has recruited a buyout specialist of the calibre of  Charles Charnas suggests plans are afoot. But who is in the company's sights? 

Speculation here has been historically fruitless. Apple is unlikely to merge with Disney, for example, while both brands can work successfully together, a merger between the two would occlude both company identities, potentially harming the business of both.

Apple's music business efforts could generate some interest among board members in the purchase of a music label, such as EMI. In a sense to bring the company behind Apple Corps. into the Apple Inc. fold offers poetic symmetry, but Apple's involvement in music distribution means such a deal could raise anti-trust concerns. (Though Charnas probably has the experience to handle such regulatory probes).

A purchase of Nintendo has often been discussed, but with the Wii console at the zenith of its success the price tag on that company may be too high. 

Looking to the computer market, Dell's continued decline could make that company a perfect target for acquisition: on lyrical basis it would be a perfect response to Michael Dell's famed comment in the '90's in which he urged returning CEO Steve Jobs to sell then-failing Apple and return the money to shareholders. In a business sense, such an acquisition could potentially help Apple introduce low cost Macs, massively inflating its market share and disrupting the industry landscape. 

Other potential targets could include Sun, Yahoo, or even a move to bridge the gap between Apple and Sony.

Naturally, all of this is speculation, and speculation on Apple's business plans is often frustrating, frequently fruitless, and occasionally no more than smoke that's absent of fire. But it's speculation based on one key and highly salient fact: Apple has hired one of the most experienced buyout specialists in Silicon Valley to lead a part of its legal team that's focused on acquisitions.

This makes it insanely easy to believe Apple has something in the works, and suggests initial conversations with regard to a (or multiple) buyouts has led to the need to put together a legal team to make such moves more concrete.

Given the regulatory need to warn investors of any major investment or acquisition plans before they take place, Apple's recruitment of Charnas means the analyst community will be looking to Apple's financial results announcement of April 23 for some intimations as to the company's plan, though with the lawyer only recently hired, it could be too early for full disclosure at this time.

All the same, the hire leaves the field open for a new wave of speculation: Who do you think Apple plans to buy, and what effect could it have on the industry landscape? 

 

( Filed Under: )

Comments

Dell!! I love the idea and

911

Dell!! I love the idea and think it is not that far fetched. Apple, with the iPhone has signaled that is is serious about the Enterprise. It also may be time to strike at Microsoft.

Buying Dell would instantly add a global network of Enterprise clients. It would also allow Apple to "invent" a low end brand (Dell) that it could use for Clones.

Imagine Dell offering Windows or Mac on their Laptops and Desktops.

Oh...so how much would Dell cost Apple?

Adobe makes the most

910

Adobe makes the most sense.

I know it has been said 1 million times for a million years but Adobe makes a lot of sense for Apple. Not only would it allow Apple to control a large part of the Deskop Software market for both Mac and Windows, but Flash as a platform is also of significant interest.

adobe all the way!!!

1110

that's the first thing i thought. there have been rumors that apple is losing interest in their pro apps. this would be the ultimate coup and give apple a dominating control in internet tools and creative apps. the only thing is apple would probably have to borrow an extra 10 billion for the buyout.

I totally agree. Further,

910

I totally agree.

Further, the market cap of Adobe is about $18bn. Pretty much the same as the cash which apple heaped up.

Adobe, they're the one

814

Yeah, I completely agree. Adobe is the best target:
http://johnsessays.blogspot.com/2008/04/mergers-and-acquisitions.html

Dell? Maybe. I think an

1110

Dell? Maybe. I think an acquisition will rather be in the telecomms field, I think small handheld internet access devices are the future, and you need telecomms for that. Also, if you own the tech you can make money there. So either a telecomms firm or a phones maker like Motorola or Sony Ericsson could be the target. What about China Telecom?

Cause the Chinese would just

1111

Cause the Chinese would just LOVE to sell a company to an American owned firm... doubt it!

Yup, sounds like Adobe to me

1110

Great article - this appointment certainly seems telling. It appears that Apple currently has enough money to buy Adobe in cash, and it's surely their most obvious merger target. Albeit, I love the idea of Apple buying Dell - that would be hilarious, but otherwise nonsensical.

http://www.macpredictions.com/2008/02/forget-buying-microsoftyahoo-think...

How about movie content?

1211

I'd like to see apple buy netflix. I'm not sure of the rights management side of things but it would open up a huge vault of digital media that netfilx already can stream to computers. I'm biased however, seeing that I use my Apple TV on a regular basis. Just a thought.

telecom, TV, Wideband satelite

1315

Apple has so many ways to go,if and when they choose to do so. Something in the telecom sector would be my bet.

Computers are not where the big money is... Mass market telecommunication devices is big business. Everything points to the demise of the PC as we know it, why invest in that space when it's on it's way down hill? Dell would be fun but a bad choice.

If Dell are the target, Leopard needs to integrate absolutely seemless virtual handling of windows applications as in a "super optimized wine" built in to leopard 10.6 or what ever it might be. If that was the prerequisites for planning to buy Dell... that could give some serious competition to Windows and the PC market in general.The share would go through the roof..if this was pulled of with out a hitch.. this is just one of many scenarios :)

Why buy DELL?

611

I can't imagine APPLE buying something as worthless as DELL.

DELL is yesterday's technology. DELL offers very little of value and what they do own is dropping in value. The don't innovate, so what is there for APPLE to really buy in that company? Not much.

APPLE wants to buy something:

fundamentally global in nature.

in the cloud.

mobile.

fundamental to tomorrow's tech user.

cool.

Or a company that can help them move more quickly in that direction.

Buying Balda, the iPhone screen manufacturer???

610

Could it be Balda, the manufacturer of the very specific iPhone touchscreen, by any chance?

They are in deep financial trouble today, yet at the same time, a strategic asset for everyone telco/bluchip related.
^^

Dell?

910

Dell? Do you think that Steve Jobs is the kind of a man that "throws money to the trash"? Low profit machines are not in Apple's best interest.
Apple likes to reinvent markets in which Apple's product quality can make a difference. So, Dell definitively not!

Sprint. Apple could fix

78

Sprint.

Apple could fix Sprint's failed WiMax rollout attempts, and make a nationwide, always on, data cloud. Then a quick joint venture with Google puts the world's data in the hands of any iphone user, anytime, anywhere.

Adobe would be awesome!

810

Adobe would be awesome! Imagine Photoshop 09 being a part of iLife 09, as a mac exclusive! Oh boy! One click in iPhoto "Send to Photoshop". That would be amazing!

What if Apple bought Dell and just completely stopped making Dell computers? They could provide an excellent switching program to all Dell users! Will never happen, but it would be cool.

And about Nintendo... I feel if apple wants to enter the gaming market, they'll create something themselves... And they have. Its called the iPhone.

 I reckon even if Apple

1112

 I reckon even if Apple hasn't got any planned purchases reading the list the 9-5 massive is coming up with could be a good read for anyone at apple involved in deciding what to buy yet. A touch screen maker really isn't such a bad idea.

Sun wouldbe the Ultimate choice

119

Personally I am hoping for a Sun merger/ acquisition,..this would enable them to incorporate Solaris features in the upcoming OS XI, it would also add a huge installed based of Sun boxes able to run OS XI. Imagine running OS X or its successor on a Sun E25K server!

Adobe Please

711

Dear Apple,

Please buy Adobe! A lot of your users depend on their products, but they don't really seem to care too much anymore about your users. I think they would prefer that everyone switch to Windows. I know you guys used to be friends, but they don't really call or hang around anymore, so you can stop being nice to them now. If you don't buy them, please develop a better product to compete. I just request that you not try to oversimplify the creative suite if this is what happens; Keep iLife for basic users and CS for pro users.

Thank you,

Long time Apple/Adobe user, developer, and fanatic.

dataspace

108

Look at data space this is where I think they are looking....

I meant space data

87

I meant space data

While everyone is speculating...

1012

Why not a "friendly" merger with HP, with Charnas being the bridge? There are certainly more potential long-range benefits with that merger than most other smaller ventures. Seriously, though, I suppose there would be too much HP baggage to ever make that combined company run smoothly.

No, Adobe seems the most likely candidate.

And one crucial point about this conversation in general...buyouts don't require anywhere near a company's total cash reserves. In many cases, very little, actually. It isn't like going to the store and paying cash for a candy bar. Adobe would be child's play to gobble up.

Don't you think that Adobe's execs and board members haven't, at least in their most secret, inward moments, thought about their compensation in comparison to that of Apple's execs the past couple of years? Check out the take during the last 30 days. That's what motivates sellouts these days. Several recent factors, internal to Adobe, make the timing better now than ever before.

The Yahoo smoke will be clearing soon, with MS forced to reset their sights. Adobe's small market cap makes them low hanging fruit for cash-flush, bargain hunters, especially in a downturn.

Adobe *will* be bought within the next two years; the only question is who gets there first with the most attractive deal. I'd bet Adobe employees would be much happier to be with Apple than MS, and Steve would be happier if the Apple logo dominated the San Jose skyline.

Dell...definitely not. Why

1014

Dell...definitely not. Why on earth would Apple buy Dell when Steve has said numerous times that a small market share directly leads to high quality Pproducts? Also, Dell has no good ideas...they are not idea people, they just sell cheap low quality computers to people who don't know any better. Apple will never ever buy Dell. I would say something with WiMax or a very similar technology to that. The ipod touch and iphone would benefit enormously from wide use of WiMax technology and it would give Apple a new way to run things when the AT&T contract is up. Don't want a cell phone provider? Don't need one, run a smooth, beautiful, Apple developed voip on your iphone with the national WiFi that Apple is providing...sounds good, right? This would lead to huge increases in people purchasing ipods/iphones and any future portable tablet or laptop that the company creates as well as huge pr advantages. Also, Apple would get some supplemental income from this or they could potentially run it for free using ad sales. I would bet on this factor, Apple is all about the ability to have a computer with you all the time and in all places, this is the best way to promote that.

THE acquisitions are here :

128

EVS broadcast, the future of digital cinema.

Atari, ex-Infogrammes, a cheap but powerfull game company

TribalMedia, authoring software, could compete with director for personnal use.

Something in the videoconferencing

OR This :

89

Divx

Garmin

think small

613

Aside from a move on Adobe I cannot see Apple buying/merging with a large corporation. It is not their style. They seem to like smaller strategic purchases that grow their portfolio and lock-in capabilities.

Sony!

910

Why would Apple buy another US centric company, a hardware company for that matter? If they want to do a cheap clone, they an right now, just go to Asus and subcontract them bundling Mac OS X with BootCamp and no Windows! Should the user/corporation want Windoze, then he buy it ahahah that would be brilliant.

Apple could buy Sony - it makes a lot of sense! Too much for it not be tempted! They were inventors of the walkman, they've got huge operations in Europe and Japan, two crucial markets for Apple right now, they manufacture plasmas and LCDs, etc. Plus they've got Sony Pictures corp!!!

And in terms of name, they're as big and famous and seductive as Apple. A perfect couple!

Just think for a moment and stop saying what you'd selfishly wish for.

Thanks for reading

Steve might be playing the clone game, after all these years

129

'think different' has got a point there with Apple-HP but NOT Apple buying HP.

Haven't you noticed how Apple works? For example, Al Gore is Apple and he is Kleiner Perkins Caufield & Byers too. End result? KPC&B puts money to help Apple. That's how it works. You're my friend? Show me! :) Same goes for Disney and the iTunes Store. Etc. Etc.

So while even if Apple doesn't get into acquisition mood, I tell you folks, there might be a big surprise coming in the form of Apple starting to distribute Mac OS X with a fez select PC vendors that will ensure a certain quality and controlled integration between hardware elements - HP does that!

So Mac Clones might be a reality after all, only authorized by Apple and making Apple money.

It would be a direct hit to MSFT in its most fragile hour. With an incredible failing menace such as Vista, doesn't it seem totally logic and enticing to just go and do that. After all, Mac OS X can do windoze for those in desperate need of crap in their lives. Or for corporations that still need to do windoze but want to migrate smoothly and surely to a very stable and magnificent OS like Leopard is.

Think about that one. Of course Granas may be just the right man to establish that bridge.

And HP hardware is much better than Dell's, they are famous in Europe for being top quality and not that expensive, very competent and with great service. A suitable ally for Apple.

Steve might be doing the clone thing after all, after all these years. Only not with garage startups that were not adding any value years ago (forgot their names) but rather with the big boys.

If they would do such a deal with HP, they would have to train their staff and so they could also start selling Leopard Mac OS X to people with existing PCs provided said machines were on a certain performance and hardware integration level. Many people would soon want to move to Apple hardware for the design, build quality and durability. You know, to own Mac OS X and not own a Macintosh... that's crazy!

Make the calculations for the number of OS X Leopard boxes Apple would then ship!

And HP is a huge distribution channel in Europe! I don't know about Japan. But may be big in India too.

How many USD Billions would that cost Apple?! Not a cent!

Steve is using all the tricks to lure people to Apple ecossystem - remember that a HP running Leopard still has iTunes and Safari - and he doesn't need to spend a buck out of the 18B to achieve that. You know, that lumpsum in his pants' pockets doesn't hitch his leg...

Think about it! Think different!

my comment on Steve might be playing the clone game after all

149

If this is true after then......MUHOOHAHAHAHAHAAAAAAAAAAA!!!!111 =D

great story

128

Great story. Seems to have incited lively conversation. Against all odds I am hoping that this acquisition will instill investor confidence and possibly help to boost stock prices back up towards where they were a few months ago. Given the current market climate I expect them to act conservatively though....unfortunately.

Who Apple is Not going to Buy

811

Here is a list of companies that Apple is NOT going to buy:

1) HP
2) Dell
3) Sun
4) Any other computer hardware maker
5) Any computer storage company
6) Adobe (Apple's been there and tried that... they are not going there again)
7) Telecom companies (Apple's not in that game now that they are partnering with Telecom companies)
8) Anyone in the social networking space or web content space (re: Yahoo!)

Cool companies that they may be interested in:

1) RED
2) AJA
3) Innovative touch technology companies
4) other small, specialized companies which have software that compliments important Apple creative workflows, particularly in video production
5) Any company that has a product that will enhance the competitive advantage of their hardware... remember, Apple is really a hardware company... that's where they make all their money, selling hardware. The software is designed to make the hardware more valuable / appealing. How many times has Jobs said 'if you want to make great hardware, you have to know how to do software.'

On the bubble...
1) Ok, I'll put Adobe here only because on paper they are a good match... but like I said before Apple's been there and tried that. They aren't going back for 2nds
2) A content company (e.g., EMI or other)
3) Internet content distribution network (e.g., Akami)

Anyway, that's just my $.02.