Why Apple Should Buy…. Nothing

Why Apple Should Buy…. Nothing

Everyone is generous about advising Apple on how it should spend its billions.

Apple should buy Twitter, according to financial analyst and blogger, Barry Ritholtz.

Apple could become a bank, according to consulting company KAE. Or maybe just buy American Express.

Apple should buy a chip manufacturer, Dell, Nintendo, Disney, Tesla, Sprint, Nvidia, VISA, Newsweek, the US Postal Service, according to a seemingly endless list of pundits.

Gimme a break.

I think Apple should buy… nothing. Here’s why. 

To suggest that Apple should buy major, brand-name companies is to suggest that the most successful company in the world should start doing everything differently from before, and stray from its successful way of doing things.

Gobbling up big companies and major brands would make Apple more like other companies and less like Apple. That’s not right. Other companies should become more like Apple, not the other way around.

Advice for Apple to buy major companies would be more persuasive if those giving such advice could point to successful cases. Big acquisitions are usually driven by overpaid suits who blather about “synergies” and new markets but who in fact are deluded that deals that appear successful “on paper” will actually succeed.

The reality is that to acquire a company is to become that company, to some degree. To acquire a large company is to hire employees en masse, most of whom you would not have hired if they walked in the door looking for a job and most of whom wouldn’t want to work for your company anyway.

The leaders of the companies you hire have all the wrong incentives and motivations — they’re in “cash-out mode,” for the most part. They’re going for the money, and rarely believe in the company that’s acquiring them. They typically just go through the motions for 18 months or however long their contract requires, then take the money and run as soon as they can.

Small acquisitions for bringing in core talent, acquiring IP or seriously advanced technology (like multi-touch or voice assistants) can make sense. But big acquisitions of major companies is for clueless bean-counters.

Besides, nearly all these proposed acquisitions come from an unspoken and deeply flawed assumption that because something can happen, that it should. Yes, Apple probably could buy Nintendo. So what? You could probably buy a goat and keep it in your living room. That doesn’t mean you should.

You might also note that many of the product decisions Apple critics complain about, also come from this same flawed assumption. Apple can build four USB ports into the iPad, and therefore it should have. Apple can add a stylus to the iPhone and therefore it should.

But one of the biggest and least appreciated ingredients in Apple’s breathtaking success is that it’s very disciplined about not falling for that kind of flawed reasoning.

HP shareholders grilled CEO Meg Whitman this week, asking why HP can’t be more like Apple, why HP hasn’t adopted Apple-like strategies in the consumer industry. They peppered her with questions about why HP spends so much more on R&D than Apple, yet is less innovative.

HP is a typical big company with zero vision that just follows the innovation leaders in every business it’s in. It offers me-too, copycat products and services in every area of business computing. HP doesn’t have any great products that I can think of, but they make it up on volume. Their sales people play golf with the right Fortune 500 buyers, and so HP is a reasonably successful Silicon Valley giant.

Instead of being visionary or innovative, HP uses its cash or stock to buy major companies. For example, it bought it’s main rival Compaq ten years ago for $25 billion, and mobile rival Palm for $1.2 billion.

As is always the case with such acquisitions, HP saw acquisitions as the solution to its problems.

The Palm press release said: “Palm’s unparalleled webOS platform will enhance HP’s ability to participate more aggressively in the fast-growing, highly profitable smartphone and connected mobile device markets.”

Of course that never happened. At this point, it’s not even clear that HP will even use the OS.

It’s fun to be an armchair CEO and fantasize about all the power you could grab by spending Apple’s hoard of cash. But to actually make any of these acquisitions would be foolish. If Apple were the kind of company that made such dumb moves, they wouldn’t have the cash to do it.

I don’t really care what they do with their money. What matters is that they don’t chase some acquisition fantasy down a rabbit hole every time they have the cash to do it.

The make-or-buy decision on any technology, product or service should rarely be about money, and should always be about focus, company culture and the long-term vision of the company.

Buying failed companies is buying problems, integration hassles, unmotivated employees, disgruntled customers, overhead and ultimately the culture of failure itself.

Apple doesn’t need that. Apple just needs to keep being Apple.

(Picture courtesy of Disney.)

Related
  • César Castro

    Apple should buy… Portugal xD (and if possible… Greece haha)

  • Kenneth Wade Johns

    I think that Apple is, or should be, thinking about building a massive network to support wifi for their own devices. Apple consumers are forced to go through third party suppliers, the phone companies, in order to access the cloud, app store, and iTunes now. This severely limits the amount of data that they can move to their personal devices. Lift that bottleneck for Apple customers and the sky is the limit.

  • Cesar Florez

    WELL “PUT” LIKE ALWAYS MIKE.. 

  • Tony Gallacher

    Apple’s already decided what Apple’s going to do, I’m guessing. The dividend and share buy back programme must have been considered, within the context of a  wider, post-Steve, detailed reflexion and strategy exercise, surely. I know there was a succession plan but I still think that must have happened.The first point addressed must have been: what does the company want to do in coming years and what resources does it need to achieve that?One reason you can see that this move is part of a wider plan is that the share buy back (and the dividend plans) are connected to an initiative to retain and reward staff. It stands to reason that there must be a much more wide ranging strategy, for the eyes of ‘core’ employees only.

  • etschuetz

    For Apple to buy any of the companies in the list above in the article would have to provide some form of “incentive” or need for Apple.  Something like Nintendo would be an interesting purchase simply for the vast library of games that Nintendo has that would make for an interesting releases on the iOS platform.  As for some of the other “ideas”, they are ridiculous as most of those do not fit into Apple’s business model…expect a chip manufacture.  Even then, Apple would need to keep said company as a subsidiary, and then have to deal with the concept that the company also provides chips for other companies, competing companies.

  • a_patil

    This is the thing that sets Apple apart from other companies. Sure making money is every company wants, at the end of the day. But problem with big corporations is that they think from money to products and not products to money and so the result is crappy products at lesser price or good products at a price nobody can afford.

    I think they way Apple’s been doing it, is just right. Not to focus on the money it has and think of it as a problem, but just take out of it how much is needed in doing whatever they want to create another revolutionary product. It’s better when you are a child and sell lemonade and think you have made profit, even though you never take into account all the other costs associated in doing that which would actually turn it into net loss. But this is what drives creativity and innovation. Not making profits on everything and anything you sell. 

  • Jim Ritzheimer

    I agree, I think they should buy AT&T…

  • Mari-Xouana H Flou

    Why Apple shouldn’t listen what analysts say@etschuetz:disqus 

    Because they’re all wrong. *

    *PS: All the fucking time.

  • Hermogenes Peralta

    Apple should invest in entertainment company (movies,music, events), it must create its own exclusive (unique) programming for the Apple TV, just like Netflix.

  • Kleber Vieira

    Apple can buy google and kill android!

  • smakdown61

    Steve Jobs had always longed to be the sole provider of data, voice, and tv content to all of his idevices. He thought about creating his own cell network at the time of the original iphone launch but realized it wasn’t feasible. He then sought to create his own content network which got shot down.

    I think both of those ideas will come in the next 10 years.

  • Aaron Hall

    I think Apple is saving up money to be the new carrier to compete against all carriers out there (ATT, Verizion, Sprint, Roger, etc.). Probably not 3G but more likely wifi or something (just like what late Steve Jobs envisioned for before iPhone was launched). I think that’s what they’re going for. Mobile business is like a gold mine. I also believe that Apple will be truly “unlimited” data carrier, more than Sprint.

  • Haakon Hoel Bakker

    Apple should buy Google… 

  • samue23

    I would prefer T-Mobile

  • Dustin Wielt

    I would like to see Apple use some of its technology and talent to solve big problems.  For example, their R & D on battery technology and power management, e.g. the high density battery in the new iPad, could one day contribute to other applications such as better electric cars.  Imagine if they integrate solar power into their portable devices and push the envelope for solar energy.  Apple is leading the pack in creating high powered portable devices, and it might translate into creating high powered big devices someday, which will help address the countries energy challenges.  If it disrupts their culture to do this, they can spin off smaller companies.

  • KinG

    Apple should definitely branch out into other market than technology, it will help them keep balance

  • Ilikestuff

    I would like to live in a world where apple has it’s own Movie/TV Show/Music label that is tightly integrated with all its products and unlike netflix, iplayer, VEVO is not bound by accountants to be artificially unavailable across country borders. Where I live (Malta – EU) iTunes music/film store just opened. in the Movies section, there is a very limited selection of overpriced content. The list of HD content is even smaller. In both music and film store, things available to other EU countries is nowhere to be found and thus has to be bought on ebay or play.com on physical media.

  • M. Niazy

    Apple should buy a country for itself.

  • hi_its_kyle

    “You could probably buy a goat and keep it in your living room. That doesn’t mean you should.” Legendary.

  • Kalen

    If Apple did buy a network, it would make more sense to buy Vodafone because it has the most coverage of any network. It operates in every major territory in the world, with the exception of Canada.

  • TyMoldovan

    Rumor has it that they want to release a streaming service this year, very much like netflix. But in time for christmas 2012

  • TyMoldovan

    I think that this article was well put and very knowledgeable. Mike great job, and great thoughts that you put out here today. 

  • Steven Chaffer

    I LOVE the pic!…….now carry on

  • Intersil Juniper

    I think to buy early stage start-ups if there is some new and promising makes sense.

    Like chomp, which they did bought.

  • Intersil Juniper

    Let´s start killing this old MSFT OS shit as next on next autumn and start ramp up MAC marketshare for +200% increase per quarter ;)

  • rogifan

    Apple would be nuts to make a major acquisition. We all saw how well AOL and Time Warner worked out.

  • RhysLadhani

    i agree. at&t is greedy. tmobile accepts its position being 4th largest and aims to please its customers. u shouldnt have to pay per gb for data. and those that already have unlimited data get throttle up the butt by at&t. idk why apple hasnt added the band to support TM. 40% of TMs customers are iphone users anyway.

  • Richard

    I think the best company would be Oracle.  That way, they could blend Solaris and OS X Server and Apple’s server apps for high end servers and they could go after the Cloud and Enterprise market, so they would have the entire ecosystem.  I could understand that Tim Cook could handle the current product line and Larry Ellison handles the Oracle/Sun portion and just Apple-ize Sun OS and just have a complete solution from top to bottom.  Then they could buy Cisco and basically tell HP, IBM, and DELL to start looking for a job pounding sand for a living. Oh, and then you throw Akamai, Sony, Universal, and other content providers for good measure and then Have a Nice Day!

  • Richard

    Verizon, not T-Mobile.

  • Artoo

     I’ve been thinking the same thing. Imagine Apple making electric bikes which could easily integrate with the iPhone or iPad to control power consumption, navigate, and reserve a parking space and restaurant table at your destination. Apple would became the ultimate “green” company if it could create some truly innovative means of individual transportation.

  • Michael Jardeen

    Apple should buy Dell — Cost 29 billion

    Then Apple should liquidate the company — Gains 29 billion

    Then they should just give the money to the shareholders — Cost 29 billion

    The look on Michael Dells face, priceless!

  • joewaylo

    Apple should buy more apps as they have before a few times. They bought Siri. They (stole) the iAd gallery app. They copied Android’s notification center. They should buy an animated theme company, navigation companies, and a few more improvements.

  • srky21

    I think Apple sholud buy Adobe & Sony. Adobe because of Creative Suite and Sony (library of games, PS, TV technology)

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Mike ElganMike Elgan writes about technology and culture for a wide variety of publications. Follow Mike on Google+, Facebook and Twitter.

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