$1 billion Apple spent for Intel modem biz is pocket change in Silicon Valley

Apple’s big spend on Intel modems is pocket change in Silicon Valley [Opinion]


Samsung wants to follow Apple in building a giant services business
Samsung wants to follow Apple in building a giant services business
Photo: Mathieu Turle/Unsplash CC

The $1 billion Apple spent on Intel’s modem business is the second-largest acquisition in the company’s 42-year history.

Still, while a huge amount of money by most normal standards, rival tech giants regularly dwarf Apple’s big spend on Intel. For a variety of reasons, Apple just doesn’t roll that way.

Apple’s massive cash reserves

Apple boasts some of the deepest cash reserves of any company in history. If it stacked up its stockpile in the form of $1 bills (and, yes, I actually worked this out), the pile would stretch 15,277 miles. That’s 10x the vertical length of the United States of America.

With around $225 billion on hand (and a market cap of about 4 times that figure), Apple could buy just about any business it wanted. And, as the saying goes, still have cash left over.

Could Apple buy Tesla? Sure. Sony Pictures? Certainly achievable. Disney? It’s not out of the question. But for the most part, Apple doesn’t spend that kind of money on acquisitions.

Google spends more than Apple on acquisitions

This makes Apple quite different from some of its more profligate (or, to be nicer about it, spend-happy) tech rivals.

Google, for instance, shelled out $12.5 billion for Motorola Mobility back in 2012. Nest Labs followed a couple years later, carrying a price tag of $3.2 billion. Advertising company DoubleClick cost the search giant $3.1 billion in 2007. (That was Google’s first giant purchase.)

And so it goes. Google’s purchase of business intelligence platform Looker cost $2.6 billion earlier this year. Before that, Google spent $1.7 billion on YouTube (in 2006) and $1.15 billion on Waze (2013).

In fact, you’d have to go all the way past Google’s seventh-largest purchase (the Pixel Smartphone Division of HTC for $1.1 billion in 2017) before you reach the amount Apple paid for Intel’s modems.

Other Silicon Valley acquisitions

How about Amazon, the second company to hit $1 trillion after Apple? Amazon doesn’t splash the cash quite as readily as Google. But it still has a handful of $1 billion purchases on its ledger. Its largest acquisition — 2017’s purchase of Whole Foods for $13.7 billion — outdoes any Google acquisition.

And that figure looks like a bargain next to the $19 billion Facebook paid for WhatsApp in February 2014. Which, in turn, looks like a budget holiday next to Microsoft’s decision to buy LinkedIn for $26.2 billion in 2016.

Apple, meanwhile, tends to be a lot more modest with its purchases. Apple’s biggest acquisition ever was its 2014 purchase of Beats Electronics for $3.2 billion.

The narrative typically goes that Apple doesn’t buy companies because it can develop the tech in-house. That’s partially true. Working for one of the most alluring tech companies, Cupertino’s headhunters can recruit from just about anywhere they want.

Apple lures top AI experts from Google, self-driving car whiz kids from Tesla, top movie executives from Hollywood and top DJs from major radio stations.

Cupertino doesn’t need to buy cool. Apple already is cool. And with such impressive resources at its command, it can do things few other companies can. Like a seasoned world-class sprinter, Apple doesn’t need to stay at the front of the pack the whole way around the track. It can hang back, size up the competition, and then put in a mad, championship-worthy dash at the end.

Apple acquisitions do happen

But Apple does buy other companies. Since last November, Apple bought more than 20, of which we know about fewer than half. The difference is that Cupertino typically buys smaller companies, folds them, and then ties whatever they were doing directly into Apple.

For instance, Apple bought PrimeSense in 2013 for $350 million. The company’s tech now forms the basis for Face ID.

Further back, Apple bought mapping company Placebase in 2009. It became Apple Maps. And in 2005, Apple bought FingerWorks, a Canadian gesture-recognition company, for an undisclosed amount. Its multitouch technology is now found on every iOS device.

Heck, Apple’s most-significant acquisition ever was a little company called NeXT in 1996 for $429 million, a deal that brought NeXT founder Steve Jobs back into Apple’s fold. NeXT’s operating system became the basis for today’s macOS. But the NeXT name didn’t last.

Compare that to Apple’s rivals. Google still runs Nest as its own entity. A WhatsApp user need never know that Facebook owns the messaging app. And Whole Food shops haven’t been plastered over with the Amazon logo.

After spending multiple billions of dollars on a brand, you don’t want to simply shutter it. Especially when, in many cases, it’s got more cool factor than you do.

Apple buying Intel modems: A smart business move

It’s no mystery why Apple would buy Intel’s modem business. Although Apple patched things up with Qualcomm, the Intel acquisition gives Apple a big leg up in terms of 5G technology. The move also helps with Apple’s ongoing plans to eventually build its own modems in-house.

Both for its own reasons, and to keep the technology away from rivals, Apple’s latest acquisition makes plenty of sense. It’s $1 billion well spent. But don’t expect this to be the start of a crazy Apple spending spree. Because that’s never been how the company works.

You want nine- or 10-figure acquisitions? Follow one of the other tech giants.

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