Billions stashed: Shock plan to buy Netflix?
Apple has reported a surprise fall in iPhone sales for its second quarter, indicating that customers may have held back purchases in anticipation of the 10th-anniversary edition of the company’s most important product later this year. David Pollard reports
Apple has some truly serious money on hand, is it about to go shopping? Picture: Eric Risberg
AS APPLE’S stash of cash grows, so does the possibility that the world’s most valuable company will use some of the money for a huge acquisition that would expand its empire beyond iPhones and other gadgets. The company currently holds more than a quarter-trillion dollars it could use to go shopping.
So far, the guessing game has primarily focused on possible targets such as Netflix and Tesla Motors. Either deal could make sense, given Apple’s long-running interest in providing a TV service to consumers and its more recent work on self-driving cars.
But in recent months the takeover talk has swirled around whether Apple might do something even more dramatic, by making a bid for Walt Disney Co.
THE MOUSE AND THE APPLE
Such a combination would create the world’s first company worth $US1 trillion. Beyond that, an Apple-Disney marriage would unite some of the world’s most successful brands in technology and entertainment — a list that includes the iPhone, iPad, Mac computer, Mickey Mouse, Disneyland, ESPN, Lucasfilm, Pixar and Marvel.
“If there’s a deal out there that would strike fear in the hearts of Silicon Valley and Hollywood, this could be it,” RBC Capital Markets analyst Amit Daryanani wrote in a recent research report assessing the logic of an Apple- Disney combination.
Apple doesn’t discuss specific companies that it might buy, but it’s exploring far and wide, according to Chief Financial Officer Luca Maestri.
“We are looking at every size of acquisition, so we will see how it goes going forward,” Maestri told The Associated Press this week.
Disney hasn’t given any inclination that it’s looking for a buyer, but publicly held companies are required to consider all takeover offers.
Buying Disney would be expensive. Daryanani estimates that Apple would have to pay $157 per share, or about $US250 billion ($A336 billion).
TREASURE CHEST
Apple is one of the few companies — if not the only one — that could pay that sum out of its pocket. The company ended March with nearly $US257 billion in cash and marketable securities, according to numbers released Tuesday with Apple’s earnings report for the January-March quarter.
That’s up from $US233 billion a year ago, and the figure is expected to keep growing as Apple piles up more profits from the iPhone, iPad and Mac, as well as the applications and services that feed those devices.
In its latest quarter, Apple’s earnings climbed 5 percent to $US11 billion while revenue also rose five percent to nearly $US53 billion.
In recent years, Apple has used a large chunk of its cash to provide its shareholders with extra income.
The company disclosed plans this week to raise its quarterly dividend by more than 10 percent to 63 cents per share, marking the fifth increase in five years. Apple also has spent $US151 billion buying back its own stock since 2012.
Doing a mega-deal would be a major departure for Apple, whose largest acquisition to date was its $US3 billion purchase of Beats Electronics in 2014 that helped launch its music streaming service.
THE SLOWING SMARTPHONE
But Daryanani and other analysts believe Apple may need to make a pricier acquisition to lessen the company’s dependence on the iPhone at a time when smartphone sales have been slowing.
iPhone sales edged up 1 percent in Apple’s latest quarter, extending a recovery from an unprecedented downturn last year.
But many investors remain concerned that Apple has become too vulnerable to the ups and downs of the smartphone market, mostly because the company hasn’t been able to come up with another hit product since the 2011 death of its co-founder and CEO, Steve Jobs.
Apple’s last big success, the iPad, came out in 2010, but sales of the tablet have been declining for more than three years. Meanwhile, the iPhone accounted for nearly two-thirds of Apple’s revenue in the past quarter.
The Trump administration may give Apple another reason to mull a major acquisition, given earlier promises to lower US taxes on overseas corporate cash brought back to the US. Should that tax cut happen, Apple CEO Tim Cook has said the company will consider bringing back most of the more than $US230 billion it now keeps in foreign countries, making it easier to finance a blockbuster deal in the US.
Apple CEO Tim Cook speaking during a product launch event at Apple headquarters in Cupertino, California. Apple on May 2, 2017. Picture: Josh EdelsonSource:AFP
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