What To Do With All That Apple Cash
Josh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Fresh off the heels of activist investor David Einhorn's lawsuit against Apple (NASDAQ: AAPL), I couldn't help but find myself thinking what I would do if I was left in charge of the "think different" behemoth. While Einhorn's determination to issue preferred stock with a 4% dividend is a fine enough concept, I am more interested in Apple's ability to generate innovative ideas and products for the future. Holding $137 billion of cash on hand, there are an infinite number of ways Apple could burn up their cash, as they try to innovate for the long-term. However, for the sake of simplicity, I am exploring 5 acquisitions Apple could make to entrench their popularity in us for the rest of our lives.
Disclaimer: Buckle up everybody, we're diving deep into the right side of my brain and will be looking at things that are not only mere concepts, but highly unlikely to happen. The thought of Apple incorporating so many new companies effectively is next to impossible. This is simply a brainstorming session of what Apple could do with their cash. Being an owner of Apple stock myself and dreaming of a fully integrated and interconnected Apple world, here are my 5 favorite fantasy acquisitions.
Valued roughly around $11 billion by Greencrest Capital, a Twitter acquisition would give Apple their best chance yet to track Google down. In much the same way Google is able to tie their search capabilities into everything from their Chrome browser, to their Android operated phones, Apple would be able to hard-wire Twitter into all of their future iProducts. By acquiring Twitter, Apple could go head to head versus Google with their newly acquired search capabilities. Using their Trends List and intra-Twitter search engine, Apple could capitalize on the public's ability to search for specific news or events, allowing the company to display ads as relevant. Furthermore, what would make Twitter's acquisition truly special is their members' ability to see results from the people and news providers they are interested in following. This could allow for specialized ads and even micro-marketing, in much the same manner that Google's advertises with their local searches.
With Twitter buyout rumors having previously circulated, this acquisition may not be completely out of the question.
While I'm on the topic of Apple going head to head against competitors, I'll announce my next move, a full acquisition of eBay (NASDAQ: EBAY). Weighing in with a Market Cap of $72 billion, eBay would deliver a major hit to Apple's cash reserves, as they would essentially be cut in half. However, such an acquisition would finally give Apple their strongest case in fighting against the low price marketplace that is Amazon.com. Considering Apple's previous acquisition of Twitter, some serious scalability could be recognized in the advertising market. Furthermore, the Kindle versus iPad competition would become even more interesting with Apple's new marketplace in eBay. Despite this excitement however, it would be the PayPal business that is the truly interesting play for Apple's future.
In a world of ever-growing connectivity, the most successful mobile payments provider would benefit Apple everywhere from speeding up sales in its own stores, to simplifying purchases on iTunes. With the natural link between eBay and PayPal, and a growing presence in the retail community, PayPal shows no signs of stopping and would give Apple tremendous revenue consistency. With an Apple TV product already released, PayPal would streamline future opportunities with their own line of TV's, once again through a world of freakish interconnectivity. On the topic of TV's...
My third acquisition comes in with a Market Cap around $10 billion and is positioned in what may just become the most rapidly changing industry, cable TV. By acquiring Netflix (NASDAQ: NFLX), Apple would be able to throw their hat into the "destruction of cable" boxing ring. As Apple's main manufacturing partner, Foxconn, has reportedly been testing 46 to 55 inch Apple TV sets, I can't help but imagine a fully integrated Netflix interface on an Apple TV. What could be a better way for Apple to push their new TV sets and Netflix accounts, than by bundling the two together, all while connecting your PayPal account for easy payments?
While Hulu, YouTube, and Amazon streamers may not see the joy, their apps would be available all the same for everyone to use in the company's App Store. While making waves, Apple would pressure the cable industry and ushering out new Apple TV sets to Netflix subscribers all over. Simply put, this would add another layer of interconnectedness for Apple, in an industry that is still looking for a true leader.
Tesla Motors and Elon Musk
The 4th acquisition on my list may seem slightly off-line operationally, but is more focused on putting visionary Elon Musk in Apple's CEO position. Sorry Tim, we love you, but Apple is lacking their next major innovation, and that is what Elon is known for. The SpaceX CEO and Founder of PayPal and Tesla, would not only bring back a strong presence to his PayPal unit, but an overall sense of innovation that the company has lacked since the death of Steve Jobs. In a very basic sense, Apple is all about innovation and I would want no one else at the helm today if I was given the choice.
As for the automobile side of things, the connectivity would once again be key, as iPads could be incorporated into the car's interface and iPod minis and iPhones could be used to run a wide array of programs in the car. You'd never have to worry about keys again if you had an iPhone, as a simple feature would allow you to start your car, lock and unlock the doors, run routine maintenance checks, etc. Once again, Apple would capitalize on keeping its customers connected, and coming in with a price tag of $4.5 billion, Tesla is easily affordable for the cash heavy giant.
3D Systems and Stratasys
Well, I wanted innovative products, and these two companies might just be home to the most groundbreaking technology we have seen in the new millennium. With a combined Market Cap of $7 billion, Apple would easily be able to afford the two upstarts and would potentially be able to streamline its own business operations. As 3D Systems would focus more on consumers, Stratasys would focus more on other businesses, and Apple's operations as a whole.
With Apple's tremendous vertical integration, the company could literally become their own manufacturer with their new line of printing products. Aiding nearly all of their business segments, whether it was Tesla's automobiles, any of the iProducts, or any manufacturing products that could be sold through its marketplace on eBay, Apple would hold an absolutely dominant position in the 3D printing market. Rivaling Amazon's budding supplies business, and going head on against the company's main operations with eBay and Netflix, the competition between the two companies would be downright entertaining.
A Foolish Final Thought
As I mentioned earlier in my disclaimer, none of these acquisitions are very likely, but what I saw was a wide variety of ways for Apple to connect to the world through future product innovations. After making these $105 billion worth of transactions, Apple would have $32 billion remaining, assuming they paid strictly market value -- which isn't likely. Once again, I know these are just fantasy acquisitions, but I hope you enjoyed the ride through my mind. If nothing else I wanted to show my excitement for Apple's future, as its possibilities are truly endless with such a stunning amount of cash on hand.
joryko owns shares of Apple. The Motley Fool recommends Apple, eBay, and Netflix. The Motley Fool owns shares of Apple, eBay, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!