3 Cool Tech Companies For Apple’s Holiday Wish List
Matthew is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Let me guess, you’re making a list, checking it twice and hoping to find a bargain on that very cool tech device. In all likelihood your capacity to spend is much less than your capacity to shop. What if you weren’t a cash strapped consumer but instead your piggy bank had grown to the point where you had more money than you could possibly spend?
That’s basically where the management of Apple (NASDAQ: AAPL) finds themselves these days with more than a hundred billion dollars’ worth of cash on their balance sheet. What if they decided to actually spend a small fraction of it this holiday season? Here’s my pie-in-the-sky list of potential targets and why they’d make my list.
3D Systems (NYSE: DDD)
Sure, at first glance this might appear to be reaching, but think with me for a moment about the potential for 3D printing in the consumer marketplace. Your kid is engaged in designing a toy via an app on your iPad and clicks print. Out of your Cube comes the toy which your child happily plays until it’s time to build a new one. No trips to the store when it breaks and you’re developing an engineer to take care of you in your golden years.
The problem at the moment is that the Cube is quite pricy at $1299 and is a long way off from being a consumer staple. That is unless of course it’s being sold by Apple which has a knack for putting pricy tech devices in the hands of consumers. With its tight control of both the manufacturing process and suppliers it could take 3D printing from a novelty to mainstream in no time.
While $1299 is quite the price to pay for a printer, it’s nothing compared to the premium Apple would need to pay to pry 3D Systems shares from its shareholders. The $2.5 billion company might already be trading at a very rich 60 times earnings, but that number would have to reach triple digits to get this deal done. That’s still a drop in the bucket for Apple and represents just a month’s worth of cash flow. You can already Cubify your iPhone cover, why stop there?
Pandora (NYSE: P)
With more than 150 million registered users of which 100 million of them listen primarily on their smartphone, Pandora is a bit more of a strategic fit with Apple. Its service could be tightly integrated with Apple’s iTunes products as well as on its bevy of iDevices. There are already rumors that Apple is looking to roll out a streaming service to rival Pandora. My question is why build it when you can buy it? Sure it would set them back by a couple billion bucks but what’s a few billion among friends?
Pandora’s service is quite addictive and would seem to fit well with Apple. Given that consumers can already easily make a purchase on iTunes right from the Pandora player, brining it in house would enable Apple to continue to lock down that market through even tighter integration.
Nuance Communications (NASDAQ: NUAN)
The idea of Apple buying the power behind Siri has been discussed a few times before. It’s been called a no-brainer by some as it would lock up the technology that Apple currently licenses as well as force its competitors to license from Apple instead. The importance of speech recognition technology is still in the early stages of adoption and Nuance is the clear leader when it comes to controlling the intellectual property behind it.
Of course locking up such a vital technology would come at quite the cost. At more than $7 billion, Nuance is by far the biggest ticket item on this list. However, the company is trading at a fairly reasonable 35 times earnings when you consider how vital its technology is becoming. Apple could easily offer a quarter’s worth of cash flow for the company without batting an eye. If it doesn't, at some point one of its competitors will.
It goes without saying that acquisitions are typically more of the fine art of setting money ablaze than a science. None of these suggestions would add much to Apple’s earnings, but would provide access to a technology platform that is a semi-logical next step for the tech giant. Problem is that when Apple buys technology it’s usually snapping up much smaller and typically private firms we’ve not heard about.
That’s why the odds are Apple doesn’t have any of the companies I’ve named on their Christmas shopping list. The company more closely resembles Scrooge when it comes to parting with cash which is why investors probably won't be seeing any of that cash stuffed in their stockings via a special dividend this Christmas either. It's still fun to ponder how to spend all that money, even if it'll never happen.
latimerburned owns shares of Apple and has the following options: Apple. The Motley Fool owns shares of Apple and 3D Systems and has the following options: short JAN 2014 $55.00 calls on 3D Systems and short JAN 2014 $30.00 puts on 3D Systems. Motley Fool newsletter services recommend Apple, 3D Systems, and Nuance Communications. 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!