A Complete History Of Apple's Corporate Acquisitions

Tyler Durden's picture

As has been extensively reported, analyzed and overanalyzed overnight, Apple finally threw in the towel on the Steve Jobs legacy (and business model), after the FT broke news that it was set to massively overspend to purchase "Dr. Dre's" Beats Electronics, in what appears to be a 3x overpriced deal since Apple is paying $3.2 billion for a company which just in September was valued at $1 billion following a $500 million Carlyle Investment (incidentally the biggest winner from the transaction is not Apple,  at least not yet, not even Dre, but Carlyle whose IRR on the investment is 478%!).

Why is Apple doing this deal? It is not exactly clear. According to the FT, there are macro considerations...

A decade after Mr Jobs transformed the music industry with the iTunes download store and the iPod digital music player, the deal is likely to be seen as an admission that Apple needs to look outside its Cupertino labs to continue making an impact.

...

While Beats commands a leading position in the premium headphone market, its real value to Apple is in revitalising its “cool” at a time when iTunes has waned in popularity and Samsung’s marketing campaigns have savaged the iPhone’s brand.

And micro:

Apple has dabbled in music streaming but never launched an unlimited subscription service to compete with fast-growing rivals to iTunes such as Spotify.

 

One motivation for the Beats deal may lie in shifts in music consumption. Subscription services are the biggest growth area for the music industry, with revenues increasing 50 per cent to $1.1bn in 2013, according to a recent report by the IFPI, the global music industry association.

 

But downloads fell 2 per cent to $3.93bn – the first annual decline since Apple launched its iTunes store in 2003. iTunes is still the world’s largest music download service.

Also, one wonders just how much of a "software" company (with software margins) Apple will be perceived after this transaction, but that will be left to the market to decide.

Curiously, even some of Apple's biggest cheerleaders across the years are skeptical about the deal, considering even Piper Jaffray's Gene "channel checks" Munster said that "we are struggling to see the rationale behind this move... Beats would of course bring a world class brand in music to Apple, but Apple already has a world class brand and has never acquired a brand for a brand's sake (i.e., there are no non-Apple sub-brands under the company umbrella)."

"Separately, we are not aware of any intellectual property within Beats that would drive the acquisition justification beyond the brand. We view a better use of capital for acquisitions to be in the internet services space given that is, in our view, Apple’s biggest weakness. This list would include Yelp, Twitter, Square and even Yahoo.

To summarize: on one hand the end of the Jobs era, on the other, the start of the M&A era, and considering Apple already succumbed to Wall Street's influence and has raised its shareholder friendly capital program most recently to $90 billion, this means that the company which was once driven by pure creative genius has been transformed into nothing more than Wall Street's puppet. This also means now Apple now has $3 billion less with which to buyback its stock, and that netting out the recent $12 billion bond deal, Apple once again has a modest $27 billion in domestic cash, meaning it will have to issue even more debt soon.

In any case, here comes the next cottage industry: predicting who Apple will buy next. With the bulk of its cash held offshore, look to mostly offshore targets.

For those who believe they can predict the Apple's acquisitive future based on the company's historical M&A pattern, here is a summary of the company's acquisition history over the last two decades.

One thing is certain: it is still not too late for Facebook to offer $19 billion for Beats.

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no more banksters's picture

'Wages are of no importance. The export of productive processes from America to China (off-shoring) was only an intermediate stage. The production has returned to America, but not the jobs. The new factory of Apple, not only is constructed without American workers' sweat, but will also produce MacBook Pro through complete automatization, without hiring Texans. Welcome to the New, Brave World'

http://failedevolution.blogspot.gr/2014/05/already-happens-capitalism-de...

0z's picture

Told you Limited Liability was a fraud!

Steaming_Wookie_Doo's picture

You know, when something doesn't make sense, then I reckon there's a completely different agenda afoot. Indeed Carlyle Group being the "big winner" seems to be on point. Perhaps someone owed someone else a favor and this was a way to "pay" legitimately. You can look here: http://www.hereinreality.com/carlyle.html#.U2zhVPldXEI and see the upstanding nature of the Carlyle staff.

So, do you think the entire Apple board is being blackmailed? The purchase price of Beats was more than all their previous acquisitions since 1997. 

Herd Redirection Committee's picture

No doubt about it.  This is a graft payment to the people behind Carlyle.  The Financial Mafia.  The Banksters.  And if this is your first time hearing about the Carlyle Group, you've got a busy day ahead of you.

Thermopylae's picture

"revitalising its “cool” ????????

more like, "just jumped the shark"

 

Seasmoke's picture

Nice headphones. But are they fucking kidding !!!

firstdivision's picture

They're not that nice, and they're quite overpriced.  So in reality, they fit well with Apples other offerings.  For me personally, I use a pair of Senheiser HD-650's hooked up to my PS4 though an Astro MixAmp Pro. 

youngman's picture

Why not buy Monster....they made the headphones first....and have other quality stuff

DavidC's picture

They're neither hi fi nor audiophile headphones, they're a 'brand'.

DavidC

djsmps's picture

That is hardly a complete list of acquisitions. They bought Power Computing, a mac clone producer, around 1998, and they bought E-Magic (from Hamburg), a music software company. I'm surer there are many more.

firstdivision's picture

Their aquisition of E-Magic only got them Logic, which Apple promptly made Mac only.  Logic is okay, but I was born and bred on Cubase myself.

Herd Redirection Committee's picture

Power Computing, LOL.  I remember those days.  Power Computing was making more money from Macs at that time than Apple was!  Shares were about $20 a pop, and the iMac had yet to be invented!

Bernoulli's picture

Headphones? That's where music comes out, no? It's innovative stuff, no?

Millionaires are now billionaires (we saw that here: http://www.zerohedge.com/news/2014-05-06/making-400000-hour-best-paid-he...).

Millions are billions

billions are trillions

So to me 3.2 million USD would sound just about right.

 

PS: HEADPHONES!!!! Aaaaarrrghhhh!!!

 

 

Dr. Engali's picture

It's amazing to see how quickly this company is imploding. It's like they have completely thrown in the towel on innovation, and have resigned themselves to the fact that they have become the next Microsoft.

Bosch's picture

Well said, as usual. 

Confused's picture

Imploding indeed. I might be alone on this, but I have stopped updating nearly any apple product (phone or computer). The software updates have been so horrible, that what drove me to use them originally is no longer a factor. 

Dr. Engali's picture

I still have, and am perfectly fine with my 4s. My wife has the five and she has no desire to upgrade. The fact that they don't have a larger screen size and multiple models to choose from is ludicrous. It's no wonder why Samsung is eating their lunch.

As far as software, their latest version is crap and it's unstable. If I could I would revert back to the previous version, at least then I could read the text.

Pee Wee's picture

When headphones are the catch of the day one has to note that innovation is all but dead.  But, who cares when investors pay for it and management gets the bonuses.

So, how much bullshit wrapped in a name would you like to buy?

TheReplacement's picture

Except they are in the consumer market versus Microsoft having captured and become the industry standard in business.

Businesses cannot afford to move away from Microsoft because EVERYONE uses it.

Consumers will go for the next great thing be it Apple or Orange.  The shelf life counter started on Apple long ago. 

post turtle saver's picture

"Apple is like a ship with a hole in the bottom, leaking water, and my job is to get the ship pointed in the right direction." - attributed to Gil Amelio by Steve Jobs

Bosch's picture

Projected MSRP of the first Apple Beats Plastic Headphones: 

$479/pair 

 

LINE STARTS OVER HERE BLACK PEOPLE. 

Confundido's picture

My investing thesis for the tech sector, which has so far worked well and for which my allocation is still not higher than that of gold, has been the following: Be long privacy invasive/destructive technolgies, short Nasdaq. Where privacy invasive are those companies that provide image technology for drones, facial recognition, algorithms that profile sheep, etc. There is a bright future in the destruction of privacy in the XXI century.

Billy Sol Estes's picture

What are mind control devices?

I'll take Google Aquisitions for $200, Alex.

AdvancingTime's picture

Nothing has been able to take the shine off this company. Apple has even enlisted the courts and legal system to fuel its advance, by attacking rivals and trying to ban competing products from the market place.

I continue to be amazed at how much American taxpayer money is spent buying products from this "American company" that does all its manufacturing overseas. Schools, the military and government have poured massive amounts of  our tax dollars into Apple products. The two articles below delve into this juggernaut,

http://brucewilds.blogspot.com/2012/09/10-things-apple-wont-tell-you.htm...

http://brucewilds.blogspot.com/2012/03/poison-apple.html

esum's picture

apple has lost its VISION and plods merrily along without a LEADER

apple is msft after gates left to play with himself and brought in a dud....... 

gatorengineer's picture

Now they have I-phones......

Mercury's picture

Not only did Trent Reznor not take the advice I sent him regarding his centralized music reccomendation service (one-on-one relationships are simply not scalable, you want to crowd-source this kind of thing in some way), he just sold it to Apple for billions.

There is no justice in this world.

 If I were an Apple investor I’d find this alarming since the music service (what they’re apparently after – not the trendy, overpriced ‘Beats’ headphones –which would be even more alarming-) is brand new and not proven to be the next big anything....and it won't be.

Life of Illusion's picture

 

Beats deal is nothing more than a flip (exit to public) by Carlyle,,period

http://blogs.wsj.com/moneybeat/2014/05/08/apples-beats-deal-is-music-to-carlyles-ears/

 

eucalyptus's picture

Spunk 5 billion on BBRY or something stupid like 20 on twitter would make more sense than this. 

Mr. Delicious's picture

Apple at least makes shit and, periodically, innovates.  Google, of course, as well.

They certainly overpaid, but there are a lot of crossmarketing potentialities with the "urban youth" whose disposable income seems recession proof.

I wouldn't be surprised....  ....  if Apple's next relatively big move is a much cheaper iPad.

 

Zerozen's picture

Reading things like this makes me feel sad and angsty, like I've missed out on a big party - if only I had a time machine and could go back in time a few years, I'd invent some app/social media website and by now I'd be sipping a cold drink on a beach somewhere ;-)