Without Steve Jobs, Apple Inc may start to embrace dealmaking after spending less on acquisitions than any of its biggest competitors.
Jobs, who transformed the near-bankrupt personal-computer also-ran into the world’s largest technology company, used less than a billion dollars for takeovers in the past decade as he unveiled the iPod, iPhone and iPad. Apple’s largest US rivals have shelled out more than $15 billion on average to buy companies over the same span, according to data compiled by Bloomberg. Microsoft Corp has lost a fifth of its value even after spending 10 times as much as Apple on acquisitions.
Apple became a $350 billion company as Jobs introduced devices that revolutionised the computer, music and mobile phone industries. Jobs, who was diagnosed with cancer and had a liver transplant, is now turning Apple over to former Chief Operating Officer Tim Cook. Boosting acquisitions in entertainment, patents and security with its $28 billion cash hoard may help Apple fend off Google Inc and Samsung Electronics Co without Jobs, the University of North Carolina and Stewart Capital said.
“Time will come for acquisitions for sure,” Arvind Malhotra, an associate professor at the University of North Carolina at Chapel Hill’s Kenan-Flagler Business School, who has taught Apple’s business strategies for a decade, said in a telephone interview. Jobs “always grew from within. If lack of his vision and availability of his position causes the future pipeline not to be there, that’s when the acquisition model comes into play. They’re sitting on a cash pile,” he said.
ACQUISITION DETAIL
Steve Dowling, a spokesman at Cupertino, California-based Apple, declined to comment on whether Jobs’s resignation as chief executive officer this week will encourage the company to make more acquisitions.
America’s 10 largest technology companies have paid more than $140 billion on acquisitions of businesses in the past decade, net of any cash received, data compiled by Bloomberg and filings with the US Securities and Exchange Commission showed.
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Apple, which introduced the iPod music player in late 2001, has accounted for less than one per cent of those purchases with $910 million in takeovers, the data show.
Even without a single billion-dollar acquisition, Apple’s value under Jobs increased by more than $300 billion in the past 10 years. Jobs has also doubled Apple’s net income every two years since the company reported its last annual loss in 2001, according to data compiled by Bloomberg.
APPLE vs MICROSOFT
Microsoft, the maker of the Windows operating system that was founded by Bill Gates, has fallen 21 per cent in the past decade even after spending more than $12 billion on acquisitions to bolster earnings and boost shareholder value.
The total excludes the company’s $8.5 billion agreement in May to buy Skype Technologies SA, the world’s most popular Internet calling service, which has yet to close.
Jobs, who founded Apple with Steve Wozniak in 1976, was ousted by the board in 1985 amid differences over strategy. When he returned 12 years later, Apple had run up $1.86 billion in losses over two years. It was 90 days away from bankruptcy, Jobs would later say.
Apple’s shares surged 9,020 per cent from July 29, 1997, the day before the San Francisco Chronicle said that Jobs would be interim CEO, through his resignation this week.
The company’s equity value rose to $349 billion from $2.1 billion, making it the world’s largest technology company and second-biggest overall behind Exxon Mobil Corp.
SMARTPHONES TO MUSIC
Microsoft of Redmond, Washington, which at its peak in December 1999 was worth more than a half-trillion dollars, is now valued at $206 billion. Armonk, New York-based International Business Machines Corp (IBM), has a market capitalisation of $198 billion, data compiled by Bloomberg show.
After returning, Jobs had led Apple’s transformation into a seller of everything from smartphones to music.
The iPhone, introduced in 2007, has become Apple’s best- selling product and turned the company into the world’s biggest smartphone maker. Jobs was appointed chairman this week after resigning as CEO and recommended appointing Cook, 50, as his successor. He was on medical leave since January 17 after combating a rare form of cancer since 2003 and surviving a liver transplant in 2009.
DAY OF RECKONING
“I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know,” Jobs, 56, said in a statement on August 24. “Unfortunately, that day has come.”
Apple may now need to spend more money acquiring products to replace those built using Jobs’s ideas, said Malcolm Polley, who oversees $1 billion as chief investment officer at Stewart Capital in Indiana, Pennsylvania.
Cook, who has worked at Apple for 13 years and focused on an expanding list of operational roles, including manufacturing, distribution, sales and customer service, hasn’t yet shown he can be an inventor like Jobs, Polley said.
“I don’t think it’s clear who the visionary is absent Steve Jobs,” he said in a telephone interview. “Cook has done a good job operating the company from a business management perspective, but I don’t know if he’s the product visionary Steve Jobs is. You could do that via acquisition.”
The company is going to have to add products to “blunt the force” of Google’s Android platform, said Michael Yoshikami, chief executive officer and founder of YCMNet Advisors, which manages $1.1 billion in Walnut Creek, California.