With its global smartphone and tablet market share plunging, Apple Watch sales much lower than expected, and an elusive new hit product seemingly years away at best, Apple Corporation may finally need to turn to high-profile acquisitions to spur growth next year.
Apple is a company at a crossroads. On one hand, it books more profit per quarter than any other firm in the world. On the other, its sales growth has completely stalled.
Its massive cash hoard tops $200 billion, according to consensus estimates. That doesn’t mean Apple has that kind of money just sitting in a bank account, waiting to be spent, but it does mean that Apple is very, very cash rich. Thus, it can afford to keep raising its dividend, execute more share buybacks, and if it wants to, buy almost any company on earth.
Apple is traditionally very picky when it comes to acquisitions. Generally, the company prefers to purchase smallish tech firms whose technology can be quickly integrated into its own platforms.
The largest buyout in company history came in 2014 when it bought Beats Audio for $3 billion. Afterwards, the company quickly shuttered Beats’ streaming music service and used its technology to launch its own Apple Music monthly subscription service.
With the Beats acquisition clearly at least a moderate success, perhaps the company will look to be more aggressive with buyouts soon. Here are some acquisition ideas that Apple could—and should—consider.
1. Netflix, Inc.
Apple has had early success in the streaming music world, so why not get into streaming video ? Netflix is the granddaddy of all streaming media subscription services with 86.7 million global subscribers (that’s more than four times the number of Apple Music subscribers). The company also boasts a fast-growing in-house media library, producing hundreds of new shows and specials per year.
The original and largest streaming music service has more than 60 million subscribers globally . $8 billion worth may be pretty rich, and the company has yet to turn a profit, but this acquisition would all but corner the streaming music subscription market for Apple. That would mean a return to portable music dominance like the company enjoyed in its iTunes heyday.
3. Electronic Arts Inc.
As one of the largest and longest-running video game publishers, EA boasts a big library of well-known game franchises, including FIFA, Madden NFL, Star Wars, Battlefield, the Sims, and Need for Speed. Many variants of its games are already available on Apple’s App Store as well. EA’s market cap of $24 billion is reasonable, and Apple would immediately become a major player in the video game publishing world.
4. Advanced Micro Devices, Inc.
Apple has long been a big fan of vertical integration, and AMD offers a foothold in the computer processing and graphics processing (GPU) industries. Semiconductors are hot right now, and Apple could leverage AMD’s processors in nearly all of its own devices. There are also big applications for AMD’s products in future growth industries like virtual reality and driverless cars, both of which Apple are already investing in. AMD’s market cap below $10 billion also makes a buyout very doable.
5. Tesla Motors Inc
The biggest wildcard of the bunch, a Tesla acquisition is complicated by its recent merger with SolarCity. But considering that Tesla is essentially “the Apple of carmakers”—with high-end vehicles and uncompromising design, coupled with Apple’s long-running plans to get into the car world—Tesla could just be the major splash that shareholders are pining for. Perhaps the biggest problem is Tesla’s valuation. At almost $33 billion, TSLA’s multiple is several times that of other automakers.