Apple (NASDAQ: AAPL) can afford to buy GM. The No. 1 US auto firm makes a fair amount of money, has nearly 20% of the American car market, and is the largest car manufacturer in China–along with its joint venture partners
GM’s market value, which will be confirmed by its IPO, is about $50 billion. Apple has a market cap of $230 billion, and the consumer electronics company has $60 billion of cash, no debt, and does not pay a dividend.
The fact of the matter is that Apple is not going to buy GM, Dell (NASDAQ: DELL), Symantec (NASDAQ: SYMC), or global handset leader Nokia (NYSE: NOK). Apple doesn’t need to. It can take market share in the PC, smartphone, and tablet business all by itself.
Every time the M&A world heats up, particularly in tech, Apple’s name comes up. It could expand its reach in the computer market, get into the server business, get a strong foothold in software security, or immediately expand its handset business. The markets believe that Apple should buy Research In Motion (NASDAQ: RIMM) and use the BlackBerry to expand further into the smartphone industry. RIM has a closed software and hardware architecture. It is paying the price for that in countries that want access to Blackberry data, and its is paying the price for getting into consumer handsets late and delivering products that the market thinks are substandard.
Apple’s next logical move would to enter the video game market. It has the brand to muscle against Microsoft (NASDAQ: MSFT), Sony (NYSE: SNE), market leader Nintendo. But, the Apple brand is stronger than any of those with consumers. Apple could buy Nintendo, but its brand weakens everyday as the Wii ages. Apple could enter the market on the software side. There is often speculation that it will buy Electronic Arts (NASDAQ: ERTS). But, Apple is already in the midst of cornering mobile gaming through its applications software relationships with sector firms that us the App Store as their primary means of distribution. And Apple takes a toll on each of those sales. It is in the video software business without any risk.
Apple is also said to lack a product in what is often considered the most important tech sector–search. Google (NYSE: GOOG), which is viewed as one of Apple’s most dangerous rivals, dominates the search market. Apple has already begun to overcome Google’s advantage. Many of the 200,000 applications that run on the iPhone are mini-search engines for everything from weather to word definitions to premium content, books, and maps. Google holds the advantages in the broad search market. Apple has begun to build out access to millions of destinations though its Apps program.
Large tech M&A deals again and again raise the issue of what Apple can buy to quickly expand one of its franchises or more into another related industry. But Apple is not buying anything. It doesn’t need to.
Douglas A. McIntyre