Apple has $206 billion in cash. One Wall Street analyst has some ideas for how CEO Tim Cook can spend it.
FBR’s Daniel Ives put out a report Tuesday morning with the following intriguing title.
Christmas M&A List for Cook & Co. Heading into 2016: A Look at Potential Deals Ahead
Ives argues that even as Apple continues to focus on its iPhone franchise, “we can finally envision Apple making a larger acquisition.”
So who should Apple buy? Ives has four targets in mind.
Adobe
Box
GoPro
Tesla
Ives thinks Adobe or Box would both help Apple become an even bigger player with corporate customers.
The so-called enterprise market is an area that Cook has moved into aggressively. Apple has inked deals with IBM and Cisco under his watch. The main goal of both? To sell more iPhones and iPads to corporate IT departments.
Box, known for its cloud storage service, could enhance iCloud, Ives said. The company went public in January and has struggled to keep Wall Street excited about its story. The stock is currently trading below its $14 IPO price.
So that could make Box vulnerable to — or perhaps even eager for — a takeover.
And an Adobe purchase would give Apple ownership of dominant creative software tools such as Photoshop, Lightroom and Illustrator.
Adobe also owns a suite of Web analytics tools that could be appealing to Apple. Data is the 21st century Holy Grail after all.
Still, an Adobe acquisition would be Apple’s biggest by far, even if it could afford it. The company’s market value is nearly $45 billion. (Apple’s $3 billion purchase of Beats last year was its biggest purchase so far).
Adobe is also operating from a position of strength. Shares are up 23% and near an all-time high. The company will report its latest earnings after the closing bell and analysts are expecting strong sales and profit growth.
Buying Adobe would also be quite amusing since Steve Jobs famously hated Adobe’s Flash media player — like most of the free world.
GoPro, like Box, also needs some help. Its stock has plunged 73% this year and is at its lowest level since its IPO last year.
There are questions about whether GoPro’s once-uber-popular Hero cameras are turning out to be just a passing fad. And it’s unclear if newer markets — such as online media, virtual reality and drones — can reinvigorate the company.
But Ives thinks that “action cameras are uniquely positioned at the intersection of Apple’s smartphone, wearables, and multimedia offerings.” He said GoPro makes a great strategic fit within the iTunes and Apple TV platforms.
GoPro also could help Apple catch up to Google and Facebook in the virtual reality market. Apple has already made an acquisition in this market as well, recently buying motion capture startup Faceshift.
And finally, there’s Tesla. This would be the sexiest deal of all. But Ives considers it a long shot. Would Elon Musk really want to sell the company? Tesla’s market value is nearly $30 billion too.
This rumor has been around for a while too. One analyst wrote an open letter to Cook in October 2013 suggesting a Tesla deal so that Apple could create an iCar.
Still, the fact that Apple is working on an autonomous vehicle — reportedly dubbed Project Titan — is one of the worst kept secrets in Silicon Valley. Ives says there’s a 60%-70% chance Apple has a product on the market by 2020.
“Acquiring Tesla’s advanced battery technology would greatly accelerate Apple’s entrance into the next-generation auto arena,” Ives wrote.
Investors probably shouldn’t hold their breath waiting for any of these deals to happen though — especially since $187 billion of Apple’s cash is held overseas for tax purposes.
But it’s always fun to speculate about how Tim Cook should spend Apple’s money.