Opinion We had a chuckle this morning at the idea of Sony being taken over by Apple Computer, an idea that has been flying around the US stock markets, supposedly as a reason for Sony’s share price to rise a miniscule few percent.
If the idea had any legs, Sony would have shot up. Apple sits on $46bn in cash and short term securities, and right now Sony is valued at $38bn. Some halfwit looked for a target which $46bn would represent a premium on, and came up with Sony. In 2003 we pointed out that Apple had a market capitalization of just $9.8bn and that Sony at the time was worth $40bn, and suggested a move the other way around.
Everyone now can see how much sense that would have made for Sony, though not for Apple, as today it’s worth around $280bn. But you have to remember how it got there. It created iconic product transitions for entire markets. That’s not something that Sony has done, not since it launched the PlayStation in the early 90s.
For Sony to have harnessed the audacity and single-mindedness of Steve Jobs would have done it lots of good, but for Steve Jobs, now at the pinnacle of his career, to take on Sony’s problems would do him harm rather than good. His beloved Apple share price would fall, and questions would be asked about even his ability to turn around such an entrenched behemoth.
Sony has something like 30 factories, mostly across Asia, it has a massive retail footprint, and it employs a huge number of “lifetime” employees in Japan, who cannot think in any other terms than the continuation of their jobs until retirement. It owns a Japanese bank. It has multiple, highly divided product divisions, and while what it needs is what Apple has, single mindedness - achieving that within Sony would require a complete rethink of the way it does business and an enormously tough internal transition.
Japanese protectionism would see half of the institutions there fight tooth and claw and government involvement in stopping a bid that would rapidly become hostile. It’s quite simply out of the question.
That doesn’t mean that if Jobs wanted something out of Sony, he couldn’t get it. If he saw something worth having, partnership and joint venture are easily within his grasp with any particular division – but we cannot even see that. Anything that Sony makes which Apple cannot build, like a particular type of screen or a camera chip, Apple can buy from Sony’s rivals on the open market, and at high volume, discount prices.
No, this was a slow day on Wall Street and someone who didn’t know any better just floated the idea. Think about what Apple has bought recently, Intrinsity, Quattro Wireless, LaLa, and the best of them, PA Semiconductor, which laid the foundations for its A4 chip.
The costs of these types of companies are in the low $100s million, and would never touch that $46bn that is burning a hole in Jobs’ pocket. They are all also direct stepping stones to what Apple was building already – streaming, ad networks, ARM chips.
If we think outside the square, Jobs might fancy buying a cellular operator, except that would make his existing cellular partners suspicious of him; he might buy a TV maker like Vizio, which is private, except why wouldn’t he just get his team to design a new TV? He might buy out TiVo, and own the time-warp patents, but then again Jobs thinks little of patents and always tries to work around them or ignore them.
After court battles he is happy to pay royalties, but what does he want with an intellectual property play. He can’t buy ARM without getting embroiled in Anti-trust and ruining ARM’s value, he might buy Imagination Technologies, but it won’t cost a fraction of his cash pile; he could buy a major studio, but he is the largest share- holder in Disney already.
If Jobs is serious about keeping his powder dry – his words when asked about whether or not he would issue a dividend – then we reckon that he might want to buy one or two retail chains, and turn them into Apple stores, giving him better retail coverage in China, Japan and the Far East and in Eastern Europe. That might cost a few $billion - that and refitting them as Apple stores, at least, is more likely than philanthropically saving Sony from itself.
Copyright © 2010, Faultline
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