A few times every year, someone comes up with a list of companies that Apple should buy. Adobe, Disney, Tesla, and a few others are perennials on the lists. One that I don’t recall making it on most of the common lists is IBM. Big Blue. Yes, that IBM. Things have changed so much in the technology world in the 21st century that Apple could buy IBM.
Let’s take a look at the benefits and the problems.
First of all, IBM is affordable. Expensive, but affordable. Financial considerations would make a merger more attractive, but Apple could buy IBM outright. With cash. IBM’s P/E ratio is better than Apple’s and the dividend yield is double the iPhone maker. But a market capo just over $150-billion is within reach of Apple’s cash.
Second, after a few decades in the doldrums, IBM’s stock price rode the 21st century rally but hasn’t done well the past five years, which makes Big Blue more affordable. IBM doesn’t have the cash reserves Apple has, but who does?
Third, there are negatives. IBM’s revenue has fallen for about 20 straight quarters. That’s not a good trend. IBM’s New York management culture is decidedly different than Apple’s laid back California culture. These days, IBM is mostly a software and managed services company these days while Apple remains a hardware company.
Apple’s annual revenue is nearly three times IBM’s and the Mac maker is far more profitable.
Yet, what IBM has is what Apple does not. Apple CEO Tim Cook once worked for IBM so he has an understanding of the company’s culture and requirements, and has made agreements to provide Big Blue what it needs most. A dependable hardware platform of iOS devices to be managed, and Macs for IBM employees to use. Win, win.
No, I don’t expect an announcement or even a rumor that Apple and IBM will merge, or IBM will sell out, or anything like that. But Apple could buy IBM is a more obvious consideration than Apple should buy IBM.
We also hear that Apple should buy or merge with Disney. Or, buy Tesla. Both, on a specific level, make sense. Apple has hardware devices that need content, and the iPhone maker is far behind the curve and lead set by Amazon and Netflix for content development. Apple may want to enter the self-driving car arena, but remains a decade behind Tesla with no hints of anything in the pipeline.
What bothers me most about Apple’s hoard of riches is the lack of creativity on what to do with the money. Apple is so profitable, and has so much cash on hand, that it could do almost anything, including buy IBM. Or, Disney. Or, Tesla. Yet, instead of refreshing the product line or becoming more competitive in pricing, or expanding the product line, all Apple has come up with in recent years are dividends and stock buybacks.