Apple could buy the mobile phone industry

Jun 17, ’11 1:34 PM

The second quarter ends in less than two weeks. When it does, I expect Apple will have over $70 billion in Cash, Cash Equivalents, Short-term marketable securities and long-term Marketable Securities. That figure has been growing predictably.

Also predictable has been the decline in value of Apple’s mobile phone competitors. Most spectacularly Nokia and RIM. The enterprise values of the public companies selling 75% of all phones sold world-wide are as follows:

Nokia $22.6b
RIM $13.8b
HTC $25.4b
Motorola Mobility $4.2b

The values of the profitable phone-making subsidiaries are a bit more difficult to estimate but we can use multiples of trailing operating profits. I generously use the multiple applied to HTC (14).

Sony Ericsson $0.21b x 14 = $3.0b
Samsung $3.76b x 14 = $53b

That leaves valuing LG’s phone business which has not been profitable in the last four quarters. I assume a nominal value of $10b. These data points are shown in the following chart:

Given the current valuations, it would not be difficult for Apple to acquire every phone vendor except for Samsung with cash alone.

The more remarkable thing is that as market values of phone vendors continue to decline, Apple’s cash will continue to grow dramatically. Indeed, a time may soon come when Apple’s cash will be worth more than the entire phone industry.

http://brandonwebber.com Brandon

This is an interesting moment in Apple's identity as a company. More than just thinking about Apple's liquid cash versus competitor values, I think the real question is what is Apple going to do with all their cash? Buying a competitor seems to me to be of little value to them.
But what of buying a service provider? If Apple is about the integrated experience for their users, what if the next step is providing iPhones and iPads straight from hardware/software design to data and broadbrand delivery?
What is Apple's liquid assets versus a company like say, AT&T ?
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kevin

Apple is not interested in acquiring any of the other mobile handset makers for their business (nor any of the content producers), though they are likely interested in the cellular patent portfolios of some of these competitors. It's been said that Apple was one of the bidders for Palm, and that it has already received approval to bid for Nortel patents. Beyond patents, Apple is more likely to acquire software or hardware technology (or staff) that makes one or more of their devices or development platforms even better. Now with the forthcoming launch of iCloud, that technology space has grown to include back-end cloud technologies.
Paul

Imagine a world with Apple, mismanaged competitors, and *no* Android. It would be hell of a monopoly.
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marcelloh

it's comparing apples to pears.. Apples revenue is not pased on it's cellphones alone. what a bs news this is.
- asymco
  
  You mis-read the article. The comparison is not with Apple's sales but with the cash it has available in the bank.
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yet another steve

This is fun because I think so many miss the sheer magnitude of Apple's profits and cash. As if "well the stock has run up so it must be expensive."

In reality we all know that Apple likes a nice minimalist business model where they suck out the profits without having to control the world. True for music (forget iTunes the money is in devices not content) and mobile (skip feature phones and let the puck come to them.)

For all of its size and financial gain, the design of Apple's business is even simpler and more beautiful than it's UIs.
yet another steve

And in their big "defeat"… PCs. Small part of the world, dominating profits.
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jaylist

They wouldn't need to . I would expect Apple to buy companies that help them provide premium differentiation. The fact is that it's a great bit of analysis but Apple will never buy any of those companies. Apple can spend $8 billion securing it's supply chain. This is a much better investment and further increases there profit margins.

What Samsung et al need to do is to create a spin-off brand like Vertu is for Nokia. you are never going to get brand lust with names like HTC or Samsung. Not because they can't make excellent products (they do). But because of brand dilution with all the other things they make. If I was Samsung I would make a new brand for the smartphone and tablet market. A global brand that radiates premium and luxury. Otherwise it's just a race to the bottom in terms of features/functions/costs.
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Joe

I think it would be way more interesting if Apple bought ATT or Verizon. If they controlled the hardware, software, AND carrier, they could really control the user experience and the pricing. Imagine a world where they allowed the carrier portion of their business to be a true dumb pipe, making all phones VOIP phones, not charging for minutes or for SMS, just for data in tiers. The other carrier could not compete. Who would buy an Andorid phone with a minutes and SMS limit and long distance charges.
- asymco
  
  The US is a small part of Apple's phone market. Buying an operator would cut Apple out of the distribution of any other operator.
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http://www.techendeavour.com/ Rahul Aggarwal

Am sure it doesn’t surprise anyone of us, with the Apple having resources to own the mobile industry. But, we also cannot publish the supremacy of the smart-phone king so easily. What about the great Android technology. It is the most preferred gadget with the masses that only aims at providing free spaces for the benefit of the end use
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Anonymous

I like the idea put forward in another article that Apple could roll out US wide wifi for less than the cost of buying a carrier. Wifi is unregulated, it then could replace all the US carriers. It could rinse and repeat the process in all unregulated countries.

The service could then be a low cost option on your iCloud account.
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