Apple scouting for acquisitions to fill portfolio gaps, accelerate product roadmaps — CFO
- Original media content driving conversion rates, store transactions
- Repatriation would provide more flexibility, allow company 'to move more quickly'
Apple [NASDAQ:AAPL] looks to obtain technologies that fill gaps in its portfolio or that accelerate its product roadmaps, CFO Luca Maestri said.
Even though the technology juggernaut has historically purchased smaller private companies, it would acquire a large public company if the target was the right strategic fit, Maestri said on the sidelines of the Goldman Sachs Technology and Internet Conference in San Francisco, California last week.
The issue is not whether a target is public or private, he said, but whether it can be acquired at the right price to create value for shareholders.
The only public company Apple has ever bought is Melbourne, Florida-based fingerprint sensor technology developer AuthenTec for USD 356m in 2012, according to Mergermarket’s database and research team.
Apple typically buys between 15 and 20 businesses a year, Maestri said.
The company reported USD 246bn in cash holdings as of 31 January.
During the investor presentation, Maestri noted that music is one of the most important use cases for Apple devices, which is why its largest acquisition to date was privately held Los Angeles, California-based streaming service Beats Music and Beats Electronics for more than USD 3bn in 2014.
Through its music business, he said Apple has discovered that ownership of exclusive content makes a meaningful difference in the number of transactions that occur at Apple stores and the conversion rates of its software subscription trials.
Now Apple is working to apply the same strategies it has deployed in music to video. The Cupertino, California-based giant is experimenting with the production of original television shows, such as “Carpool Karaoke,” which it purchased the first-window rights to last year for its streaming service.
Apple plans to see how these initial TV shows are received by consumers and “go from there,” Maestri said. Apple is already a large distributor of video through its computer, smartphone, tablet and television platforms.
Despite the enormous success of its iPhone business, the company still sees plenty of growth and innovation ahead as smartphones increasingly become more ingrained in consumers’ lives, Maestri said. Apple wants to gain market share in emerging markets, such as China and India, where penetration is low, he said. The company also continues to work on advancing key foundational technologies that go into the product, including processors, sensors, batteries, displays and cameras, the CFO said.
To that end, the amount it spends on research and development is higher than in the past, Maestri said, because its portfolio of products and services is larger. Developing technologies in-house allows it to push the envelope of innovation and have better control of costs, time and quality, he said.
The US tax code was also a topic of discussion.
The existing corporate tax rate of 35% is punitive for companies, he said, and creates tensions around the world. Apple has long championed tax reform, Maestri said, noting that Congress is expected to make changes this year.
If companies are allowed to repatriate capital held overseas, he said it would provide Apple additional flexibility to allow it “to move more quickly.”
The Trump administration’s proposed border tax, however, would harm tech companies and the economy, Maestri contended, because the financial burden would be passed on to consumers. Not only are the majority of its products manufactured overseas but Apple’s suppliers are also there.