Silicon valley investment strategies | Brunswick Group

Silicon valley investment strategies

Should the tech giants spend their cash by acquisitions or should we just stop trying to guess?

For years now, the media and their friends in the pundit class have had a field day telling the world’s biggest tech companies how to spend their billions of dollars in stashed cash. It’s an irresistible parlor game. Apple, Google, Facebook, Microsoft and Oracle together have more than $600 billion in cash and investments. It drives some people half-crazy that Apple in particular has enough cash to acquire almost any company this side of Berkshire Hathaway, but historically has made very few large acquisitions. Some of the others in that group are a little more acquisitive, but nonetheless continue to sit on mountains of long green.

One complicating factor has been that most of that cash sits offshore for tax reasons. But with recent changes in US tax law, conditions for cash repatriation have improved – and that could trigger a more active M&A market in tech. What is surely going to follow is widespread speculation by investment bankers, M&A reporters and equity investors about who is going to buy whom. And here’s the thing: they will generally all get it horribly wrong.

Try this. Type “Apple should buy” into Google search. Here’s a sampler of the results:

• “Could Apple Buy Disney?” Forbes, December 16
• “Why Apple Should Buy Netflix,” Bloomberg, November 7
• “Why Apple Should Buy Sony,” Monday Note, October 1
• “Apple Should Buy GoPro,” Motley Fool, September 26
• “Apple Should Buy IBM,” Forrester Blog, June 29
• “Apple Should Buy Athenahealth,” CNBC, June 15
• “Why Apple Should Buy Sirius and Pandora,” Barron’s, December 14, 2016
• "Why Apple Should Buy McLaren,” Gizmodo, September 21, 2016
• “Apple Should Buy Tesla – And Make Elon Musk CEO,” Marketwatch, May 7, 2016

This behavior runs deep. A few historical gems:
• “Should Apple Buy Dell?” Forbes, February 11, 2013
• “Why Apple Will Buy BlackBerry,” SeekingAlpha, October 13, 2013
• “Could Apple Buy Intel?” The Guardian, April 29, 2013
• “Why Apple Should Buy Nokia,” Forbes, October 6, 2012
• “Why Apple Should Buy Yahoo,” Forbes, February 22, 2012
• “Four Reasons Why Apple Should Buy HP,” IT Pro Portal, August 22, 2011

Of course, none of those happened.

You can play this game with the other cash hoarders:
• Google should buy, apparently, Dropbox, Twitter, Groupon, HTC, Nintendo, The New York Times and Amazon. (That last one was from 2011; it’s now silly on the face.) One story suggested Google ought to buy the entire music recording industry.
• Microsoft, according to the historic headlines, should buy HP’s PC business, Red Hat, Citrix, Salesforce, Slack, DocuSign, AMD, Netflix and, here’s a nice one, Ford.
• Facebook’s shopping list, apparently, should include Twitter, Vimeo, Slack, Groupon, eBay, Pinterest and Hulu.

No one really knows what Apple or the others are going to buy, if anything. But nature abhors a vacuum; so do reporters, and speculative M&A stories always generate readership.

There is no question that Apple and some of their tech kin have way, way more cash than they need to run their business. But while imagining all the possibilities, I would keep in mind this headline from Gizmodo in May:

“Apple Doesn’t Need To Buy Anything.”


Eric Savitz is a Brunswick Partner based in San Francisco

Download (4 MB)