Apple merges with Google… You have to be kidding right?

by Roger Kondrat on June 19, 2007

Recently I was on Seeking Alpha which is a kinda blog/traditional news site, that is independent (see their about page) but their product (articles) are very much grassroots and in an ethically balanced editorial style which I respect.

So I was a bit surprised when one of their most prominent authors (Eric) speculated that Apple and Google would merge or could merge. For me I find this a no go idea.

Here are my three reasons why its not going to happen:

    1. Google doesn’t have any expertise or understanding of building a ‘real’ life product. They struggle to get any traction in the market with any service outside of their core search effort e.g. Finance, product search, video, etc. Their most successful products outside of search are usually products they purchased e.g. Blogger, Picasa, Documents, Groups…
    2. Apple’s hardware is a high risk business with long-term contracts and high costs again an area that Google not only doesn’t understand but why oh why would Google take it on? I don’t see how Google benefits, market cap for Apple aside Apple is a high risk purchase for Google.
    3. It won’t produce nearly synergistic as other opportunities are such as a purchase of Yahoo!

      Lets be honest Apple and Google are one trick ponies, as much as we love them they are at their heart known for the iPod/iTunes and Search. That is their key and overwhelmingly successful product.

      Because of this they have high market caps and investors love them, but eventually their markets will mature and margins will erode making their number one business just another business like any other. Google and Apple actually have the same problem, they need to buy a company that broadens their portfolio of products with some success in a variety of arena’s.

      As mentioned earlier Yahoo! is an excellent choice and cheap too. If I owned Apple shares and the board asked me how I was going to vote on a Yahoo!/Apple merger I would say ‘YES YES’. Yahoo would make Apple an instant ‘global’ web player. Also it would bring Yahoo!s many web properties into Apple’s product portfolio. Apple would then be able to tie iPod/iTunes into a variety of services with a greater global reach which is going to be important, more so now than before with the trend towards DRM-free (legal) music. Apple could broaden the reach of its iLife products and Webify them allowing them to play nicely with MS Windows world via the web but not in a way that enhances the MS platform due to its web-based focus.

      Yahoo! would get an amazing brand, better marketing, and visually stimulating results for its ’stodgy’ boring products. With Yahoo! and Apple, together they could then segment the market and all premium services would be Apple dubbed products and all lower end mass products could be branded with Yahoo!… Yahoo! could also sell its services through Apple stores.

      Its possible Apple and Yahoo! would also be able to get traction in the business market (B2B) as well. Yahoo! offers a whole host of products for business but it never gets serious attention, the same problem happens with Apple, so a decision could be made to strengthen the offerings or cease their efforts all together and sell what they can e.g. sell the hosting business of Yahoo!

      Questions have always been flying about their B2B efforts and the long-term value of them. For me personally I am thinking distraction. But that’s just me.

      **I am no where near naming all the benefits as I wanted to restrain the size of this post but please feel free to comment any other synergies you see.

      There are so many opportunities here versus with Google.

      Google wants the worlds data, they want you to look on their systems for it, what does that have to do with iPods, Laptops, and a desktop OS? I genuinely wonder how Google could justify a purchase of that magnitude with few significant upsides.

      Lastly here are some radical suggestions, Yahoo! sells their search operations to a Chinese organisation and Apple licenses its OS to a few select hardware vendors once the merger occurs. Why? I would say that with Apple, Yahoo! is just wasting money on Search when it could just focus on continuing to be the largest and most dynamic set of properties. Apple isn’t making anywhere near the money on its  traditional hardware (PC, and Laptops) that it makes on its other hardware (iPod, iTunes, iTV, iPhone) and services so licensing would allow them to improve their margins and continue their trend away from a ‘hardware/computer’ image to a media company.

      Together these two companies would make formidable media generators, aggregators, and distributers. Once this is done I would then make moves on Lions Gate Films, and content (Blog) networks such as B5 Media.

      These last two purchases would cost less than a $ Billion or so and would strengthen the merged company.

      What do you think? Off my ‘rocker’ or does this make sense?

      PS I know some of my reasons for not going with Google could be applied to Yahoo!… My bad that I was too lazy to pick other reasons. Go ahead throw that back at me :))

      **Update: Todd Ogasawara of oreillynet.com thinks Apple should buy Nintendo.. I happen to agree that is a good fit and would further improve their content distribution using hardware which directly complements Apple. I found this story off C|Net News which is also talking about.

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      Viewing 5 Comments

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        Considering Google's positioning as a consumer software experience service company, it has competition with Apple, Yahoo, eBay, MS and many others.

        However the core strength of Google is in producing easy-to-use software (be it GMail, GTalk, Google Apps, etc) which impresses the "common man/user". I believe the next generation market opportunity and share lies in acquiring common user.

        Coming back to your analysis, whether Apple-Google or Apple-Yahoo is best bet, I don't think Apple is in sight for Google/ vice versa.

        I analyze from Google's point of view. My analysis says that Google will go for Adobe! Adobe is the undisputed leader in innovating solutions which has mass user appeal (PDF, Photoshop, coming soon AIR, Flash and many other solutions). As web moves towards RIA (rich internet application), Adobe's capability and stack will allow Google to further extend its leadership as follows.

        1.Common user can design web pages (Google's page creator and Adobe's Dream weaver)
        2.Rich Internet Application (Google's pure Java based AJAX and Adobe's AIR, Flex)
        3.Web based Apps (Google Apps + Adobe easy-to-use & publish PDF, Presentations)
        4.Learning Tools
        5.Next generation Mobile Apps and Software
        &
        Many such capabilities

        Considering Google uses millions of open source software like Linux (Red Hat), and Red Hat/Linux increasing OS market share, why will not Google acquire Red Hat and hit Microsoft most in OS market?

        In a longer term, the only missing bit for Google is OS; all other bits and pieces they are either acquiring or building on their own.

        Apple-Yahoo? Unless Yahoo performs exceptionally well, it will be an definitive acquisition target of Apple or eBay or Microsoft. That's my guess.
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        Excellent assessment from the Google perspective. I would agree that Adobe has made themselves the perfect target for Google with their acquisition of Macromedia last year.

        Yahoo! wouldn't want them because as you said 'stack' doesn't fit, Apple doesn't want to go there and there is quite a few major apps that overlap, and finally MS would get a nice call from the U.S. Department of Justice if they ever went after Adobe so it definitely leaves Adobe exposed to an out--right purchase by Google.

        Maybe later this year or early next once Adobe has their product portfolio sorted and the merger being well behind them at that point.

        Good spot and I think you are right on with your speculation.

        :)
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        Google buying Adobe is not going to happen. Google's specialization is all about using AI (suggest, spell check, translate, newsbot etc) and in making search blazing fast. Google's methods scaleout to millions of servers. So scaleout, using AI (and associated development tools), search, algorithms, statistical inference - google's hands are very dirty with technology, a very hands on engineering company.

        Adobe has adobe, it has macromedia (very uncool if I was a googler).
        Google's mantra is "do no evil" - thats also a criteria too.

        Does Adobe have an emerging technology that google absolutely must have - (in their time youtube, blogger, picasa etc.. were all such). ?

        Google talks lisp, python, ajax - does Adobe talk that too?

        The deal will need to be approved not on wall street, or in a board-room - but it will need to get the 'coolness' nod from the phds and the google math guys.
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        I think Vijay you are a victim of drinking too much of the Kool-Aid as one of my readers also pointed out to me not too long ago. You may believe Google needs to sell 'something' to their 'PhDs' as you implied but that isn't the case. Google are a business and everyone is getting rich off their stock options, don't think for a second that when they are cruising around with their real-estate agents for $1 Million homes they are worried about the 'mantra' as you refer to optimistically. When lots of money is involved people change whether they have PhDs or not.

        Also yes Google is specialised in AI but that is their technology what is their business that goes on top of the technology? They are not selling their software (yes they sell a search box but that is for internal Enterprise use and less than 1% of their revenue) to Yahoo!, MySpace, Lycos, Ask, MS, etc are they?

        No they are not so that means they have technology but that isn't their business per say. They are an Agency more than any other business and Adobe complements their technology in a way that helps them provide better Agency related services.

        Also Google uses those technologies because it suits them, but that doesn't mean they won't reach out to new technologies as Adobe has many attractive products and patents.

        Regarding 'emerging' tech that google 'must have' I am a bit surprised you said Picasa.. They had great technology? Huh? Sorry I think you will need to explain that one to me. I don't disagree that Picasa is a good product but a 'must have' technology...?

        All that being said, I like that you drew attention to the AI work being done at Google, it is impressive and the possible applications will affect those outside of Googles walls in many other industrys for decades I would expect.

        PS. I am curious have you ever met a PhD? If so did you think they were cool? Did you think they were into cool?
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        I have to say - would find it extremely unlikely that Google will buy Apple or indeed that there will be any kind of merger.

        Apple have a very large market in front of them and are making good grounds in the pc, personal mp3 player and more recently mobile phone hardware market - the last thing they need is a merger with a fairly unrelated business.

        Google are doing just fine and will continue to dominate in the internet services market. The last thing they need to do is completely diversify there business buy purchasing a fully-fledged hardware business.

        Basically, it's not gonna happen. Yahoo is an interesting one to watch in the near future, but if Yahoo is bought by or merged with anyone, it won't be Google or Apple!

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