Apple's M&A Prospects for 2011

NEW YORK ( TheStreet) -- While Apple ( AAPL) has historically shied away from big acquisitions, CEO Steve Jobs hinted during his most recent quarterly earnings call that his firm, which is sitting on more than $50 billion in cash, could make more large-scale acquisitions going forward.

Notoriously tight-lipped about many things, Apple couldn't be reached for comment on this story, although TheStreet will be listening in to hear if the company reveals any concrete M&A plans during its fiscal first-quarter earnings announcement Tuesday afternoon.
Steve Jobs
Apple CEO Steve Jobs

"Apple's revenue mix has changed dramatically in the last several years, which should demand that the company reevaluate the emphasis it puts on its patent portfolio and its overall strategic direction," said Jeff Orr, an analyst at ABI Research.

Analysts are mixed about specific sectors that Apple could target.

Security

Security is one area that Apple could look at beefing up via acquisition, said William Stofega, an analyst with IDC who tracks the mobile sector. He noted that Apple has faced some criticism over the safety of its technology from some IT experts.

Among businesses that refused to support corporate access of Apple's iPad, more than 62% cited concerns over security as the primary reason, according to a recent survey from networking firm Citrix ( CTXS).

Chips

Apple could also continue its strategy of buying semiconductor companies to make faster chips that use less energy for the iPod and iPad devices, said Toan Tran, an analyst at Morningstar. Apple has purchased several chip companies in the past, including P.A. Semi and Intrinsity.

One chip prospect could be the U.K.-based Imagination Technologies, said Tran. Apple already holds a 9.5% stake in the company, whose chips help power smartphones and tablet devices.

Mobile Payments

Apple has filed several patents related to mobile payments, according to reports, and it recently hired Benjamin Vigier, an expert in near-field communication (NFC) technology, to head up its mobile commerce division. NFC could be used to allow consumers to pay for things via waving their smartphones at "smart" tags located near a store or restaurant cashier.

Apple has also been rumored to be in acquisition talks with startup mobile payments company Boku, whose technology lets Web surfers pay online by entering just their mobile phone number.

Cloud Computing

Noted to be a later-comer to the cloud, Apple is reportedly looking at cloud computing to streamline some of its mobile apps. Evidence to support this strategy could surround the building of a new, 500,000 square-foot data center in North Carolina.

Apple purchased music service Lala in late 2009, reportedly to develop a music and video streaming service and cloud-based storage system as part of iTunes. A cloud-based iTunes would allow users to access their music and playlists from any Internet-connected devices without the need for storage-based products like the iPod or iPhone.

Apple's Past Acquisition Strategy

In the past, Apple has purchased companies for their engineering teams and has vertically integrated these acquisitions within their existing infrastructure rather than letting them operate as independent entities, said Tavis McCourt, an analyst with Morgan, Keegan, and Co.

The company's largest acquisition was Next Software, founded by Apple CEO Steve Jobs, which it purchased for $429 million in 1997.

Apple's more recent sizable acquisitions include PA Semi for $278 million in 2008, and mobile advertising company Quattro Wireless for $275 million.

But despite Jobs' hints at big buys, it's unlikely Apple feels pressure to make large acquisitions to catch up with far more spendy rivals like Google ( GOOG), ABI's Orr said.

"Apple doesn't care what other companies are doing; Apple doesn't react," he said. "Apple's biggest competitor is always itself."

--Written by Olivia Oran in New York.

>To follow the writer on Twitter, go to http://twitter.com/Ozoran.

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