What Could You Buy for $8.5 Billion? | Hacker News Reader

What Could You Buy for $8.5 Billion?

daringfireball.net

62 pointslotusleaf198754 comments

If Microsoft does spend a billion on a time machine, my advice would be to buy Apple's 2006 stock and hold it in trust. I have zero confidence that Microsoft in 2006 or in 2011 could buy a disruptive company and not destroy it.

Which is, I think, the arch point of Gruber's quip. If Microsoft had bought Apple in 2006, does anyone seriously think Microsoft today would have a dominant position in phones, music players, music distribution, and tablets? Would it have a world-class retail chain?

Moving forward to 2011, people point out that B$8.5 could buy a lot of startups. Assuming that they could identify it, Microsoft probably could buy the next Apple or Google. Heck, they could probably buy it just by trying to buy everything. But does anybody seriously think that if Microsoft does buy the next big disruptive company, it would still be the next big disruptive company?

Aren't there controls in place to prevent companies from buying up each others' competitors' stock?

There are certain anti-monopolistic laws in place. You might need to put a hundred million aside for lawyers and lobbying to get your deal past the regulators.

But given patience and money and a willing seller, I'm sure Microsoft could buy anyone and find a way to get the deal approved. We are talking about a world where Adobe can buy anyone it likes just to kill off their competition.

Msft couldn't have bought Apple. They needed to have plausible competition in the desktop market to avoid monopoly regulation, etc.

There's a good chance Apple wouldn't exist without Microsoft (and vice versa):

http://en.wikipedia.org/wiki/History_of_Apple_Inc.#Microsoft...

Without Office, etc on Mac the adoption could have been severely limited. Would Apple have had the cash to develop the iPod?

I think of them as competitive symbiotes. Together they are more valuable than the sum of the parts.

Several people seem to believe that Office was key to Apple's survival. I do not understand this claim. Apple's big markets were pre-press and education. Neither really cared about Office.

Do you have a citation to back that up? I do not know about publishing, but I can guarantee you that lack of Microsoft Office compatibility would have been a dealbreaker for several of the Mac owners that I supported when I worked in educational IT.

Apple's own marketing campaigns targeted at "switchers" tout this fact: http://www.apple.com/why-mac/its-compatible/#office

Apple's current position is nothing like Apple's position then.

I was gonna say, didn't Microsoft buy into Apple in order to avoid becoming a monopoly at some point along the way?

I think you're not giving Microsoft credit, they are ahead of your strategy buying $150 million in Apple stock in 1998 which if they've held it would give them a 7557% (eleventy billion dollar) return.

What am I not giving them credit for?

I am saying that they couldn't have managed Apple if they'd bought it as well as Apple managed Apple, not that they did or didn't invest 150 million in Apple as part of an attempt to weasel out of punishment for their illegal monopolistic behaviour.

Microsoft has owned Apple stock in the past:

http://ask.metafilter.com/30833/How-much-of-Apple-Computer-d...

From Apple's 2003 SEC filing:

"In August 1997, the Company and Microsoft Corporation (Microsoft) entered into patent cross license and technology agreements. In addition, Microsoft purchased 150,000 shares of Apple Series A nonvoting convertible preferred stock ("preferred stock") for $150 million. These shares were convertible by Microsoft after August 5, 2000, into shares of the Company's common stock at a conversion price of $8.25 per share. During 2000, 74,250 shares of preferred stock were converted to 9 million shares of the Company's common stock. During 2001, the remaining 75,750 preferred shares were converted into 9.2 million shares of the Company's common stock."

I was around at the time, I remember it well, and this is entirely orthogonal to my point. My point is that they couldn't buy a company like Apple and do as well as Apple did being independent. Had they bought all of Apple in 1997, Apple would not exist today. Microsoft would probably be doing a lot better due to the lack of a competitor, but you never know, Jobs might have founded another company and be killing Microsoft with it.

My post is about management, not stock picking.

For 8.5 billion, you could hire a couple dozen of the highest class escorts forever and travel the world in a super-yacht with them for sixty years.

Or you could pay a ton of people that you hate the most a dollar per hit to punch themselves in the face for a year straight.

Or you could build your own Skype service from scratch and have about $8,499,500,000 left over to maintain and market it.

Yeah, but how much would you have to spend to get 500 million users, many of which you already have credit card information for? Not saying this acquisition was necessarily worth the cost at all- but it wasn't just about the technology.

Pay each user who signs up and uses your service $10. You'd still have $3.5 billion in change.

This seems like a sustainable business plan :)

If only user acquisition costs were that low...

Where are these 500 million users? Do you mean the Skype user base? Skype has 170 million users. Of those, only 1% actually pay for the service. So you're probably paying for 1.7m people's credit card information and accounts. Or do you mean 500 million Microsoft users? (Not being an ass, I honestly wasn't clear which users who were referring to in the process here.)

From SFGate article about the acquisition: "Skype's huge user base- more than 660 million users, including more than 120 million active of 'connected' users." http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/05/12/...

The 500million user figure was from a big TechCrunch article from 2009. http://techcrunch.com/2009/10/21/skype-hits-521-million-user...

Again, I'm not trying to necessarily argue that this acquisition was worth it. But, there is more than technological value here. There is a huge user base here.

I like that somehow you did the escort math and came up with about 60 years of luxury travel.

escort quality is like a gas, it expands to fill the bank account available for it

Am I the only one that can't read a daringfireball post without cringing?

Feels like a cultist's blog.

This is daringfireball? Well, you could buy Apple stock, iPads, iPods, MacBooks, movies and songs on iTunes, AppleCare packages, Mac Pros, iMacs, Mac accessories, and iOS apps. Nothing else is worth buying.

Oh, oops. Read the 'article'. My joke is more accurate than I thought.

Ooh.. I can play this game too. I guess Apple/Google could have bought Facebook for a few million dollars in 2004.

Its fun to read these sorts of things, back in the day when I was at Sun and Sun had taken a billion dollars of VAX business away from DEC there was a similar article about what DEC could have bought with that missing billion dollars in revenue.

A hallmark of a successful business is that it generates enough cash that you can step into adjacent markets. The down side is the risk to your focus if the adjacent market it too off axis.

For perspective and comparison, MSFT paid a $32 billion dividend to shareholders in 2004. With their cash on hand, they could have bought 4 AAPLs. They currently pay out around $5-6 billion in dividends per year. AAPL pays out $0.

http://luhman.org/blog/2004/07/23/dividend-capture-and-micro...

Paying a dividend is what a company does if it thinks it cannot invest the money better than its shareholders could.

Apple thinks it can make good use of billions of dollars and Microsoft thinks you can do better with the dividend.

It doesn't seem like Apple really has a plan for it's pile of cash. They just don't want to pay a dividend and they don't want to buy back stock and they don't want to acquire much so it just keeps building up.

They claim to be making strategic purchases in bulk of some component (rumored to be displays) in order to get low prices and crowd others out.

It's a weird thought experiment; $7.5B adjusted for inflation from 2004 to today would be ~$8.9B. (18.3% inflation.)[1]

By this logic, Gruber would still be short of money.

[1]: http://www.usinflationcalculator.com (or any other inflation calculator).

Yeah, it's only 13.3% growth over 7 years, which ends up being ~1.8% growth in market share per year. Seems pretty small considering their success in recent years...

Edit: OK, I'm a dumbass -- I misunderstood the comment and didn't realize there was a link to click through to the chart there.

Entire text of TFA follows:

--START--

http://ycharts.com/companies/AAPL/market_cap

For just $7.5 billion, you could have bought Apple — in January 2004. That leaves $1 billion to create your time machine.

That deal would have had a snowball's chance in hell of getting the regulatory approval in US & EU.

I dunno, after seeing the FCC commissioner get hired by Comcast, it may very well be Dante's hell.

If this were Dante's hell, ex-Commissioner Baker would either be boiling in pitch, burned alive or frozen in Cocytus.

The DoJ under Bush was extremely lax in its enforcement of antitrust rules. EU, on the other hand...

In 1997, Microsoft rescued Apple with a $150 million investment just so that Apple could survive as a viable competitor.

http://www.apple.com/ca/press/1997/08/AppleMicrosoft.html

The problem with the "$150 million investment saving Apple" argument is that Apple had $1.2 billion cash on hand.

Personally, I think it was Microsoft's commitment to keep Office for Mac (as well as building/bundling IE for Mac - which at the time, was a damn good browser!) that "rescued" Apple to a certain degree (it definitely made it a viable machine for the education market!)

Honestly though, I think after Steve Jobs returned and killed off the clones (and released the new iMac), Apple would have succeeded (or at least, not "died") even without Microsoft's investment --- mostly due to how loyal the users are. No clue how successful they would have been though, without IE/Office (I doubt MS would have killed Office though - considering it was still generating cash for them...)

http://news.ycombinator.com/item?id=2460925

As others have pointed out, Apple had a giant stash of cash. $150 million was small change to Apple at the time.

It is widely speculated that this deal was really a settlement over the alleged infringements in Windows of Apple's IP. Microsoft pays Apple $150 million, disguised as a face saving investment, and agrees to keep Office on the platform for a few years, and Apple doesn't sue the crap out of Windows.

Spoiler alert - Apple's market cap was $7.5 billion 2004.

Except if Microsoft had bought it, it would not be worth even that much today.

I wonder if Skype acquisition will follow the same fate

The same assumed fate?

Microsoft would probably worth more than currently however.

Wouldn't MSFT would have had to pay a premium on the market value per share? So upwards of 120% of market price?

Obviously this isn't meant to be taken seriously, but you could never buy a company for it's market cap. Shareholders wouldn't agree to an acquisition where they make exactly what they have now.

Also, you couldn't just buy up a ton of shares of stock either with the whole supply-demand curve of shares. If you buy 1% of Apple's shares, the share prices isn't going to just hover around the original price.

People here need to lighten up. It was a joke...

Would it be smarter to go the future and come back to buy stocks from the next Apple-Google-Facebook, or go to the past and buy early Apple stock?

If I have a time machine I hope I'm doing a bit more than buying stock in tech companies.

The present value of your efforts at time 0 (the present) would be much higher if you bought apple in time -15 and then returned to the present than if you spooled off a bunch of stock market history at time 15 and then returned to time 0 and dutifully executed your trades.

Of course, it would probably be easier to pull off the second approach (a-la back to the future 2) than the first, since opening a brokerage account in time -15 would likely cause unwanted contact with your past self.

You also run a chance of your past self discovering your plan and fooling about with it in time -14.9 - 0. I guess that lowers your expected value by a figure that depends on your probability of being caught.

At the end of the day, it's probably less of a headache to just buy an index fund.

a bunch of companies working on life extension

You know what you could buy for $1 ten days ago? The winning lottery ticket for one million dollars in yesterday's draw.

Skype.

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