Apple should buy big companies, says Scully | Hacker News Reader

Apple should buy big companies, says Scully

bbc.co.uk

18 pointsgroundCode48 comments

It's amazing how quickly Sculley reminded me why he had no business running Apple.

"He said it could shift the 'whole landscape of e-commerce' if it bought, for example, eBay."

Why not just buy Amazon? Or the moon? It's really big too.

"... when you look at the Passbook, and fingerprint recognition - what would it mean if Apple went out and bought eBay? And they had PayPal, and integrated that? My guess is you'd suddenly see the whole landscape of e-commerce shift."

It'd shift alright. The efforts toward fingerprint theft and black market print trading would skyrocket, because there would suddenly be a direct financial link to millions of fingerprints. You can change your Visa card, you can change your address, you can change your phone #, you can change your social security #, you can change your name, you can change your password, you can change your PIN #, you can't change your finger prints.

+1 for buying the moon strategy.

I hope my next iPod comes bundled with green cheese.

Given Sculley's time and "success" at Apple, the data suggests that doing exactly the opposite of what he proposes would be in Apple's best interests.

Somewhat in his defense, he does admit to "inexperience" and "wishing he had a mentor" when he was at Apple. Not that it means anyone should take his advice now.

Define success. I watched Triumph of the Nerds last night that somebody linked to here at hn. Sculley led Apple to 10x sales increase and left the company with $2 billion in cash and $200 million of debt. Sounds like a success to me, considering Macintosh was not a sales success people think it was (from the horses mouth from the documentary).

Gil Amelio on the other hand... but at least he brought (bought) Jobs back into Apple, who ousted him soon afterwards.

"Here's a man who has spent 33 years at Microsoft, loves the company," he said. "He really did not get enough credit for what he did accomplish.
"I can't name a CEO who didn't make some mistakes in the hi-tech industry.

"I think Ballmer has a lot he ought to be proud of. So he didn't get everything right - not many people do."

Ummm.... Is he suggesting lets celebrate someone who spent a lot of money buying companies that didn't pan out? And better yet, let's suggest the company that destroyed them in the market to switch and follow their vanquished foe's failed strategy?

No wonder he destroyed so much value at Apple!

This touches on the issue of why companies have amassed such huge reserves and seem unwilling or unable to spend them. Clayton Christensen (of Innovators Dilemma fame) gave an interesting talk at the RSA last month[1] where he described a possible reason for this. Unfortunately only the audio is up but they do often have video so perhaps that'll be there soon as the slides were very important.

The high-level summary is that in order for companies to develop market-creating changes, they need to be willing to make long-term investments with high probabilities of failure. This hasn't happened because the incentives of the management of the company are to provide short-term results which means they choose to only deliver incremental improvements or cost-savings as it has a greater improvement in the short-term on share prices and their remuneration.

He went into far more detail - listen if this sounds interesting to you.

[1] http://www.thersa.org/events/audio-and-past-events/2013/the-...

Clay's nytimes article summarizes the points that he makes in the talk.

http://www.nytimes.com/2012/11/04/business/a-capitalists-dil...

They aren't in a capital intensive business. Does this mean they have to throw away their money on frivolous investments?

Having a ton of cash does not change the economics of any single investment. Every investment decision is based on the individual parameters and expected outcomes and circumstances surrounding it. You don't think, "Hey, this is a shitty investment, but we have a ton of cash, so if this one sucks, who cares!"

So let's say Apple sees value in acquiring eBay (ridiculous, but it's the hypothetical put forward by OP). They take a look at eBay. Nothing about the acquisition changes because Apple happens to have a lot of cash, except for maybe the cost of the purchase, which in current interest rate environments is almost negligible (they can borrow extremely cheaply as evidenced by their latest massive bond sale).

Say Apple wants to build a revolutionary new TV. That is not a huge capital investment. They just keep paying their engineers and designers, perhaps hire a few more. The cost of this labor is not even worth mentioning. The manufacturing is contracted, they don't have to buy a bunch of machinery. In fact, they can announce the product and get a million pre-orders before shipping and pay for the whole thing in an instant.

Has any big acquisition ever made for a positive integration?

And if Apple wanted to dip into payments, a mobile payment processor is far more compatible with their existing offerings and more Apple-y to boot.

Square would be the obvious choice, not Paypal.

In my opinion, Braintree would've made even more sense than Square, as they could've tied that more directly into iOS.

Braintree has been acquired by Paypal [1].

[1] http://m.techcrunch.com/2013/09/26/paypal-acquires-payments-...

> Has any big acquisition ever made for a positive integration?

Exxon/Mobil, AT&T/BellSouth come to mind.

I was thinking more about 'acquisitions of a fundamentally different business'.

Mergers of very similar businesses are a little different.

Apple culture is too unique - 80 hour weeks, getting yelled at constantly, crazy secrecy - its hard to match that with other big companies.

Yes, let's listen to the man who almost drove Apple to bankruptcy because he thought computers and soda were sold the same way.

He left Apple with $2Billion cash in the bank, and only about $200Million in debt. Hardly bankrupt.

(http://en.wikipedia.org/wiki/John_Sculley#1983.E2.80.9393:_A...)

The worst thing a big company can do is buy another big company. The two will never mesh well - one will be subsumed into the other. It is very, very rare that big acquisitions and mergers work out well. One company is sure to wither on the vine.

If you don't believe me, go ask someone who worked at an EMC company who was part of an acquisition.

eBay is an obvious nonsense, there's no link up there that makes sense.

The only largish company that springs to mind that might makes sense is one Apple tried to buy previously and failed - Dropbox. Apple have a weakness in their cloud service offerings that Dropbox might help fill but given what it would likely cost ($5bn+) and how Apple have slowly been improving in this area, I suspect that Apple would be as well just sinking that money into what they're already doing.

I agree Apple has been improving in cloud services but did they not completely scrap their Dropbox alternative? (iDisk).

iDisk died with mobile me.

Interestingly as an iOS user I don't find Dropbox a great fit because of the jarring of the file system model with the sandbox model. I'm sure that their cloud expertise would be beneficial to Apple but it may be that the optimum time for the two organisations to come together has passed.

Ever since the App Store opened the the public, I have heard people suggesting that Apple should get into the mobile payments business, given that they already have a huge database of credit cards ready to accept payments. Now perhaps that would be a bad idea for them, but if they were to actually go in that direction, Braintree (eBay) wouldn't necessarily be a bad acquisition, cost aside.

Instead of buying a company like eBay, Apple should try to acquire a company like Tesla, assuming Elon is ever willing to sell (probably not).

1. Apple has considered building a car before

2. Not quite the same but essentially an EV is pretty much a giant computer, and more relevant to Apple's current strength than entering the e-commerce space itself. There is a lot of baggage that comes with the eBay/PayPal business model (I realize this is just an example Scully used) that Apple probably doesn't want even if they were to enter the payment space.

3. The market for EVs is still tremendously young and in my opinion hugely massive and one worth entering and competing in right now even if it is far from Apple's current product lineup and doesn't sync as well as all of its existing product.

4. Even with point #3 above, Apple is working with car manufacturers already to integrate Siri and other things probably. This might put a dent in partnerships (maybe) but arguably the EV market is more important than extending a marketing strategy to integrate Siri and other aspects into other major car brands in my opinion.

Just my two cents.

Apple should buy TomTom and get their maps sorted out.

They already use Tom Tom map data. How would owning them sort anything out? They'd just own the provider of (some of) the slightly dodgy data.

And this is exactly the point: ownership, as Scully suggests, gets you little but more non-core specialties to manage. Let someone else make stuff happen, then contract with them to make what particular stuff you need.

Owning that data doesn't help. Owning all the tangents unrelated to Apple doesn't help (in-car GPS devices, other unhelpful-to-Apple services). Lock-in doesn't help, as Apple can if need be switch vendors on short notice, vs dumping lots of cash into something that might not work after all.

Focus on the core. Contract out what's not your specialty.

I think it would be more advantageous for them to heavily invest in promoting Open Street Maps (OSM) contributions and editing. Make it easy, integrate into OSM (although MapBox is doing a fantastic job with the iD editor). Get that up to snuff and then start using solely OSM data... but that's a blue sky and Apple isn't exactly renowned for its use of OpenSource data / software.

That's a clever idea. Apple absolutely makes use of Open Source, but only when it makes strategic sense, not out of idealism. (Examples: BSD->OSX, khtml->WebKit, LLVM.) In this case Apple needs a way to massively upgrade the quality of their data-set (they still have fundamental errors right in San Francisco! presumably Cupertino near 1 Infinite Loop is sorted by now). They do not want to be in the business of cultivating a gigantic geographic database, so aligning themselves with the many others out there who would like access too a Google Maps quality db is quite clever. They would have to think carefully about how to present this, to make it clear the data is not theirs, in case there are any horrendous gaffes in it.

Building great products is hard. Take something hard and try to scale it, you get shit. You have to make it easy first, reduce it to a formula that you can then abstract and export to other domains. Apple has not achieved that. They can't buy up big companies and expect them to suddenly start getting the same results Apple gets. This is pie-in-the-sky nonsense.

only works if you immediately fire all top and middle line manages in the aquired company, lest you import a hostile culture and a lot of foreign politics.

HP buying EDS, Atos buying SBS - if you ever talk to employees on the inside you'll hear about what a big aquisition means.

Big Pharma is better in this, buying others is a key market tactic. Pfizer's handling of the Pharmacia merger is a great example of how to do it - go in hard, literally destroy everything in the target.

Besides EDS, HP's acquisitions of Palm and Autonomy didn't turn out so well either.

Maybe Apple should indeed make some acquisitions with its cash hoard - but it seems to me that the kinds of prospects that would fit best with its vision are companies focused on engineering great hardware-centric products which consumers love. eBay and PayPal don't match that vision.

I always thought Yahoo would have been a good acquisition for Apple, back when Yahoo were courting Microsoft and Apple was getting its feet wet with iAds.

Buying eBay/Paypal would be interesting but the same could be said for Google buying them.

As a Microsoft employee, I personally would have loved for Apple to catch the bullet we dodged :). I hope yahoo finds it way, but a big company buying them will help no one.

"I think Ballmer has a lot he ought to be proud of. So he didn't get everything right - not many people do."

The mind boggles. He's probably a nice guy, but there's a reason he doesn't work for Apple anymore.

90% of these uber mergers dont really add value and end up destroying companies snif DEC being a premier example - of course merchant bankers and lawyers get a metric shit ton of cash for advice

I am surprised that anyone would even solicit the opinion of this bozo.

I cannot imagine any use Apple would have for eBay / PayPal. They seem like they would be more effort than they are worth. I could see Adobe and AMD.

I agree. What a mistake they would be making to buy eBay. eBay's anti-innovation and stagnation-driven culture would kill everything dead.

What did Ballmer do right though? I'm serious.

Kept Microsoft's enterprise licensing rolling along to continued substantial profits, both by tending to existing "franchises" (Windows, Exchange, SQL Server) and launching new ones (SharePoint is now something like a $2B business).

Ballmer is a sales guy at heart, and I always suspected that his staying power at the company had much to do with his relationships with Microsoft's largest business customers. That someone like the current Ford CEO is considered a candidate to replace him only reinforces that impression.

Alans an engineer from what I recall?

Sure. My point wasn't that they're considering bringing in another sales guy, but rather they're looking for someone who understands the large enterprise market. Microsoft and its shareholders fear nothing more than waking up to headlines about 100,000+ seat companies, like Ford, launching initiatives to get off of Exchange and onto Gmail.

Oversaw the transition to .Net. He really does seem to care about developers (I say this as a Linux dev who still misses intellisense).

Absolutely not.

http://finance.yahoo.com/q?s=EBAY $70 Billion market cap so they might need to offer around $90 Billion to be taken seriously. That's a nice chunk.

Maybe they should buy an enterprise company and get serious money from businesses too.

Buying back stock is the best use of cash right now.

id prefer a dividend give the spare cash directly to the owners.

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