Apple may be preparing to engage in a significant strategic acquisition, at least that’s what’s suggested by the company’s move to hire HP’s leading legal corporate buyout specialist, Charles Charnas.
Bear with us. We understand that recruitment isn’t necessarily the most engaging story, but let’s take a quick look at this.
Firstly, Apple has hired Charnas to lead its corporate department, filling a role that hasn’t been occupied for seven years. In his new post, Charnas will oversee Apple’s intellectual property and strategic acquisitions.
We accept that Apple’s IP effort may need an extra hand as the company files patent after patent in order to secure and develop its iPhone.
Consider the experience the newly-appointed lawyer and 18-year HP veteran has: principally, he led the $25 billion merger between Compaq and HP. That he was involved in such a significant business deal lends him valuable experience, and makes it a viable speculation that his role at Apple will be to lead the company in another key strategic bid.
"He’s been known as one of the high-profile heavy hitter corporate lawyers in Silicon Valley for many years," Anna Marie Armstrong, a legal recruiter for Mlegal told Law.com. "It seems like Apple’s at a point where they want to hire really senior experienced lawyers for their in-house department."
Apple is widely known to be sitting on a huge heap of cash – around $18 billion. The company has used its cash hoard to engage in strategic investments in the past: purchasing huge quantities of flash memory to secure iPod shipments or acquiring audio company Emagic in order to bring market-leading audio application Logic into the Apple fold.
It’s no surprise that Apple is preparing to flex a little of its financial muscle in some strategic investments. Apple’s Chief Financial Officer Peter Oppenheimer alluded to this when asked what the company planned to do with its cash reserves. Rather than a stock buyback, he explained: "Our preference continues to be to maintain a strong balance sheet in order to preserve our flexibility to make strategic investments and/or acquisitions.”
And it’s not just the cash Apple has to hand: the pathways to investment aren’t so direct. Should the company want to retain some of its cash, it could ask executive board member Al Gore to put in a word for the company at venture capital firm, Kleiner Perkins Caufield & Byers, where he has a seat. (So it’s no surprise that particular VC firm is handling the $100 million iPhone development fund). Given Apple’s track record across the years, the company would have no problem finding venture capital firms and other investment partners should it want to punch above its weight in an acquisition.
Certainly that Apple has recruited a buyout specialist of the calibre of Charles Charnas suggests plans are afoot. But who is in the company’s sights?
Speculation here has been historically fruitless. Apple is unlikely to merge with Disney, for example, while both brands can work successfully together, a merger between the two would occlude both company identities, potentially harming the business of both.
Apple’s music business efforts could generate some interest among board members in the purchase of a music label, such as EMI. In a sense to bring the company behind Apple Corps. into the Apple Inc. fold offers poetic symmetry, but Apple’s involvement in music distribution means such a deal could raise anti-trust concerns. (Though Charnas probably has the experience to handle such regulatory probes).
A purchase of Nintendo has often been discussed, but with the Wii console at the zenith of its success the price tag on that company may be too high.
Looking to the computer market, Dell’s continued decline could make that company a perfect target for acquisition: on lyrical basis it would be a perfect response to Michael Dell’s famed comment in the ’90’s in which he urged returning CEO Steve Jobs to sell then-failing Apple and return the money to shareholders. In a business sense, such an acquisition could potentially help Apple introduce low cost Macs, massively inflating its market share and disrupting the industry landscape.
Other potential targets could include Sun, Yahoo, or even a move to bridge the gap between Apple and Sony.
Naturally, all of this is speculation, and speculation on Apple’s business plans is often frustrating, frequently fruitless, and occasionally no more than smoke that’s absent of fire. But it’s speculation based on one key and highly salient fact: Apple has hired one of the most experienced buyout specialists in Silicon Valley to lead a part of its legal team that’s focused on acquisitions.
This makes it insanely easy to believe Apple has something in the works, and suggests initial conversations with regard to a (or multiple) buyouts has led to the need to put together a legal team to make such moves more concrete.
Given the regulatory need to warn investors of any major investment or acquisition plans before they take place, Apple’s recruitment of Charnas means the analyst community will be looking to Apple’s financial results announcement of April 23 for some intimations as to the company’s plan, though with the lawyer only recently hired, it could be too early for full disclosure at this time.
All the same, the hire leaves the field open for a new wave of speculation: Who do you think Apple plans to buy, and what effect could it have on the industry landscape?