OK, so it’s probably a crazy idea and there’s no hint that it will happen, but it’s well worth taking a look at what would be an incredible business deal.
The idea came to me on the back of the recent PSN hack and Microsoft’s deal for Skype. Apple is sitting with an ever-growing amount of cash on its balance sheet. That and their short-term investments now total an enormous $29 billion. That’s money which is not doing a great deal and many analysts believe it could be put to better use by acquiring other companies. Microsoft has made its move by buying Skype. Now its Apple’s turn.
Sony is currently valued at $27.7 billion (according to Google finance and not including options). Some believed Apple might acquire Sony back in October of last year (at that time Sony’s share price was around $32, more expensive than the $27.58 it is today).
Of course, the true cost of buying Sony would be a lot more. Apple would have to take on Sony’s colossal debts but Apple could afford to do it – if it wanted to.
The Console War
We all enjoy the rivalry between Sony and Microsoft as each company pushes the other onto greater and better things. But the truth is, Sony has been struggling. Its share price has collapsed from $149 a share in 1999 to just $27.58 today. Its rival Microsoft is valued at about eight times more.
Sony may be winning this round in the battle of the consoles (although many would disagree). However, it has made a loss the last two years. How much longer can it keep pace with its rival? Is it destined to follow Sega and, dare I say, Nintendo into mediocrity? Perhaps Sony needs to be bought out before this can happen.
Is it time Apple entered the console war? No doubt some Sony fans will baulk at the idea of an Apple takeover. But imagine the expertise Apple could bring to a console. The PSN network could be integrated with iTunes and Apple TV, and Apple could bring its brilliant design expertise to the PlayStation hardware and software. There would a whole of host of synergies.
The Brand
Imagine the power of the Sony and the Apple brand combined. Imagine the iPlaystation. We have iPad, iPods, so why not an iPlayStation?. Apple was already recently rated as the most valuable brand in the world (at a staggering $153bn). Picture what the addition of Sony could bring to it.
Would it Really Benefit Us?
A question worth asking as consumers is: Do we want to have to pay for this super brand? Would it work? Or would the strength of both brands work against each other?
The best thing for us, the consumer, would be if Apple entered the console war by itself. While we’d love it to happen, Apple is probably too far behind to do this. That said, who knows? If anyone could do it, it would be Apple.
The Microsoft and Apple History
The Microsoft/Apple History has been a very complex one. There has been mutual co-operation, contract deals, law suits against and investments in each other.
In the last 10 years, Apple has really taken the fight to its brother. In the last few days, Apple finally passed Microsoft in Profit ($6 billion to $5.2 billion for the quarter), having already passed it in revenue and market cap.
The Xbox is one of the last bastions of Microsoft not under attack by Apple. If Apple bought Sony, this would no longer be the case.
Other synergies
If Apple bought Sony, it would immediately mitigate much of the damage done to the Sony brand by the PSN hack. If Apple handled it properly, they could portray themselves as a rescuer. I believe Apple could add value just by stepping in. They could also bring their security experts to help shore up Sony’s system and prevent another attack.
An increasing presence in online gaming and entertainment could help Apple to challenge the likes of Facebook.
There would be many other savings as well, in the production process, purchasing of raw materials, marketing and distribution etc.
Could it Actually Happen?
Apple is probably far too sensible to consider such a deal. Part of the reason they have done so well at the moment is precisely because they have avoided getting distracted by the console war. Both Microsoft and Sony have sunk huge resources into their consoles for relatively little gain and it has shown in terms of profits and share price. Both have struggled in recent years partly as a result of this distraction.
However, Sony has previously been sighted as a potential Apple target and it is known they are in the market for acquisitions. On paper, the deal might make sense but that fails to consider the very different corporate cultures at Sony and Apple. Ultimately, this is probably the reason the deal will never happen. Mergers as big as this one have a poor record of success. Sony’s deeply ingrained corporate culture would be hard to overturn.