Apple may find it harder saying “no” to bad ideas

Image:apple.comThe author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Robert Cyran

For Apple, saying “no” may be getting harder. Eddy Cue, an executive in charge of iTunes and internet services for the technology giant, raised the possibility of a bid for Time Warner at a meeting with the media conglomerate last year, according to the Financial Times. That seems at odds with Apple founder Steve Jobs’ recipe for success: Reject “1,000 ideas” and focus on only the very few excellent ones. An aging iPhone, a tepid stock price and a pile of idle cash, however, could make the mediocre look awfully tempting.

The deal talk, fortunately, never went beyond a preliminary stage or involved Apple Chief Executive Tim Cook. Making more movies, television shows and other content available on, say, iPads might help boost the device’s popularity and sales. It’s unclear, though, why owning content – not to mention acquiring it by paying perhaps $75 billion for Time Warner, including a control premium – makes more sense than just agreeing to distribute it. Apple’s resources are better spent creating compelling gadgets, not trying to develop a sequel to “Game of Thrones.”

The company has been phenomenally successful sticking to Jobs’ mantra of minimalism. There’s growing pressure, though, for something new.

Producing beautiful cutting-edge technology is, in some cases, turning into a business of churning out commodities. About 1.4 billion smartphones were sold worldwide last year, so it’s harder to find new customers willing to spend hundreds of dollars extra for an iPhone, no matter how elegant its design. Investors seem to recognize that: Apple’s stock trades at a roughly 30 percent discount to the S&P 500 Index.

The company’s financial strength also feeds an urge for change. Its net cash exceeds $150 billion, and its free cash flow should easily surpass $50 billion this year. That makes almost any acquisition easier to rationalize.

Apple is well known for resisting any impulse to splurge on second-rate ideas. It’s tough to imagine one of its top executives even discussing the purchase of a tangentially related company like Time Warner. Yet the news about Eddy Cue suggests a shift. Apple’s best hope may be that Tim Cook stands firm on his predecessor’s sage advice.
This article was first seen on Roytars

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