Surprise! Apple Turns Laggard Even As Tech Peers Rush Headlong
Apple Inc., which used to acquire a company every three or four weeks, has dramatically slowed its dealmaking in the past two years, a sign the tech giant is being more choosy in the face of a shaky economy and heightened government scrutiny.
The company spent just $33 million on payments connected to acquisitions in its last fiscal year and $169 million in the first nine months of the current year, according to regulatory filings. That's down from $1.5 billion in fiscal 2020.
Apple is famous for avoiding the kind of blockbuster acquisitions that have enticed its Silicon Valley peers. But the company has spent much of its history snapping up promising startups, some of which formed the basis for popular features such as Siri and Face ID. Just last February, Chief Executive Officer Tim Cook noted that Apple had acquired 100 companies in the past six years -- more than one a month on average.
That deal flow has slowed to a trickle. Apple only made two known acquisitions in 2022: the UK-based startups Credit Kudos and AI Music. The first of those two companies developed technology for calculating credit scores, which will likely aid Apple's efforts to build its own infrastructure for financial products. The latter business used artificial intelligence to generate tailor-made music.
Apple's only known takeover in 2021 was the purchase of Primephonic, a classical-music streaming service.
Those numbers don't factor in spending on content for Apple TV , including purchased shows and distribution deals for Major League Baseball and Major League Soccer, but they stand in stark contrast to the recent big bets made by other tech giants.
Microsoft Corp. agreed to purchase Activision Blizzard Inc. in January for about $69 billion. Alphabet Inc.'s Google is buying Mandiant Inc. for $5.4 billion. And Amazon.com Inc. last week agreed to acquire IRobot Corp., the maker of the Roomba vacuum, for $1.65 billion.
Of course, Apple has plenty of money to spend if it wants to join the party. It ended last quarter with $179 billion in cash and marketable securities, and it could move quickly if it decides to do a deal. Cook attended last month's Sun Valley Conference in Idaho, a popular spot for brokering megamergers. For now, though, the company has opted to put money toward stock buybacks and dividends.
Apple declined to comment on its acquisition strategy.
Even as tech deals multiply, they're coming under more regulatory pressure than before. Apple added language to its annual report last year noting that acquisitions face more risks now, “including failing to obtain required regulatory approvals on a timely basis or at all, or the imposition of onerous conditions.” Government scrutiny has only grown since then, with Apple coming under fire for its App Store practices and reluctance to open the iPhone's tap-to-pay feature to outside services.
Other tech giants are under the microscope as well. In July, the Federal Trade Commission sued Meta Platforms Inc. to stop the acquisition of Within, the developer of a fitness app for virtual reality headsets. In February, Nvidia Corp. walked away from what would have been the biggest chip deal in history after the FTC sued to block it.
In a 2021 report, the FTC said that five of the biggest tech companies -- Alphabet, Apple, Amazon, Microsoft and Meta -- acquired hundreds of smaller businesses over the previous decade, often relying on legal loopholes to avoid notifying antitrust regulators about the deals.
Apple also is looking to rein in spending next year, which could further hamper M&A. The Cupertino, California-based company is slowing hiring and expenditures in some departments, Bloomberg reported last month. More recently, Cook said that Apple will be more “deliberate” in its spending in the near term.
Key parts of Apple -- like its chip division, the multitouch technology behind the iPhone and iPad, and the operating systems at the heart of all of its products -- stemmed from acquisitions. More recent deals helped lay the groundwork for the company's weather, music and news services.
To date, Apple's largest acquisition remains its $3 billion takeover of Beats Music and Beats Electronics in 2014. Over the years, analysts and investors have dreamed of more ambitious deals, such as Apple buying Netflix Inc., Tesla Inc. or Electronic Arts Inc.
The company rejiggered its management ranks in 2019 so that Apple's M&A chief reports directly to Cook -- a move investors took as a sign that big-money deals were coming. The company spent over $600 million on small transactions that year and agreed to buy Intel Corp.'s wireless chip business for $1 billion, but a massive purchase never came.
During Apple's last two earnings calls with analysts, Cook was asked about spending on acquisitions. He maintains that the company is on the prowl, but won't just make a purchase to bulk up on revenue. Apple wants talent or technology that helps its strategy, he said.
During the call in April, Cook said he wouldn't rule out making a larger deal if the right opportunity emerged. “I don't want to go through my list with you on the phone, but we're always looking.”