What Apple Could Do With its Billions in Cash

Ever since Apple declared its spectacular quarterly results, I have been wondering what it could do with the billions of dollars it has amassed as cash reserves. When you have $76.2 billion in cash, and you keep generating cash faster than any other company, you have very little to fear about and can afford to make a lot of bold moves.

Right now, Apple could spend all its cash in the best possible way by making some acquisitions. Even though some of its stock holders are demanding a dividend, I would rather have Apple use it up in some big-ticket acquisition that makes strategic sense rather than distributing it as dividends.


Buy InterDigital ($3.3 billion)

Now that Apple has snatched away the Nortel patent portfolio from Google, it’s desperate to buy a huge portfolio of wireless patents from some other company to protect itself and its hardware partners from getting sued by Microsoft, Oracle, Apple and numerous patent trolls.

As we posted earlier, both Apple and Google are already in negotiations to buy InterDigital, which has over 8,800 patents related to wireless technology. It could just buy it for around $3.3 billion.

Buy Motorola ($15.5 billion)

Motorola is rumored to be another acquisition target for those scouting for patents. It has close to 17,000 patents and has applied for 7,500 more. It is easily worth more than $15 billion, if Nortel’s 6,000 patents was worth $4.5 billion.

If Apple acquires Motorola, then besides the patents, Apple could also shut down a major Android device manufacturer.

With these two acquisitions combined, there would be no company which could make a smartphone without infringing on at least one of Apple’s 40,000 patents. Apple could rake in billions in licensing fees and damages every year.

Buy ARM ($8 billion + $13.15 billion)

ARM Holdings is the single most important company which powers almost every smartphone out there. All chip makers license technology from ARM to make the processors and chipsets which power their devices.

While buying ARM may not allow Apple to completely control the smartphone industry, it will definitely give it a lot of leverage over the other manufacturers.

Buy Hulu and Netflix ($2 billion + $13.75 billion)

By buying Hulu and Netflix for around $15 billion, Apple could become the number one player in the digital TV business. These two acquisitions would also fit in perfectly with its Apple TV offering. The TV market is estimated to be worth hundreds of billions of dollars in the long run. It could also boost Apple TV sales and make it the next iPod or iPhone.

The total for all these acquisitions comes to just about $55 billion. We still have around $20 billion left, and I’m already running out of ideas.

So here’s one last idea.

Sell iPhones and iPads at Cost

Apple has a huge operating margin on the iPhone and iPad. It takes up a majority of the profits of the entire smartphone industry despite having much lower total sales. Despite its charging a hefty margin, it is still able to price its products (at least the iPad) lower than any Android tablet, due to its ability to acquire components at a much lower cost.

If Apple were to sell the iPhone and the iPad at what it costs it to make them, it would probably be able to completely dominate the market and cut Android’s smartphone market share down to size. It already dominates the tablet market, but if its starts selling iPad at cost, it will obliterate its competitors completely, before they even enter the market properly.

$20 billion would be enough cash to sustain Apple for a few years, and Apple will continue making money by selling its content on iTunes – apps, games, movies, videos, TV shows etc. It should make enough from Hulu, Netflix and ARM to sustain it in perpetuity. I doubt its competitors will be able to claim predatory pricing, even if Apple sells it at cost, as it could claim that it makes money from its ecosystem.

If everything goes as planned, in a few years, Apple could probably be worth more than Exxon Mobil, Microsoft, Google, Facebook, Berkshire Hathaway, HP, IBM and Samsung combined.

Note: In this post, I have just assumed that the current market cap (and not the enterprise value) would be the purchase price of that company. I’m also assuming that Apple would be able to buy these companies without any antitrust lawsuits or other hassles.

HTC Puccini Images Leaked

Compared to the other Android device manufacturers like Motorola, Samsung and LG, HTC got into the tablet game rather late. Since HTC was the first company to launch an Android smartphone, I expected it to be the first, or at least one of the first companies to come out with an Android tablet as well.

However, they came out with the HTC Flyer much later than Samsung launched the Galaxy Tab, and almost all other companies had announced new Honeycomb tablets. The HTC Flyer didn’t exactly fly off the shelves, and saw dismal sales.

However, HTC is back with a new offering – the HTC Puccini. It’s a new Android tablet with a 10.1 inch capacitive touchscreen display, and it will run Android Honeycomb. It seems to have an 8 MP camera with a dual LED flash. It will also sport stereo speakers, a mic, and comes with stylus input support, like the HTC Flyer.

Though we don’t have many official details about the HTC Puccini, some rumors have suggested that it will come with a dual core 1.5 GHz processor, and 1 GB RAM. It will likely have a display resolution of 1280 x 800 pixels. It will come with the Sense UI and will offer 4G LTE connectivity as well.

Today, BGR has leaked some images of the soon to be released HTC Puccini. Check them out:

HTC Puccini

HTC Puccini

Karbonn Launches the A1, Budget Android Smartphone at Rs. 6,999

Karbonn A1Karbonn Mobiles has launched a new Android smartphone – the Karbonn A1. it is a budget Android smartphone priced at Rs. 6,999. It is quite similar to the Micromax A60, which was one of the first budget Android phones in India.

The Karbonn A1 comes with a 2.8 inch resistive touchscreen display with a resolution of 240 x 320 pixels. It runs Android 2.2 Froyo, and it’s unlikely to get an upgrade to Gingerbread.

It has a 3.2 MP camera and is powered by a 600 MHz processor. It also offers 3G and Bluetooth. Karbonn plans to launch three new Android smartphones by Diwali, priced under Rs. 10,000.

Karbonn currently has a 5% share of the Indian mobile handset market. It’s aiming for 10 million handset sales for the year. It is also planning to raise close to $125 million to fund its expansion plans.

We are looking at raising $125 million to fund our expansion plans. This will be done through PE investors and we will finalise plans in the next quarter. By the end of this quarter, there should be clarity on how we are going about it,said Karbonn Mobiles Executive Director, Mr Shashin Devsare.

Personally, I wouldn’t touch the phone with a stick. But if you want an Android smartphone in that budget range, you don’t have many other options.

Check out the specifications of the Karbonn A1 here – Karbonn A1

You may also want to check out the Micromax A70, which was launched recently.

Amazon Coming to India in 2012

Amazon, the world’s largest online retail company, is planning to enter the Indian market, according to a report by TOI. It is in talks with multiple Indian e-commerce startups like Flipkart and Letsbuy, about a possible acquisition.

An acquisition would be the best way for Amazon to enter the Indian market, and ramp up quickly, in terms of market share. So far though, most of the talks haven’t been working out, and Amazon may also consider entering the market on its own.

It is currently in the process of hiring more than 200 people in Hyderabad, Bangalore and Chennai to man its operations. We had reported about this around a month back – Amazon Might Be Preparing to Enter India Soon.

It has already bought space for a warehouse in Mumbai. Flipkart is currently the biggest player in the Indian e-commerce space. Like Amazon, it started out by selling books online, but has since branched out into multiple products. It recently raised $20 million in Series C funding from Tiger Global.

Considering the huge e-commerce opportunity in India, it is unlikely that they will sell to Amazon, unless they get a huge premium above their current valuation.

The Indian e-commerce market is supposed to be worth around $10 billion in 2011. If Amazon enters now, with a big ticket acquisition, it has a good chance of dominating the space in a couple of years.

Mozilla Working on New Mobile OS – Boot to Gecko

Mozilla has announced its newest project – Boot to Gecko. It will be a mobile operating system powered by Gecko, the layout rendering engine which is used by Firefox and Thunderbird.

Here’s the official announcement by Andreas Gal, a Mozilla engineer.

“We propose a project we’re calling “Boot to Gecko” [http://wiki.mozilla.org/B2G] (B2G) to pursue the goal of building a complete, standalone operating system for the open web. It’s going to require work in a number of areas. We will do this work in the open, we will release the source [http://github.com/andreasgal/B2G] in real-time, we will take all successful additions to an appropriate standards group, and we will track changes that come out of that process. We aren’t trying to have these native-grade apps just run on Firefox, we’re trying to have them run on the web.”

Unlike Android, it will be a “true” open OS with the complete source freely available. Apparently, Mozilla plans to use some parts of Android as a base for hardware compatibility and then build a new user interface, application stack and APIs based on Gecko which will run on it.

I doubt that this new effort will see much success, or even see the light of the day. There are multiple smartphone OS options now, and there is space only for a few major players at the top. In all probability, Mozilla is too late to the game.

You can check out a detailed explanation of the Mozilla Boot to Gecko project by ArsTechnica.

Here’s the official wiki – Mozilla B2G Wiki

Nokia Ovi Store Now Has 50,000 Apps

Ovi StoreNokia, which recently posted very disappointing quarterly results, finally has some good news. The Ovi Store, Nokia’s application store, just hit a major milestone – it now has more than 50,000 apps.

MobileBusinessBriefing reports that there are now more than 50,000 apps available in the Ovi Store. Nearly 6.5 million apps are now downloaded from the Ovi store every day.

While the numbers are very encouraging, they are still much lower than the Apple App Store and the Android Market. The App Store has over 425,000 apps, and the Android Market has more than 250,000 apps. The Windows Phone 7 Marketplace currently offers close to 27,000 apps.

Both Apple and Android have overtaken Nokia in terms of smartphone sales, but Nokia still has a very large installed user base around the world, around 225 million users. It recently released devices powered by the new Symbian Anna OS, but will be shifting its focus to a new platform – Windows Phone 7 – soon.

Nokia will also be launching the Nokia N9, a MeeGo based device soon. It also restated its vision for QT based apps, which will run on both platforms – Symbian and MeeGo. Unfortunately, QT based apps wouldn’t run on Windows Phone 7 devices, which means developers will have to choose between the two options.

RIM to Announce New Blackberry 7 OS Devices Today

The official account of Research in Motion on Twitter, @BlackBerry, just tweeted out that RIM will be announcing some new devices running the new Blackberry 7 OS today.

You got it! New #BlackBerry devices are coming w/ our new OS, BlackBerry 7! Check back tmrw 4 deets on #BB7FanNight. ^CHless than a minute ago via CoTweet Favorite Retweet Reply

They haven’t specified which device launches they will be announcing, but we do have a rough idea of what they will announce, based on the multiple leaks and announcements in the last couple months.

If I was a betting man, my money would be on these devices being announced, along with the launch details:

  • Blackberry Bold 9900
  • Blackberry Torch 9810
  • Blackberry Touch 9860
  • Blackberry Curve 9360
  • Blackberry PlayBook 4G

Most of these devices will be launched on multiple carriers, and should be available by the end of August. Most of them have been announced already, but we should see exact release dates on various carriers today.

This will probably be the last major release of devices running the Blackberry OS. The next series of Blackberry devices will likely be powered by a QNX based OS, and will sport dual core processors. While all the devices I listed above are much better than their predeessors, they still leave a lot to be desired when compared to the current crop of Android smartphones. With the iPhone 5 launching in September, it’s only going to get tougher for RIM.

RIM Fires 2000 Employees; Stock Near 52 Week Low

RIM which has been completely blindsided by the Apple iPhone and Google’s Android in the last couple years, is in very dire straits. Its market share in the U.S. market is dropping and its stock is getting hammered every day. It’s currently near its 52 week low, at around $25.

Its dual executive arrangement isn’t working at all, and none of its recent products have managed to attract consumers. The Blackberry Playbook is officially a failure and even its lineup of new Blackberry devices doesn’t really seem impressive.

The only saving grace for RIM has been Blackberry usage in corporates, but even that has been dropping gradually.

Today, RIM announced that it would be laying off about 2000 workers, or about 11 percent of its total workforce. It has also shuffled responsibilities among a few executives and announced a few high profile departures. It commented that it would be explaining the exact reasons for the job cuts during its second quarter results on September 15.

The old guard in the smartphone industry (Nokia and RIM) is under attack by the new entrants (Apple and Android). Nokia is cozying up with Microsoft, hoping that Windows Phone 7 will be the panacea for all its problems. RIM has migrated almost all its new devices to the QNX platform, but none of those moves seem to be working so far.

Airbnb Raises $112 Million at a $1 Billion Plus Valuation

Airbnb is the latest startup to join the $1 billion club. It has just raised $112 million in a Series B round led by Andreessen Horowitz at a $1 billion plus valuation. It was earlier rumored that they were raising $100 million at a $1 billion valuation.

Airbnb had last raised $7.8 million in October 2010 in Series A funding from Greylock Partners and Sequoia Capital.

Jeff Jordan, a partner at Andreessen Horowitz posted an interesting story about their humble beginnings:

“Brian Chesky and Joe Gebbia met at the Rhode Island School of Design and became roommates in San Francisco in 2007. A prominent design conference was coming to town and the nearby hotels were sold out. Joe and Brian thought it might be both fun and lucrative to rent out space in their apartment to conference guests looking for lodging, but alas they lacked the requisite beds. Turns out that Joe had a few airbeds in the closet. They threw in a morning meal and airbedandbreakfastwas born. Three lucky conference attendees enjoyed good accommodations, food and hospitality while Joe and Brian enjoyed the company of their guests and some very welcome income.

Joe and Brian resolved to make a run at transforming this experience into a business. They were joined by a third co-founder, Nathan Blecharczyk, who brought programming expertise. The name was shortened to Airbnband they launched their website in 2009.

The Airbnb service quickly struck an extremely powerful chord with consumers. Growth has been flat-out explosive, with over two million room nights already booked. The site now features spaces in 186 countries and over 16,000 cities around the world. Hosts can earn substantial sums of money—one has even used Airbnb earnings to pay off his mortgage—and their community of users is passionate about the service, enjoying the social aspects of Airbnb travel.”

You can check out the official press release here: Airbnb Bags $112 Million In Series B.

Here’s another very inspiring anecdote about Airbnb by Mark Suster:

“The Airbnb founders came out of the winter 2009 Y Combinator class. They came to see us during their time at YC. They told us about a great stunt they pulled at the Democratic Convention in Denver (in which Obama was nominated). They bought a bulk supply of generic cheerios and made up these cereal boxes to generate seed capital for their startup. Here’s how one of the founders Joe Gebbia describes it:

We made 500 of each (Obama O’s and Cap’n McCains). They were a numbered edition on the top of each box, and sold for $40 each. The Obama O’s sold out, netting the funds we needed to keep Airbnb alive. The Cap’n McCains… they didn’t sell quite as well, and we ended up eating them to save money on food.

I asked them if they’d leave a box of the cereal for us and it has been sitting in our conference room ever since. Whenever someone tells me that they can’t figure out how to raise the first $25,000 they need to get their company started I stand up, walk over to the cereal box, and tell this story. It is a story of pure unadulterated hustle. And I love it”

Samsung Beats Apple in Smartphone Sales

Samsung, the number one Android smartphone manufacturer which has seen tremendous success with its Galaxy line of smartphones and tablets, may have beaten Apple in terms of smartphone sales in the last quarter.

Nokia, which held the lead in smartphone shipments sold close to 16.7 million devices, while Apple sold around 20.3 million iPhones last quarter.

According to a research report by Strategy Analytics, Samsung may have surpassed them both with smartphone device sales of up to 21 million.

Apple recently sued Samsung over the Galaxy line of Android devices, saying that the Galaxy smartphones infringe on Apple’s patents related to the iPhone and the iPad. The Samsung Galaxy S 2 has been a huge hit, selling over 3 million devices in less than 2 months.

With Nokia’s market share on the wane, Samsung is on its way to become the world’s number one mobile company. It already has a 20% market share, compared to Nokia’s 26%.

“Samsung’s Android portfolio is selling strongly in most regions. Samsung stands a reasonable chance of capturing the top spot on a quarterly basis if it can continue expanding its Android portfolio across high-growth markets like China and Brazil. Samsung and Apple will be at similar levels in smartphones by the end of the year.” said an analyst.

The Samsung Galaxy S 2 will launch in the U.S. market soon, which is likely to boost sales further.