Apple Acquisitions: What’s AAPL Up to With the Buying Spree?

by Brad Moon | December 9, 2013 10:47 am

Apple Acquisitions: What’s AAPL Up to With the Buying Spree?

Apple (AAPL[1]) paid a reported $200 million for Topsy Labs[2],  a social media analytics startup specializing in analyzing Twitter (TWTR[3]) data.

NextApple185x2 Apple Acquisitions: What’s AAPL Up to With the Buying Spree?[4]That acquisition caps a series of recent purchases that include personal assistant app Cue and PrimeSense — the 3D sensor company behind the first Kinect for Microsoft’s (MSFT[5]) Xbox 360 game console. In the summer, AAPL snagged a handful of companies involved in semiconductors, mapping, data compression and media searching. Siri and the Touch Sense fingerprint scanner on the iPhone 5s came out of 2010 and 2012 acquisitions … so is AAPL planning a slew of new features, or are these latest Apple acquisitions part of something bigger?

Apple, of course, seldom comments on its reasoning for buying a company, typically issuing a standard boilerplate response: “Apple buys smaller technology companies from time to time, and we generally do not discuss our purpose or plans.”

But that doesn’t mean we can’t speculate.

AAPL Acquisition Trends

Taking a very high-level view, there seem to be several themes that line up with what we know (or think we know) about Apple’s product pipeline.

First up is Passif Semiconductor[6]. The company builds power-efficient communication chips, including Bluetooth low energy (BLE) radios. Apple’s interest could include making its iPads and iPhones more efficient, but there’s little doubt this is also a piece of the iWatch puzzle, given Apple’s reported struggle with battery life in prototypes of its smartwatch. There’s also a possibility of AAPL using Passif technology to build its own iBeacon sensors[7].

AlgoTrim, an August acquisition[8], also has clear possibilities for improving Apple’s iPhone, iPad and possibly iWatch. The company is all about data compression, and its codecs could allow Apple products to transmit data (including images) that maintain high quality while using less bandwidth and less battery power. This doesn’t just mean the potential for better photos snapped by an iPhone, but also more energy-efficient AAPL mobile products in general.

Next is PrimeSense, a purchase Apple confirmed in November[9]. Buying biometric sensor maker AuthenTec was a logical step to beef up iPhone security with fingerprint scanning technology. What could AAPL want with a company focused on 3D sensors? Two things come to mind: Gesture control could supplement Siri voice command if Apple is working on user interfaces for that long-rumored Apple television[10]. Motion sensing a la the Xbox Kinect, Nintendo (NTDOY[11]) Wii and Sony (SNE[12]) PlayStation Eye might also be something Apple is pursuing if it takes the step of upgrading its Apple TV streaming box to offer video game capability[13].

Personal assistant app Cue, picked up in October the no-brainer among the AAPL acquisitions. Siri was cool when first released, but its limitations are all too obvious, and with Google (GOOG[14]) competing for iOS users with its Google Now, Apple needed to boost Siri’s capabilities.

Embark, another August purchase, is also a slam dunk. The company makes apps for public transit users in major cities. It’s an obvious boost to Apple’s own Maps app, joining two other location-based companies the company bought in July: Locationary and Hopstop. AAPL has been relentlessly improving Maps as it works to take on Google Maps, and that means bringing in outside technology and expertise to bolster the effort.

Matcha, a media discovery app the company bought in August could also be related to the existing Apple TV or an Apple television — the app is based on video recommendation, after all. But speculation is that AAPL might have been after its recommendation algorithm[15] (which performs very well) for use with iTunes in general. With millions of songs, apps, movies, TV shows and books being offered through iTunes, finding content has become laborious, and system-generated recommendations are a great way to spur sales.

And then there’s Topsy, the most recent of the Apple [16]acquisitions.

One of the more interesting theories I’ve read about the Topsy acquisition is from Peer Index’s Azeem Azhar, who suggests that Apple bought the company for the purpose of building its own search engine to compete with Google Search[17]. This may sound far-fetched, but AAPL has tackled core Google service before — remember Maps?

Apple has a long standing grudge against Google, dating back to late CEO Steve Jobs’ threat to unleash ‘thermonuclear war’ on the search giant[18] over its use of Android to copy Apple’s move into smartphones. How better to hurt a company that still gets something like 94% of its revenue from displaying ads than to attack its search business?

I don’t know that current CEO Tim Cook is as intensely focused on revenge, but having its own search capability could benefit AAPL stock by directing some of those Google ad dollars its way.

Of course, we won’t know for certain what Apple is doing with any of the companies its bought until the next Siri or Touch ID is released. But Tim Cook is under pressure from everyone from customers to Apple’s own board of directors[19] to speed up the pace of innovation and release something new. Buying technology and know-how is one way to accelerate product development, and Apple’s pace of acquisitions suggests the company is preparing to deliver in a big way in 2014.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Endnotes:
  1. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  2. paid a reported $200 million for Topsy Labs: http://online.wsj.com/news/articles/SB10001424052702304854804579234450633315742
  3. TWTR: http://studio-5.financialcontent.com/investplace/quote?Symbol=TWTR
  4. [Image]: http://investorplace.com/wp-content/uploads/2012/06/NextApple185x2.jpg
  5. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  6. Passif Semiconductor: http://jessicalessin.com/2013/08/01/exclusive-apple-recently-acquired-low-energy-chipmaker-passif/
  7. iBeacon sensors: http://investorplace.com/2013/11/ibeacon-aapl-apple-store/
  8. AlgoTrim, an August acquisition: http://techcrunch.com/2013/08/28/apple-reportedly-acquires-swedish-firm-algotrim-a-company-that-does-mobile-media-and-data-compression/
  9. PrimeSense, a purchase Apple confirmed in November: http://techcrunch.com/2013/11/24/apple-primesense-acquisition-confirmed/
  10. long-rumored Apple television: http://investorplace.com/2012/12/will-apple-tv-be-steve-jobs-salmon-of-doubt/
  11. NTDOY: http://studio-5.financialcontent.com/investplace/quote?Symbol=NTDOY
  12. SNE: http://studio-5.financialcontent.com/investplace/quote?Symbol=SNE
  13. Apple TV streaming box to offer video game capability: http://investorplace.com/2013/06/watch-out-nintendo-apple-is-designing-game-controllers/#.UqHyoZETvZs
  14. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  15. AAPL might have been after its recommendation algorithm: http://techcrunch.com/2013/08/15/why-apple-acquired-matcha-tv/
  16. Topsy, the most recent of the Apple : http://www.theverge.com/2013/12/2/5167906/apple-buys-topsy-twitter-analytics-search-engine
  17. Apple bought the company for the purpose of building its own search engine to compete with Google Search: http://www.linkedin.com/today/post/article/20131203115846-2954-the-real-reason-apple-bought-topsy
  18. unleash ‘thermonuclear war’ on the search giant: http://www.bloomberg.com/news/2011-10-20/jobs-regretted-not-getting-cancer-surgery-sooner-biographer-isaacson-says.html
  19. Apple’s own board of directors: http://www.techradar.com/news/computing/apple/report-apple-board-concerned-over-speed-of-innovation-under-tim-cook-1172360

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