Its time for Apple to buy these tech giants and use its wealth

As Apple shares soared to their fifth record high in March on Tuesday, and is the 11th record this year, it’s a good time to take a serious look at what the tech giant should do next. Apple is known to be a major disruptor, relying on a “build rather than buy” approach. However, when the company released a disappointing new iPad last week, many began to question its status as an innovator.

earlier i argued that apple is following a harvesting strategy, a smart strategic move in which it extracts as much profit as possible from a static or declining market. iPad sales are down (along with all tablets), and Apple is trying to capture profits while it’s still possible to do so. This makes sense, and the markets seem to agree, as Apple shares hit another record high yesterday.

Reading: Companies apple could buy

However, the Mac, iPad, and iPhone (responsible for more than 85% of Apple’s revenue) are under increasing pressure, and the future looks harder, not easier. consumers resist the temptation to upgrade for marginal improvements. Competitors such as Samsung, ZTE, and Huawei are bridging the quality gap and, in many cases, providing superior features at a lower cost. Furthermore, iOS is losing the global platform war with Android. Although there is still much to be done in these lines of business, the long-term forecast does not look positive.

To assert its place as a digital disruptor, Apple will need to shift from a defensive to an offensive strategy. Fortunately, Apple has the brand name, the loyal following and, with around $200 billion in cash on the balance sheet, the money to do it. Yet while other cash-rich competitors have spent on high-profile acquisitions, Apple has watched largely from the sidelines. its largest acquisition to date has been for $3 billion in 2014, a mere pittance compared to many of its peers.

Apple’s recent attempts to occupy new battlefields have not been very successful. the apple watch has failed to ‘revolutionize the wrist’; Apple’s car strategy seems to have stalled and Apple Music hasn’t been closing the gap for Spotify. apple needs to improve to occupy new competitive spaces, as explained in the digital vortex, whether or not it is the disruptor.

building from scratch takes time, and apple has recently lost momentum in areas outside of its core. The business has cash, and now is the time to spend it. it’s time to buy instead of build.

so what should apple’s next acquisition be? First of all, any acquisition must fit the image of the company. it should be great in design, innovative, simple, technology-focused, and have a high-end or luxury reputation. These criteria rule out some commonly viewed targets such as Disney (too diversified) and Sony (too complex). a list of possible and not so possible candidates includes:

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pandora ($3 billion market cap)

An acquisition of Spotify probably wouldn’t bypass antitrust scrutiny, so if Apple wants to gain an additional foothold in the music streaming arena, it could buy Pandora for a relatively small $3 billion. to $5 billion. however, this won’t move the needle very much and apple should think big.

tesla ($44 billion market cap)

apple and tesla have been trading picks and engineers for years. Buying Tesla could be a quick way for Apple to enter the car business, with a strong, innovative, high-end brand. however, tesla is relatively small, unprofitable, and vulnerable to shocks. He’s also very close to his CEO, Elon Musk, which could lead to a clash of egos with Apple CEO Tim Cook.

paypal ($52 billion market cap)

apple pay, launched to much fanfare in October 2014, hasn’t taken off as quickly as many had hoped. Apple has learned the hard way that the financial services industry is complex, well-protected, and generally difficult to crack. Acquisition of PayPal (assuming it is approved by antitrust regulators) would give Apple more leverage in convincing both consumers to adopt and merchants to accept its payment service. however, financial services are a long way from apple’s core and could become a distraction.

activision blizzard ($37 billion market cap)

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apple could get into the gaming arena, which has now become bigger than the movie and music industries combined. While Activision Blizzard doesn’t have a game console business, it is strong in PC, online and mobile gaming (with the acquisition of Candy Crush’s parent company). if apple wants to enter an adjacent industry, this is an interesting option.

netflix ($61 billion market cap)

apple has been dancing around video for years, but has never quite broken through the upper echelons of content creation or distribution. it has achieved great success in capturing value from devices such as the ipod, iphone and ipad at the expense of content generators and other players in the ecosystem. however, there is plenty of evidence to suggest that this balance is shifting away from device manufacturers. both netflix and amazon understood this trend and have moved to stay ahead of it.

netflix has been very successful, first in distribution and now in content generation. apple, by contrast, has been slow to react. You’ll have a hard time bridging this gap, especially with traditional content generators waking up to the value they create, and other new entrants, like Amazon, making a lot of noise. netflix is ​​an expensive option, but would add great value to apple’s platform.

with its reputation on the line, apple must expand its current strategy and open new markets to play. It makes sense to make as much profit as possible from your current hardware business, but you need to transfer this value to new areas, such as gaming, and content generation and distribution. Traditionally, Apple makes its own products to enter new markets. however, his latest attempts to do so have failed and time is not on his side. therefore apple should use its massive wealth to make strategic acquisitions and occupy adjacent markets, with activision blizzard or netflix as very attractive targets.

michael wade is director of the global center for digital business transformation, professor of innovation and strategy at imd i > and co-author of Digital Vortex: How Today’s Market Leaders Can Beat Disruptive Competitors at Their Own Game. wade is not an investor in apple or other companies mentioned in this article.

This article first appeared in fortune.

See also: Jack Dorsey steps down from Twitters board – TechCrunch

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