Why Apple Should Buy Twitter

| About: Apple Inc. (AAPL)

Michael Arrington at Techcrunch is reporting a rumor that Apple (NASDAQ:AAPL) is in talks to buy Twitter for approximately $700 million in cash. The rumor states that Apple optimistically hopes to announce the acquisition at their developers conference in June. Investors need to understand that this is just a rumor; Apple’s precedent suggests that it won’t happen, both parties are mum on the speculation, but I see this as a great opportunity for Apple so I’m going to chime in.

Many analysts have been wondering why Apple continues to hoard their $30 billion in cash and I think the reason is simple - there has been a drought of innovation. There haven’t been any companies worth buying. Twitter, however, is different. The platform is growing 40% per week and is now approaching 25 million users. I began using it on my iPhone a few weeks ago and now find myself checking it multiple times a day. It is so much more efficient to get my news updates through one click at Twitter than it is to surf 50 different news outlets when I’m on the go.

The thing that really excites me about Twitter is the ability to personalize the news in a way that has never been done before. If you’re an NBA fan, you don’t have to rely on ESPN for the inside scoop; now you can follow Shaquille O’Neal or Steve Nash or Kobe Bryant on Twitter. Hear what they have to say about tonight’s game instead of some reporter. If you are an investor you can follow Doug Kass or Jim Cramer or me (eWEATHER) to get regular updates throughout the day. This platform is more efficient than text messaging, more efficient than email, and more efficient than checking the web. I imagine Steve Jobs has had plenty of time to play around with Twitter over the last few months and surely he sees the innovative evolution that Twitter provides.

How does Twitter fit with Apple’s strategy? The pending Apple Media Tablet is rumored to become the first product that can serve as a newspaper/magazine replacement. A 10 inch touchscreen, with built in 3G wireless potentially might become Apple’s best selling product yet. Well, the ideal tool for sorting through the clutter of newspaper/magazine sites on the Web is Twitter. You could argue that Twitter might be more effective on the Media Tablet than Google (NASDAQ:GOOG) search. For this reason, this rumor might have legs. An Apple-Twitter offering might be exactly what Steve Jobs has in mind for the new product.