Apple's (AAPL) acquisition of the relatively small firm Topsy certainly has strategic purpose, but the speculation about it is widely varied. No matter what the exact plans are for Topsy, and there could many varied plans, I expect the rather inexpensive acquisition to help Apple keep its spot atop the hill in all of its businesses. Apple would not elaborate on its plans for Topsy when it announced the acquisition, but I can plainly see the value-add in the information and intelligence Apple now controls and is likely to enhance and manipulate for broader purposes. Besides its usefulness in defending turf, it's a resource and tool that will also help it wherever else it competes moving forward.
Apple followers and experts have occasionally noted a relative indifference to consumer sentiment at the firm in the past. If true, it would have been because for the longest time Apple had no serious competitors. The company's products and services were so innovative and disruptive that they stole consumer dollar spend market share from legacy gear that had no chance to compete. The evidence of that is on the battlefield, which is today littered with the remains of once relevant players like Palm, Nokia (NOK) and BlackBerry (BBRY).
However, now that everyone is producing tablets and Smartphones with touch screens, and with Google (GOOG) and Microsoft (MSFT) breathing down Apple's neck with competitive operating systems, it is ever the more imperative Apple pay attention to market trends. Samsung (OTC:SSNLF) certainly has been paying attention, and is still operating as a serious competitor today because of it; Samsung has even jumped ahead of the game with Apple in some instances, like in television. Certainly, Apple's innovative success has woken up the playing field, and invigorated effort at Microsoft and elsewhere, where previously complacency may have been developing, or relative complacency anyway compared to Apple's dramatic initiatives.
In my view, Apple has signaled that it is going to defend its turf with this $200 million purchase, but it has also shown to be vulnerable and in need of defense. That is something that the investment community seems to have accurately assessed ahead of Apple, given its deeply discounted valuation to growth projections. The company is now armed though with additional important data, this time being mined from Twitter (TWTR). Topsy Lab is a Twitter search, monitoring and analytics firm, and just one of a handful of firm's with special access to Twitter data.
Some have proposed that if Apple just wanted access to Topsy's Twitter data and analytics, it could have signed on as a customer of Topsy. So the acquisition therefore means it wants to integrate Topsy somehow into its offerings, like say for instance to enhance Siri. This may be true, but the data and this analytical firm are resources that can be used in many ways. I suspect Apple also sees an opportunity to enhance Topsy in ways that will help it to protect and better itself. In other words, it can add value to the value added purchase. Also, owning it is important. Any suggestions Apple might have made to Topsy as a customer would have also helped other partners of Topsy, but now any help or enhancement Apple provides will only be reaped by Apple.
Apple could also use the Topsy tool to build in trending news information into its offering and the offerings of its application developing partners, keeping the populace better attuned to what's popular. There is a human mania that is universal now that data is so readily available; people have a need to know what's going on everywhere and at all times. Previously, though it seems like a lifetime ago, it was just in the morning, with a cup of coffee. Using Twitter data to track what's popular among people is a resource direction Google has not yet gotten a great hold on, though it's working on something similar with Google+, and of course it has its very useful and powerful search data. Perhaps Apple now has a better tap on trend, and one it can control and not be at risk of losing, save if Twitter were acquired by a competitor. Make no mistake about it, Apple's interest in Topsy could signal a future interest in Twitter, and TWTR shares should have also benefited from this announcement and acknowledgement of importance.
The many potential uses and opportunities for Apple's new tool are well covered in this Apple Insider article I suggest readers reference. What I want to focus on is what this acquisition signals to me and to investors. The company is paying attention to social media and understands and is employing resources to advantage from data. It will employ it for defensive purposes to defend turf, and also to enhance products and services. This was a value-added acquisition, and probably an important one. We already knew Apple's turf was under threat by the expanding and branching out of competitive products lining up against the company, and by its discounted valuation. However, this week, we saw an important action taken to counter that issue and in turn open up the stock's valuation again. I believe Apple's silence with regard to its plans is indicative of just how important they are. Oh to be a fly on that wall. In conclusion, I suggest investors file this one away as a positive we cannot yet quantify, but probably an important one that should solidify the floor a bit below the stock price. Translating to English, it's a reason to own the stock.