Apple: 4 Potential Takeover Targets

Aug.21.14 | About: Apple Inc. (AAPL)


Apple has a lot of cash and financial flexibility.

Other than capital returns, acquisitions do make sense.

Today, I'll propose a few takeover targets.

As I discussed in my latest quarterly wrap-up for Apple (NASDAQ:AAPL), the tech giant had over $164 billion in its cash pile at the end of the quarter. While a large majority of that was located outside the US, the company still has a lot of cash and financial flexibility. We know that Apple is going to return a lot of cash to shareholders by the end of 2015 through the dividend and buyback. Additionally, however, the company could also look to make some more acquisitions to further bolster its growth going forward. Today, I'll discuss some potential takeover targets that could strengthen Apple.

BlackBerry (NASDAQ:BBRY):

This one has been debated several times over, and we got another reiteration of why this should happen just a few weeks ago. With concerns over security and privacy, an Apple acquisition of BlackBerry isn't that far fetched. It would be the largest potential acquisition of the ones I am proposing today, but BlackBerry would still be a drop in the bucket given Apple's financial position. As the article linked above details, after BlackBerry's acquisition of Secusmart, a German company that makes chips for voice encryptions, BlackBerry can now boast of having the most secure communication devices on the planet. With Apple's tremendous global user base, security is obviously very important. I don't know if this acquisition would ever occur, but it does make sense on paper.

Control4 (NASDAQ:CTRL):

This one I came across while reading an article on, and it does make sense along the lines of Google's [(NASDAQ:GOOG), (NASDAQ:GOOGL)] acquisition of Nest. This acquisition would be all about Apple's move into the home. The Yahoo! Finance profile for this name, in the first sentence, says the following: "Control4 Corporation provides automation and control solutions for the connected home." As the battle for the living room continues, it seems as if it will just be a matter of time before this name is bought out. This would be the smallest acquisition of the four, probably only costing Apple about half a billion dollars or so.

Glu Mobile (NASDAQ:GLUU):

This is another name that Apple probably could purchase for less than a billion dollars, and would push Apple into mobile gaming. Glu is the company behind such hits such as Deer Hunter and the tremendously popular Kardashian game. Mobile gaming has a lot of potential going forward, and I think Glu Mobile provides an interesting opportunity for Apple. Glu would be a smaller scale acquisition, so Apple wouldn't need to spend a couple of billion to buy a name like Zynga (NASDAQ:ZNGA). Apple could get its foot in the door with a smaller acquisition, almost in a test the waters kind of effort.

GT Advanced Technologies (GTAT):

This isn't a new idea, as it has been out there for some time. This acquisition would be a little more expensive, probably about the same price as Apple's purchase of Beats. GT's factory in Arizona is producing sapphire cover glass, which could be used for both Apple's newest iPhone as well as the rumored iWatch. For about $3 billion or so, Apple would be able to acquire a name in its supply chain, which would seem to give Apple more control over the production of its products.

Final thoughts:

Apple is being very generous to its shareholders, returning several billion dollars a quarter. The company's tremendous financial flexibility also allows it to make acquisitions to strengthen its ecosystem and help with the future growth of the business. Today, I proposed four names that Apple could acquire to help it grow. Two of the names could probably be had for less than a billion dollars each, which would fit in with most of Apple's recent acquisitions. However, as we saw with the Beats deal, the company is not afraid to make a purchase that requires a few billion dollars, which is why I also detailed two slightly larger names as targets. I believe that these acquisitions would make Apple an even better buy, and I still recommend being long the name ahead of the upcoming iPhone 6 launch. Apple shares have crossed $100, but there still seems like a decent amount of upside ahead.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Investors are always reminded that before making any investment, you should do your own proper due diligence on any name directly or indirectly mentioned in this article. Investors should also consider seeking advice from a broker or financial adviser before making any investment decisions. Any material in this article should be considered general information, and not relied on as a formal investment recommendation.