Apple's Next Conquest: Telephony Patents, Mobile Communications Dominance or Both?

| About: Apple Inc. (AAPL)

Apple (NASDAQ:AAPL) is a phenomenal company whose potential never ceases to amaze. The last 14 years it has been a success story that is virtually incomparable.

Who would we compare Apple to? Perhaps we'd have to combine companies like Hewlett-Packard (NYSE:HPQ) and Research-In-Motion (RIMM) to find a fair comparison.

Take a look at a chart of the stock prices of all three of the above mentioned companies. There's no doubt that Apple literally rises above the competition here as well.

Chart forResearch In Motion Limited (RIMM)

Friday, the Wall Street Journal (according to a CNN Money- Fortune story posted) reported that Apple joined the bidding war for the telephony patents put up for sale when the Canadian telecommunication equipment maker Nortel went bankrupt two years ago. The story claims that more than 6,000 patents are at stake, covering some of the key underlying technologies of mobile communications, including Wi-Fi, social networking and LTE, the fourth-generation wireless technology now being deployed.

Among the other companies competing for Nortel's patents are Google (NASDAQ:GOOG), which is no surprise, Intel (NASDAQ:INTC), Ericcson (NASDAQ:ERIC), and a little-known patent licensing company named RPX Corp. (NASDAQ:RPXC).

Google started the bidding at $900 million, but it is widely anticipated that it will soon go much higher, especially with Apple in the mix. Apple has a great wealth of patents in PC and user-interface technologies, but in mobile telephony it's a newcomer compared with companies like Nokia (NYSE:NOK) and Nortel.

Maybe Apple's appetite to buy and acquire is part of the reason the stock again took a hit on Friday. It spent most of the day struggling to maintain that all-important $320 per share support level. This, while things are looking grim for one of its competitors.

Research In Motion Limited saw its shares fall to a new 52-week low Friday after the recent disappointing quarterly report and guidance by the company's leadership. Apple-- arguably the most valuable, well-managed, and under-valued of the major large caps-- has "eaten" Research In Motion's "lunch".

Could it be feasible that Apple might be considering a way to "finish RIMM off" through an investment or an acquisition? It's an interesting possibility. If that were to happen it would open a door for Apple to acquire what's left of Research In Motion's business formula. A joint venture or an acquisition of Research In Motion by Apple would open the way for Apple to reach and win over a customer base that otherwise might not be interested.

It's a bit of a stretch to imagine enough synergies between these two tech companies to envision the above.
Yet I thought the same thing back in the 90s, when Bill Gates of Microsoft (NASDAQ:MSFT) invested money in Apple when Steve Jobs took back the helm of the company. So I wouldn't rule out some kind of possible coup by Apple. Apple has a brilliant and well-conceived way of making large inroads into its competitors' "turf".

Research In Motion's business-oriented customers could be another "prize" Apple could target. That could help Apple to take a huge leap forward in acquiring more business and commercial accounts.

Other possible competitors for Research In Motion that are big enough to afford them are IBM (NYSE:IBM) as well as Hewlett-Packard (HPQ).

Another company Apple might want to pursue is Advanced Micro Devices (NASDAQ:AMD). AMD has the potential to gain business in both the desktop and notebook computer processor market, as well as making great strides in doing what it does well. If analysts and the company's own projections for sales and revenue growth in the second half of the year turn out to be correct, this could also make AMD a delectable take-out target.

AMD, while selling at somewhere between 8 and 9 times forward earnings, also has some lousy debt issues. It sells at a shaky total-debt-to-equity ratio of almost 144. Ouch! So although it has $1.74 billion in total cash, it has total debt (mrq) of $2.24 billion. In the most recent quarter it posted earnings growth (year-over-year) of over 98%. It has a respectable profit margin of over 11%, and as the analysts pointed out, it should grow its business in the second half of 2011 in both the desktop and notebook computer market.

It would be a financially possible feat for Apple to use some of its $66 billion in cash and cash equivalents to swallow AMD with its $5 billion market cap company. Apple's market cap is still north of $296 billion.

Why shouldn't AAPL own and operate its own microprocessor chip company, with its ingenious ways of marketing and growing? It could pay for it in money-saved and profits within 6 months at the rate that Apple is making money.

Apple is no doubt the "800 pound gorilla" in the future of the technology sector, especially in the smartphone and tablet mega-businesses. That's why it surprised very few that the company joined the bidding war for the telephony patents put up for sale by bankrupt Nortel. Steve Jobs and company have other surprises up their sleeve-- no doubt, and in time these will invariably benefit Apple shareholders. Those shareholders own a cash-rich company selling at ridiculously under-priced 11X times forward earnings. It's growing more apparent that Apple is on the cusp of revealing more strategies to grow its company, earnings and its total cash.

Disclosure: I am long AAPL, HPQ, INTC.

Additional disclosure: Last Thursday I bought more AAPL at $324, and I may "double-down" if it falls below $300 before the "summer rally" begins.If INTC goes "on sale" below $20 I'll buy another portion as I love their dividend history.

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