What if Apple bought out Sony?

A possible takeover is only speculation, but the 2 tech giants do have a few things in common.

By InvestorPlace Oct 26, 2010 9:07AM

Credit: (© 2010 Apple Inc.)
Caption: Apple retail store, Upper West Side, New YorkBy Jeff Reeves, editor of InvestorPlace.com


Apple (AAPL) and Sony (SNE) have a lot in common. Both redefined music with portable players -- Apple with its recent iPod, and Sony with its Walkman, which debuted in 1979.


Both companies have redefined gaming, too -- Apple with its emerging App Store and convergence devices that are both useful and fun, and Sony with its groundbreaking PlayStation 2 system, which remains the best-selling video game console in history.


So what would happen if the creative minds at both companies joined forces to create a new generation of gadgets? Shares of Sony rose in premarket trading Tuesday amid speculation that the Japanese electronics maker could be acquired by Apple.


The source of the buzz was a column by Eric Savitz posted at Barron's over the weeked in which Savitz noted comments from chief executive Steve Jobs suggesting Apple could "use its cash to make a strategic acquisition or two" -- such as Abobe (ADBE), Sony or even Disney (DIS). Adobe is a more digestible $14 billion company, while Disney is almost twice the size of Sony at a whopping $67 billion.


"But," Savitz writes today, "that was pure speculation."

 

Apple is cash-rich, with $23 billion in loose change and about twice that in short-term securities that could become liquid in a hurry. Sony's market value is a bit shy of $34 billion, a huge chunk of change but certainly not outside Apple's reach. Post continues after video:

Adding intrigue is a recent Bloomberg interview with former Apple CEO John Sculley in which he mentioned how much Steve Jobs is impressed by Sony's products and manufacturing operations.

But neither company is talking, and a number of analysts have been skeptical of such a deal, suggesting that any move by Apple would likely be a hostile takeover. And despite lots of love for Apple in the states, such a bid would have a hard time succeeding in Japan.

So how likely is a deal? Well, there's no doubt Jobs and company would love to get a piece of Sony's established gaming operations. The potential of a marriage between Sony's portable PSP console and the iPhone and iPad is obvious. Besides, though Apple is getting a cut from games sold in its App Store, it is taking a cut of only about a third from sales. Gaming hardware generates much bigger margins.

But any consumer who has prowled the electronics section of a big-box store knows that Sony is an octopus of a company that makes televisions, car stereos and digital cameras -- not to mention manages movies and software studios on top of managing a catalog of music.

Apple is in the content distribution business, and a move to become a one-stop shop would at least prompt stonewalling from competitors and at worst prompt antitrust hearings.


Perhaps the biggest hurdle to any deal is that weak consumer spending and a downward spiral of computer and HDTV prices have slashed the margins on many Sony products. Judging by anemic profits recently, including quarterly losses in two of the past four periods, it doesn't appear that trend will end anytime soon.

But if anyone can turn around Sony and put a premium price tag back on its products, it would be Apple. Consumers and investors will have to wait and see, but in the intervening days it sure will be fun to read about any potential products such a partnership would create.

 

iPlayStation, here we come!

 

Jeff Reeves is editor of InvestorPlace.com. As of this writing, he did not own a position in any of the stocks named here. Follow him on Twitter at http://twitter.com/JeffReevesIP.


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55Comments
Oct 26, 2010 11:43AM
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I too hope this is a rumor. Coming from a gamers standpoint I could see the PS3 and PSP selling for $500 a piece because of Apple's absurd pricing. And to be quite honest, I hate apple with a passion because of their price gouging. I hope Japanese pride wins out over fat wallet america in this case. 
Oct 26, 2010 12:30PM
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"Both companies have redefined gaming, too"

Is this guy on crack? Apple's ****ty game app, in my opinion, does nothing to redefine gaming. Give credit where credit is due. Companies like Microsoft, Sony, and Nintendo have redefined gaming. Any REAL gamer would know that.
Oct 26, 2010 11:41AM
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There goes the PS3 market !!! Quality and price will be diminished to the standards of the XBOX.  Hoping this is just a bad joke.
Oct 26, 2010 11:35AM
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Clash of cultures for sure. This would be the demise of sony's camera innovation.  It would be dumbed down and sold via clever advertisements. Another interesting item is Vaio PC line.  while not the most popular it is the most eye-candy heavy line.  What would apple do here?
Oct 26, 2010 11:34AM
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If it happens I'll never buy another piece of Sony equipment  again.... I can't stand Job's or the fan boys that worship him.
Oct 26, 2010 11:32AM
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The two do not match I thin Sony needs to stay whre it's at, because if Apple gets it it will ruin the sony name. I know apple is household name now but their products are not very durable. Sony is know for good quality stuff where people who buy apple are just buying the hype.
Oct 26, 2010 1:15PM
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i agree this the most utterly disturbing thing to happen in the history of all time. and i know disturbing i was almost raped....

 

Oct 26, 2010 12:41PM
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Apple makes obsolete over priced toys and Sony is an eledtronics powerhouse. If anything Sony should buy Apple and just put them out of their misery. Apple hasn't invented anything. I had a touch screen iPAQ in 2002, solid state hard drives in the new Mac laptop has been in Toshiba Windows Laptops  for a couple of years already, the iPod is a rehash of the Walkman and the same functionality as the 2002 HP iPAQ. This guy from InvestorPlace much be on crack.
Oct 26, 2010 1:35PM
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If Apple purchases Sony, I will sell all of my Sony products. I despise Apple and everything their company stands for, that is why I buy Sony and Microsoft instead. I have a PS3 and a Sony laptop, and I love them, but if Apple buys Sony, I will sell both of those products and go 100% Microsoft.
Oct 26, 2010 12:18PM
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This is terrible! The last thing I want is Sony, a Japanese corporation, to be bought out by the likes of Apple. That would probably mean no more PlayStation consoles and my bro loves PS and he would be devastated. Also if the two companies were to merge, then no more Japanese PS games! Also the author of this article is saying that the Playstation 2 is the number one selling game console of all time. Is there proof somewhere that it is? Or is he just saying that? I thought the Wii and NES were the best-selling consoles of all time.
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I HOPE THIS DOESN'T HAPPEN BECAUSE I PREFER SONY PRODUCTS OVER APPLE ANYDAY. I HATE THE MONEY HUNGRY GREEDY ELITE OF APPLE. I ONLY BUY SONY PRODUCTS.
Oct 26, 2010 12:44PM
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Will they call the new company Sapple? 
Oct 26, 2010 12:01PM
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Apple's wants to purchase a TV mfg in order for it to hold onto its lead in the mobil space without offering open architecture across all devices.  TV's are the third leg of a three legged table.  Convergence between smart phones, computers and TV's is where we are headed and TV mfg hold the trump card on standardization across all devices as it will require Apple and other non-open architecture products to open up in order to allow docking of smart phones and other hand held'd and computers directly to the TV to give the user the same experience across all three devices tailored to each user's particular needs and interests.  -  Google with its Android OS is a ahead of the curve in this space and would be ahead of the game with a strong affiliation or purchase of a TV mfg to push Apple and other closed architectured products to open up or take a back seat in the new frontier of user experience and user generated content.  Apple want's dominance in every space but does not want to offer open architecture in order to keep their hold on their consumer but , just as Google opened their architecture forcing Apple to allow outside applications (although still heavily vetted) on the phone,- Google will, if it decides to partner with TV mfgs,  force Apple to stop trying to control every space in which it sits, and either move to open architecture or be left behind.  Apple, play nice or shut up and take your medicine like a good boy.
Oct 26, 2010 12:00PM
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I for one, will not support sony anymore if apple buys them out, and I belive they would loose a massive loyal customer base that sony has.

 

Apple seems to have an issue of saying this is ours product, and we desice if you are allowed to connect it to something else, they use priatery connector and hardware as much as they can so you are forced to buy their product.   They also force tech down your mouth and dictate how you should use it..

 

Ie. phones. sending images.. also their new antine problem, look at I pad, refusal to work with other software, look at I pod, connection type. dont get me wrong they come out with cool stuff, but they force it so hard, dont see why ppl dont use better stuff.

 

like a lot of ppl. I own a ton of sony, TV, PS, Recivers, sperkers, systems. ect...  I would never buy another since within in 10 years they would destroy sony brand. 

Oct 26, 2010 11:37AM
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They are a perfect match. Although Sony electronic products are easly the best in the world, their consumer base is dwindling due to all the proprietary DRM crap they have built in in all their hardware - a pressure from Sony Entertainment no doubt.

 

Even HDDVD was a winning format due to its openess until Sony outright bribed the studios with billions in cash for not supporting it.

 

BluRay ROM is an incompatible piece of crap that constantly puts spyware on your computer and Sony MP3 players are a joke due to DRM.

 

Sony notebooks are overpriced crap with inferior specs and infested with DRM software.

 

All of the above can be said about Apple too... Except all their hardware is crap also.

Oct 26, 2010 1:48PM
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under a strategic point of view, it'd make a lot of sense for apple:

 

1) Sony's TV-making expertise/brand would support the move to Web-TV which is the hot new thing these days

 

2) Sony's computer expertise/brand: good support to go right into Microsoft's playing field and start aggressively developing/marketing software solutions and operating systems for non-macs

 

3) tech expertise to further expand their mobile phone market

 

4) use sony's video games hardware presence/knowledge to bring video gaming online and on web TV

 

5) expand the Asian market precence, knowledge and reach instantly (the marke to be for the years to come)

 

The only problem is that a cultural match of Apple (posterchild of American business culture) with Sony (don't know much about sony but...they're japanese and, well...not exactly a match with the american professional/corporate culture). This is a big risk BUT...makes a lot of sense strategically.

 

If i was apple, I'd scout around for another takeover prospect before buying out Sony. Cash is not an issue. Strategical value is not an issue. But assimilation is a big issue in this case.

 

If they go for it and they succeed...it could bring massive value and synergies. If they fail...they'll loose billions and take a hit in a key market such as the Asian market.

 

Tough call. I wonder who else they could be considering as a takeover prospect.... :-)

Oct 26, 2010 1:27PM
Oct 26, 2010 12:51PM
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Apple has a market cap of 283 Billion and sony is a mere 34 Billion. Apple could come close to paying cash for Sony and still have money left over. The chance of Sony buying a company 8 times larger than itself is nil. While I don't care one way or another, and anti-trust would never let it happen, it is still good food for thought.
Oct 26, 2010 12:26PM
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mikurotoro10,

 

The Sony PS2 is in fact the best selling console, it still sells consoles and games on a regular basis, and has been doing so for a very long time.  Obviously game and system sales have tapered off since the emergence of more up to date systems they still do sell games.  In regards to the article I also think this would be aweful.  I see the benefits for Apple, but none for Sony... especially in Japan where it is clearly a part of power and history.

Oct 26, 2010 11:32AM
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Sony could do with a bit of better management. They're making some of the same mistakes Sega did, where the Japanese side started ignoring the Western market too much.

 

On the other hand, I think this rumor is hogwash. Where did it get started? What kind of remote evidence even caused this rumor to spark? Or is this just some person on the internet just saying this at random, hoping to get a bunch of people talking?

 

The rumor just seems unfounded. So yes, you can call me a skeptic. Without any little move towards such a decision, the rumor holds no weight. I'm almost shocked the markets actually reacted to this.

 

Ok. I might as well see if the markets react to me just saying that Lady Gaga might purchase a bunch of Sony shares, next week!

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