Apple's $25 Billion Conundrum

Without doing the math, I like the idea of Apple extending its reach into other areas of digital delivery by acquiring a company like Netflix or Blockbuster. This allows Apple to merge a video content company into its iTunes business -- while continuing to develop hardware (phones and computers) that deliver that content through increasingly sophisticated means.

Apple needs to be careful, however, to make sure that any acquisition can be re-invented to fit its business model. Blockbuster, for example, is still largely tied into its decade-old strategy rather than online video downloading. So there is value in its brand name, but not without some major concept development.

Richard Seesel, Principal, Retailing In Focus LLC

I think Jobs is sounding the smart theme--cash is king. Yes, it is tempting to look at undervalued companies and think about making an acquisition. The real question remains: what would those companies bring to Apple? Some small purchases might add good ideas that could be built into current or future products. Large acquisitions tend to have a low success rate and could simply distract Apple.

Stock repurchases, while often done, are proving to be less and less attractive. Dividends are great, but only if you can keep them going over time. One-time special dividends also don't add much. I am assuming Apple is investing heavily in R&D and doesn't feel the need to add more spending there.

For the next year or two, keeping a large amount of cash around and not having any debt will allow Apple to ride out any rough patches and be in a great position to continue its growth when the economy recovers.

Kenneth A. Grady, General Counsel and Secretary, Wolverine World Wide, Inc.

Apple should continue to do what it does best: innovate. Rather than buying an existing company like Netflix or TiVo, which come with their owns sets of positives and negatives, Apple should invest in itself to discover new devices that will lead the market in their respective categories.

Max Goldberg, Founding Partner, The Radical Clarity Group

Having used an iPhone and talking to other users, they might want to spend some of that cash coming up with a better network provider or that cash might find its way into the pockets of competitors who are developing better mobile devices.

Len Lewis, President, Lewis Communications, Inc.

They will probably need some of it to keep the stores afloat as I see sales tanking right after Christmas (if not sooner). They have a strong product line and great associates and stores selling them. I would sit on the cash and use some for operations. When we clearly see the light at the end of the tunnel, then we can start developing new and exciting products.

Doron Levy, President, TheMortgageMachine.ca

While Cash is King, Apple needs to continue to innovate. The company would be frustrated by any acquisitions.

Digital content delivery would be their next task. Simplify the TiVo system and get it into everyone's homes. Then add in the delivery system that makes it easy enough for the 4 year old and the 84 year old to use it.

Dan Desmarais, President, Cantactix Solutions Inc.

With a culture like Apple, acquiring another company would not be the best strategy. Apple is best when they think outside the box. Take that money an invest in the research of the next big idea that nobody knows they need yet but will become the next thing we can't live without....

'vhicklin'

Apple needs to keep the cash for now, invest in itself and continue to keep its unique culture. Once it buys someone else, it also buys that culture and to change a culture is like getting someone to change their personality. It takes a frontal lobotomy.

Mel Kleiman, President, Humetrics

There are some ultra-rich, international preying sharks searching for innovative and cash rich companies such as Apple. It would be humiliating to have one bite off another American icon like when the Belgians captured Budweiser.

To lessen the likelihood of such a possible occurrence, Apple should use a goodly portion of their cash bounty for a larger R&D budget to invent the next generation of products that would keep Apple surging ahead of the pack...and be more valuable. Then, if there are extra bucks in their box, share them with the shareholders.

Gene Hoffman, President/CEO, Corporate Strategies International

Jobs may have thought of this already, but maybe Apple should invest some of that surplus in a design center--patterned after Porsche Design. It would develop products in other categories for other companies that would be sold under license. These could range fairly broadly across hard lines categories, from household appliances to automobiles to office equipment to furniture. If successful, this would only add to the cash hoard.

James Tenser, Principal, VSN Strategies

Obviously, Apple has been charging too much for their products and should offer a targeted stimulus program by offering all their customers credits on iPod and iPhone accessories.

Bill Bittner, Principal, BWH Consulting

Cash is King, but R&D will make the registers ring!

If Apple wants to remain on top it should invest considerable amounts of its reserves into further R&D in order to stay ahead of the curve and to ensure continued dominance in phones and mp3 applications.

The iPhone is a very good phone but it is not GREAT. I have owned and used the iPhone since its launch in 2007 and while there have been modest improvements, there are many features which need to be improved to offset the novelty/trend loss over time.

The iPhone concept moves the iPod to obsolescence. What's next?

In an age where technology is changing as fast as it does, why buy a company founded on principles which may be obsolete in the near future? Stay ahead of the game by doing what Apple does best, positioning themselves to take advantage of where the market is going next, not catching up to everyone else.

Charles P. Walsh, President, OmniQuest Resources, Inc

I think you will see Apple become more aggressive on the M&A front, but you're not likely to recognize the companies unless you're in Silicon Valley. Apple's recent acquisitions were PA Semi, Silicon Color, and Emagic. Apple tends to buy companies that bring specific IP, talent, or products to fit the overall strategy. Emagic, for example, made Logic, a key professional music production application, and discontinued the Windows version.

With all that cash, we may see Apple make bolder moves, but I expect they'll be consistent with this philosophy: acquire companies that lock key technologies and markets into Apple hardware and the Apple "ecosystem" and/or keep Apple products well ahead of competitors. At some point we may see Apple make an acquisition to extend itself into a new marketplace, but one that is a logical extension of its existing business; maybe DVRs, media distribution, televisions, home automation/media serving, etc. A bolder move, but not unthinkable, would be to acquire a content publishing company, either music or movies, to capture some exclusive content for its iTunes ecosystem. Those companies' revenues seem to volatile to fit the Apple model, however.

Jeff Weitzman, CMO, Buysight, Inc.

Apple should continue doing what it does. Great marketing and great new products. Not the best out there technically according to aficionados, yet the mix of style, marketing and retail is superb. R&D and next generation products is what is needed to plug into the mix.

Steve Bramhall, Managing Director, SB Purchasing