There are five technology companies that matter.
In order of influence, they are: Apple, Google, Facebook, Amazon, and Microsoft.
Let’s look at what these companies have done in the past three months.
- Microsoft got a new CEO.
- Amazon announced plans to eventually use drones to deliver packages.
- Google bought Nest for $US3 billion, sold Motorola for $US3 billion, and bought a handful of robotics companies.
- Facebook paid $US19 billion for WhatsApp.
- Apple announced $US14 billion in share buybacks.
Which thing in that list is not like the others?
In case you can’t figure it out, it’s Apple’s boring buyback.
As fund manager Eric Jackson notes, Apple is just standing still while these other companies go flying around snapping up key assets to bolster their future.
Microsoft is in transition to a new CEO, so take it out of the mix.
That leaves Google, Amazon, and Facebook all running as fast as they can in public, making super aggressive moves. Those three companies clearly have a big bold vision for the future of their companies.
Apple meanwhile is just sitting there.
Yes, it likely has interesting things happening behind closed doors at its headquarters. And, yes, it spends billions on factories and equipment to build new products.
But so what? It’s sitting on a mountain cash and its most exciting idea for that cash is buying Apple shares, which aren’t looking like a particularly great investment lately.
There’s nothing out there — nothing at all? — that Apple sees, and thinks is worth buying?
It has no interest in owning Twitter, Tesla, Dropbox or any other service that would bolster itself for the future? It doesn’t have the guts to go buy a bunch of TV content to build an over-the-top global TV network?
Jackson put it most succinctly, saying:
Think of this for a second: Apple spent $US14 billion on its own stock a few weeks ago and now the stock is lower from where it was after they announced it proudly. Facebook spent $US16 billion on WhatsApp (before RSUs). Which company spent its money more wisely for the long-term health of the business?
And short of buying companies, Apple doesn’t think there’s a strategic value in lowering the price of the iPhone to ramp up sales around the world? Really? How much money is enough money? Investors aren’t rewarding Apple for a pile of cash, and Apple has no creative uses for it. So why keep collecting so much money?
Why are Facebook and Google willing to make bold bets? I think there are two reasons.
First, neither company would exist today if it weren’t for the timidity of Yahoo.
Yahoo could have bought Facebook for $US1 billion. It could have bought Google for $US5 billion. In both cases, it balked at the valuation.
Today, Yahoo is an also-ran scrambling to catch Google and Facebook.
Both Google and Facebook realise there’s no point in being scared of a big number if it means taking out the company that could kill you.
The second thing that is emboldening these companies is YouTube. When Google paid $US1.65 billion for YouTube, it seemed insane. It was a whopper of a number.
Today? It’s the deal of the decade. What would be the valuation on a standalone YouTube right now? $US50 billion?
Apple by contrast, became the world’s most valuable company on its own. It built the iPod, iPhone, and iPad from scratch. It never dealt with the same sort of missed opportunities and threats as Google and Facebook.
So, it probably sees no need to buy companies.
But 2014 is very different from 2001, or 2007, or 2010.
And Tim Cook has often said that he plans to run the company as he sees fit, not as Steve Jobs ran the company. Yet, he’s following the exact same playbook. Slow and steady.
There are a lot of powerful companies growing around Apple. With $US159 billion in cash, Apple could very easily take on one or two of them.
Instead, it’s watching its fast moving rivals make big moves that solidify their future.
It feels like Cook is making a mistake sitting still.
“Apple needs to start picking off strategic assets as if their life depends on it, rather than continuing on with a plodding attitude that doesn’t match the speed of their competitive environment,” says Jackson. “It’s time for Apple to get aggressive.”