Apple buys chip-maker Intel and roils computer industry.
Such might be a headline you'd be reading sometime soon if a highly speculative piece by Jean-Louis Gassée proves true. The emphasis, here, is on the word highly, but the idea has enough credibility (not to mention entertainment value) to warrant a close read.
The basic idea is that Apple is increasingly at odds with its primary chip and screen supplier, Samsung, and is generating so much cash that it doesn't know what to do with it. Meanwhile, Intel looks ripe for acquisition because its own cash-cow, the PC business, is in severe decline as computing shifts increasingly to phones and tablets. Servers, another market for its chips, are not doing so great either. And so, were Apple to buy Intel, it could solve both its Samsung and cash problem in one fell swoop and save Intel from itself.
Gassée states his thoughts on the potential for such a takeover in the form of a fly-on-the-wall recap of a supposed discussion taking place in Apple's boardroom. And that framing alone signals that he is being somewhat playful, even while raising some serious questions.
Gassée, you'll recall, is the former Apple executive who in the 1990s launched a company called Be that developed a widely regarded multimedia-rich computing platform. He hoped to sell the OS to Apple, which had a Mac OS operating system that was more than a little long in the tooth. Instead, Apple, with its founder Steve Jobs newly back at the helm, opted for an OS developed by NeXT, Jobs's troubled workstation startup. Since then, Gassée has operated mainly as an investor in Silicon Valley, but because he is one smart cookie, his piece about Apple buying Intel is worth more than a passing glance.
Apple, Gassée reckons, currently sits on an "obscene pile of cash," and with lots more on the way, the company needs to figure out what to do with it all. One option is to buy back Apple stock and share some of the wealth with stockholders in the form of a dividend. But why not buy Intel instead, Gassée hears an Apple board member suggest.
That person's reasoning is that Apple needs to extract itself from a "toxic" relationship with Samsung. That arch-rival in smartphones actually supplies Apple with ARM processor chips and touch-screens, too. Intel, meanwhile, is "flailing" and would serve Apple well as a captive chip maker. Intel, the thinking goes, could put its massive shoulder behind the ARM processor that powers the iPhone and iPad and now, even some specialized servers, too. In one fell swoop, Apple would make history.
For those of us working in and around the datacenter, Apple's acquiring Intel would likely be a disaster. Indeed, I am reminded of AOL's late-1990s acquisition of Time-Warner, which looked pretty cool on paper, made many headlines, but quickly proved a giant mess that is still getting sorted out.
Apple, you'll agree, currently has little interest in the enterprise-class x86 processors most servers depend on these days. And there's no way -- none, I would say -- that these two proud companies' disparate cultures could be successfully melded into one.
Which is, it turns out, exactly Gassée's point. "Apple," he writes, "really has no choice other than submit to another cash phlebotomy, this time for an additional $60B." That's the Greek word, in case you are not aware, for bloodletting, a long-ago medical practice that sometimes involved leeches.
While some see Apple's decision to return cash to its shareholders as a sign of defeat, Gassée sees quite the opposite: "We ought to be glad that the Apple execs (and their wise advisers) didn't allow themselves to succumb to transaction fever, to a mirage of ego aggrandizement held out by a potential 'game changing' acquisition."
And what of Intel? It, too, has a good stockpile of cash, a reservoir of great technology, and as Gassée has pointed out before, a legacy (namely the need to maintain x86 compatibility) that prevents it from fully participating in the legacy-free and lower-margin ARM market. Intel really does have some big decisions to make, even as it lacks a permanent CEO.
Interesting times, these, with competitors battling it out even as they sell each other key parts. And who knows, Apple may yet make a big acquisition. And Intel may have a good trick or two up its sleeve, as well. It's their world, pretty much, and we just live here.