Is Apple's Newest Potential Acquisition A Sour Deal? - The UpStream

Is Apple's Newest Potential Acquisition A Sour Deal?

posted Sunday Aug 8, 2010 by Jon Wurm

Is Apple's Newest Potential Acquisition A Sour Deal?

Apple seems to be eying smart phone chip manufacturer Infineon but they aren't the only ones. Other titan tech companies such as Samsung, Broadcom, and Intel appear to be very interested in Infineon as well. The current bid is sitting at $2 billion which is a hefty price tag but all these tech giants and especially Apple have the cash to burn. The real question is, should Apple continue to pursue the merger and acquisition?

Despite Apple being grouped together in the same industry, there are some major differences between them and their competitors. One difference deals with the way Apple normally handles mergers and acquisitions. They are used to purchasing and integrating with smaller companies. This process can usually be expedited to get projects up and developed quickly. Another factor is that Infineon would be there debut in the manufacturing arena. Apple has never done any in-house manufacturing, so along with a hefty price tag there would be a much slower and most costly integration process. Samsung, Intel, and Broadcom are quite familiar with the manufacturing industry.

Hit the break for more reasons why Apple should or shouldn't continue this merger process.

The profit margins are relatively small compared to what Apple is used to making and the A4 chip only accounts for about 8% of the iPhone 4 materials costs so they don't have much there to justify the current purchase price. However, smart phones are becoming increasingly more important and Infineon has a myriad of technological know-how and a wide range of applications for it's chips which continue to vastly improve.

Intel is also looking to get back into the smart phone market, so purchasing Infineon would be a good way to stifle some competition and increase their control over their products. Given all this I think Apple would be making a good move to go for it.


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