Apple Will Likely Make An Acquisition, But Maybe Not For The Reason You Think

There is little doubt that attention grabbing headlines like "Why Apple Inc. (NASDAQ: AAPL) should buy Netflix, Inc. (NASDAQ: NFLX)" make for good reads and stir debate among followers.

But few are taking a step back and considering the philosophy behind any M&A move — until now. UBS's Steven Milunovich, a well-respected Apple analyst, argued in a research report the probability of a mega-merger involving Apple is "low as it should be."

Looking Deeper Into Possible M&A Activities

Milunovich cited Apple's co-founder and former CEO, the late Steve Jobs, who famously said: "Companies forget what it means to make great products [...] they really have no feeling in their heart about wanting to really help the customers."

As such, the analyst believes Apple shouldn't necessarily shy away from M&A deals, it should only do so when an acquisition creates a better product and customer experience and not to protect financial results.

"Apple's history has been one of focus — we think management is mature enough to know what it's good at and what it is not," Milunovich wrote. "Although many corporations seeing slowing growth would use deals to bolster revenue, Apple appears to have sufficient confidence in its future to be careful, especially in diversification."

Finally, Apple's unique and unusual culture and functional organization also make acquisitions challenging. Although this shouldn't necessarily deter Apple from seeking acquisitions in areas that could "leapfrog Apple ahead in an ear of interest," including transportation, health, home automation and even content.

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