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Subject:  Re: say no to financial engineering distractions Date:  11/1/2013  9:52 AM
Author:  NailThatJello Number:  197705 of 204061

Let's say for example, and of course this is sheer speculation, that their secret strategy was to buy Disney

That is precisely the kind of deworsification I'd hate to see happen. Why would you want them to spend a penny on something that doesn't fit into precisely what has made them the most profitable business in the universe?


Yeah, I hesitated before providing that example, but went with it to try to make my point clearer. What I cautioned against, was taking this particular speculative example too seriously.

Having said all that, I think a reasonable case could be made, that if Steve really had some brilliant idea on how to rework TV, then to make it succeed Apple would probably have to shake up the content provider ecosystem. And the only way to do that might be to buy an important one or two of them. Disney being one that Apple has had historically close relationships with. So it's not a totally unreasonable example.

What examples do you have of great, focused businesses which became better by an enormous acquistion?

I agree that diversification is usually diworsification. But I haven't earned a Ph.D. on the subject that could make me able to list the top ten successes and failures. Maybe GE has swallowed some big companies in its past, I don't know. EBay did well in buying PayPal for a pretty penny, because it made eminent business sense. Yet eBay failed with Skype, but that made little business sense in the first place.

I wouldn't be too dogmatic about diworsification. There are probably some cases where it makes a lot of sense, and others where it doesn't. Apple has time and again done things that others failed at and surprised the world by doing them right. Music players, smartphones and tablets come to mind. Buying a content provider would make sense to me if that's the key bottleneck to moving television into the modern age.

But as I said, more likely they would spread their 100 billion eggs in different prodcat baskets. Each basket might start off from small acqusition(s) rather than large acquisitions. But collectively they might require big expenditure, hence Apple holding on to that cash pile.
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