Apple Needs Bold Ideas, Not a Mega-Acquisition

A blog about business and economics.
Feb. 25 2014 12:40 PM

Apple Doesn't Need a Mega-Acquisition to Think Bold

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Cheap is good too.

Photo by Philippe Huguen/AFP/Getty Images

Recent large-dollar acquisitions by Google and Facebook have created a new surge of chatter about the idea that Apple is being excessively cautious with its cash and ought to be out there spending on some exciting high-profile acquisitions.

John Gruber is right to be skeptical of this idea. Firms tend to make mistakes when they betray their own cultures, and it's simply not in Apple's nature to make that kind of move. Apple does acquisitions, but they tend to be relatively modest in scale and aimed at incorporating specific technologies into Apple's products. The kind of thing Facebook is doing with Instagram and WhatsApp where it buys a big well-known company and then basically just socks it away for future consideration isn't the Apple Way, and there's no sense in trying to change that.

That said, I don't really think it can be denied that Apple's gargantuan stockpile of cash has become more of a distraction for management than a useful tool for flexibility. Adding more cash to the pile is hardly the best way to help the company over the long term at this point.

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So why not cut prices?

The high prices and high margins for the flagship iPhone model—the iPhone 5S, currently—make a ton of sense to me. This is the most popular phone in the world at its current price, and during peak demand times Apple always struggles to produce as many phones as people want to buy. So thumbs up for high prices and high margins. But what about Macs? The PC industry is now shrinking, but it's shrinking slowly and Apple has such a small share of the overall PC market that it would be easy for Apple to increase sales and strengthen its overall platform by making some of this stuff cheaper. By the same token, the Thunderbolt Display is just a fantastic piece of equipment but almost nobody is going to buy it at its price.

But more importantly, it seems to me that there's a strong case for aggressively priced downmarket iOS devices. The iPhone 5C isn't on the cutting edge of technology, but it's hardly a piece of junk. If priced as a low-margin device, it would be a huge hit. Same with the non-retina iPad Mini. Apple makes so much money from its core sales of state-of-the-art iPhones and iPads that making the lower-end iOS devices genuinely cheap would still leave them with a growing cash stockpile. But it would also make these devices exactly the kind of devices Apple likes to make—great devices. The 5S would be the best phone, and the 5C would be the best value phone.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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