Will cash-rich Apple make a megadeal?
CUPERTINO, Calif. - As Apple's (AAPL) stash of cash grows, so does the possibility that the company will use some of the money for a huge acquisition that would expand its empire beyond iPhones and other gadgets. In its latest quarterly report out Tuesday after the stock market closed, Apple reported that its cash reserves are now about $257 billion.
The guessing game primarily has focused on potential acquisitions of video streaming service Netflix (NFLX) and electric-car maker Tesla Motors (TSLA). Either deal could make sense, given Apple's long-running interest in providing a TV service to consumers and its more recent work on self-driving cars.
But in recent months the takeover talk has swirled around whether Apple might do something even more dramatic by trying to buy Walt Disney (DIS).
A marriage between Apple and Disney would create the world's first company worth $1 trillion while uniting some of the world's most successful brands in technology and entertainment -- a list that includes the iPhone, iPad, Mac computer, Mickey Mouse, Disneyland, ESPN, Lucasfilm, Pixar and Marvel.
"If there's a deal out there that would strike fear in the hearts of Silicon Valley and Hollywood, this could be it," RBC Capital Markets analyst Amit Daryanani wrote in a recent research report assessing the logic of an Apple-Disney combination.
Apple doesn't discuss specific companies that it might buy, but it's exploring far and wide, according to Chief Financial Officer Luca Maestri. "We are looking at every size of acquisition, so we will see how it goes going forward," Maestri told The Associated Press in a Tuesday interview.
Disney hasn't given any inclination that it's looking for a buyer, but publicly held companies are required to consider all takeover offers. Buying Disney would be expensive. Daryanani estimates that Apple would have to pay $157 per share, or about $250 billion.
Here's yet another way of putting Apple's cash hoard into context: It has more cash than the GDPs of Chile, Finland and Portugal.
The iPhone maker's earnings report for its fiscal second quarter showed net income of $11.03 billion, or $2.10 per share.
The profit results beat Wall Street expectations. The average estimate of 14 analysts surveyed by Zacks Investment Research was for earnings of $2.02 per share.
The maker of iPhones, iPads and other products posted revenue of $52.9 billion in the period, just barely topping Street forecasts. Ten analysts surveyed by Zacks expected $52.61 billion.
For the current quarter ending in July, Apple said it expects revenue in the range of $43.5 billion to $45.5 billion. Analysts surveyed by Zacks had expected revenue of $45.05 billion.
IPhone sales edged up 1 percent in Apple's latest quarter, extending a recovery from an unprecedented downturn last year.
But many investors remain concerned that Apple has become too vulnerable to the ups and downs of the smartphone market, mostly because the company hasn't been able to come up with another hit product since the 2011 death of its co-founder and CEO, Steve Jobs. Apple's last big success, the iPad, came out in 2010, but sales of the tablet have been declining for more than three years.
Meanwhile, the iPhone accounted for nearly two-thirds of Apple's revenue in the past quarter.
Apple shares have climbed 27 percent since the beginning of the year, while the Standard & Poor's 500 index has risen almost 7 percent. After closing regular trading on Tuesday at $147.51, a rise of 58 percent in the last 12 months, the shares dropped 1.7 percent in late trading, falling $2.46 to $145.
The Trump administration may give Apple another reason to mull a major acquisition, given earlier promises to lower U.S. taxes on overseas corporate cash brought back to the U.S. Should that tax cut happen, Apple CEO Tim Cook has said the company will consider bringing back most of the more than $230 billion it now keeps in foreign countries, making it easier to finance a blockbuster deal in the U.S.
