Apple’s Midlife Crisis
May 20, 2014 Leave a comment
Apple’s Midlife Crisis
MAY 9, 2014, 1:34 PM 5 Comments
Apple is showing another symptom of a midlife crisis.
It hasn’t got a tattoo or hooked up with a Pilates instructor. But Apple’s interest in headphone maker Beats Electronics suggests that it feels the need to open its wallet in order to keep up with the cool kids.
As it approaches its 40th year, Apple is displaying signs of middle-age spread. Its $500 billion market value dwarfs all rivals, and it has been a while since the company brought out a worthy successor product to the iPod, iPhone and iPad. Persistent rumors that it is on the cusp of reinventing the television or the wristwatch have yet to come true.
One advantage of advancing years is increased financial security. At last count, Apple had more than $150 billion in the bank. But issuing bonds to carry out a tax-efficient stock buyback, as the company did last month, does not get you talked about in San Francisco bars. It is a common refrain that Timothy D. Cook, the chief executive, lacks the innovative streak of his predecessor, Steven P. Jobs. Apple’s interest in Beats may be part of an effort to change that perception.
Rapper Dr. Dre’s headphone brand offers street cred, while the new Beats music streaming service could lend some vigor to Apple’s underwhelming iRadio. A deal might also snag the Beats chief executive, Jimmy Iovine, a music industry legend and sometime collaborator with Mr. Jobs. At $3.2 billion, according to news reports, it would also be Apple’s biggest acquisition, even though it would barely register in the tech group’s financials.
Once Apple goes down the road of buying things it does not think it can build, however, it is hard to know where it will stop. Just as middle-aged men stereotypically buy sports cars, Apple could even target Tesla, Elon Musk’s $22 billion electric carmaker.
Apple is not alone in splashing out to keep younger generations engaged. Mark Zuckerberg’s $1 billion purchase of Instagram two years ago looked defensive but seems to have worked out well for Facebook. He has gone on to spend more than $20 billion on acquisitions this year.
Until now, though, Mr. Cook has not resorted to large-scale mergers. Efforts to acquire coolness can look undignified: remember Time Warner’s unhappy marriage with youthful AOL, or Rupert Murdoch’s brief love affair with Myspace. Apple may end up better off just aging gracefully.
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