Apple Inc. (NASDAQ:AAPL) has huge cash reserves, everyone knows that. How it plans to use the reserves is the question that every investor wants answered. Robert Weinstein from the Street feels that, with such amounts of cash, Apple may buy a company like Yahoo! Inc. (NASDAQ:YHOO).
Yahoo including Alibaba is valuable
Steve Ballmer, CEO at Microsoft Corporation (NASDAQ:MSFT) once realized the potential of Yahoo and offered a bid of $31 in 2008. Later, the deal failed, and Yahoo stocks plummeted during the financial crisis. Ballmer said at that time, “Sometimes you get lucky.”
The author noted that Ballmer was right when he realized the potential of Yahoo! and was also correct when he said that Microsoft escaped the crisis by not buying Yahoo after stocks tumbled in 2008. But, at present, the valuation of Alibaba comes close to $50 billion and is further expected to raise up to $100 billion. Yahoo! has a 24 percent stake, “meaning if you use a back of the envelope adjustment, over 60% of Yahoo!’s current market valuation is in cash and investments,” says Robert Weinstein.
Apple to benefit deeply
An acquisition of Yahoo! will allow Apple Inc. (NASDAQ:AAPL) to expand into a new though related area, which will assist the competitive position of the iPhone maker. Apple has the biggest competitor in the form of Google Inc (NASDAQ:GOOG), though it was BlackBerry once, which can disappear anytime now.
Google generates ad revenues through massive amounts of traffic, and the comScore’s report suggests that Yahoo! Inc. (NASDAQ:YHOO) is at the top when it comes to unique visitors. Google follows it at second place while Apple is at distant 11th position.
Apple Inc. (NASDAQ:AAPL) has the unique quality of realizing revenue from almost every segment it enters, a trait that Microsoft and Yahoo! lack, according to the author. Google’s service to provide relevant search offers has not yet marked the success. Yahoo, if acquired by Apple, will transform to offer the world class search experience, and will be simpler than Google to buy ads.
Further, Yahoo! Inc. (NASDAQ:YHOO) can help Apple Inc. (NASDAQ:AAPL) in expanding its iSystem user base by using the services of Yahoo like email, games, finance, and other segments. If the combination works, then it will take away the users from Android, and Apple can use the “Web traffic from iDevices to increase the per-user revenue generated that is currently lost,” says the author.
Given the sheer size of both Apple Inc. (NASDAQ:AAPL) and Yahoo, an alliance is bound to hit some bumps, but if something of such sort even happens, then return on Investment, revenue and profit for these two will enhance.