Apple vs. Google: The two tech giants are at it again. But instead of competing for the release of technologies that most benefit consumers, they are competing—purposefully or not—to be the top dog in acquiring other companies.
It seems that when it comes to mergers and acquisitions, either Apple or Google is regularly in the headlines. Google has been a big spender for several years, but Apple has now for the first time outspent Google on company acquisitions.
While Apple and Google have been neck and neck for the past few years, Apple significantly increased its M&A spending over the last five quarters, having made 23 acquisitions over a 16-month period.
As a result, in 2013, Apple topped Google’s acquisition numbers for the first time with $1.61 billion spent versus Google’s $1.45 billion. This is no small feat, given Google’s acquisition-happy nature to make multibillion-dollar buyouts in the past like it was spending chump change.
This information now begs the questions, what exactly were Apple and Google’s competing acquisitions? And what do they mean for the future of the two companies?
What Are The Companies’ Most Recent Acquisitions?
Apple and Google have different methods and motivations for their M&A.
Apple tends to go for smaller acquisitions over large-scale mergers like Facebook and What’s App or Google and Motorola Mobility, as recently highlighted by Tim Cook in Apple’s annual meeting in February. Google too picks up smaller companies, but it also isn’t afraid to spend big, such as with its $12.5 billion Motorola acquisition in 2012.
According to Seeking Alpha, Apple acquired companies spanning a wide range of technologies in 2013, including but not limited to maps and navigation (HopStop, BroadMap, Embark, Locationary), infrared motion-sensing and 3D scanning (PrimeSense), video data compression (AlgoTrim) and ultra-low power semiconductors (Passif).
VentureBeat lists more acquisitions, including companies working on social media analytics (Topsy), Web development (Particle) and TestFlight (Burstly) as well as developers of apps such as a mobile camera app (SnappyLabs), note-taking app (Catch), productivity app (Cue) and photo-sharing app (Color Labs).
And these are just the companies that have been confirmed—others have been left up for speculation as well. AppleInsider, for example, posits that “Apple is secretly buying up far more assets in talent, technology and production capacity than the tech and business media are acknowledging (or are perhaps aware of).”
Such a strategy benefits Apple. When a company such as Apple acquires another tech company, this typically signals to the rest of the tech industry where that company is headed next in terms of its products and services.
With Apple often being a trendsetter in the realm of technology, to be shrouded in secrecy means keeping your upcoming technologies under wraps and away from the eyes and ears of competitors eagerly awaiting to copy or improve upon Apple’s next move. Secrecy also tends to drive sales, a fact Apple has thoroughly enjoyed in the past.
Google has also likely kept at least some of its acquisitions under wraps wherever possible, but it too has picked up a variety of technology companies over the past year. This has included natural language processing (Wavii), cloud computing (Talaria Technologies), GPS navigation software (Waze), mobile software for “bumping” two phones together to share information (Bump), airborne wind turbines (Makani Power), Flutter (gesture recognition technology), humanoid robots (Schaft.inc) and several other robotics companies (Redwood Robotics, Meka Robotics, Holomni, Bot & Dolly, Boston Dynamics).
What Might These Acquisitions Mean?
Both Apple and Google are always looking for more room to grow, and acquiring new companies is one way to do that. And with the breadth of types of companies the two have acquired over the past year, it’s clear that they are both looking to expand in many different directions.
What this could mean for Apple in particular is that it is gearing up for a series of launches of not only new products but of new product categories in 2014 and over the next few years. Every fall, Apple doesn’t hold back as it unleashes a new generation of products, but only in some years do they introduce an entirely new category. With these acquisitions in mind, 2014 just might be a big year for Apple products.
Google will also likely roll out new products in the coming years, but the company is not on as regular a product-unveiling schedule as Apple is. Google is much more sporadic with its product releases, so there’s no telling when its acquisitions might come to fruition.
Will Apple’s M&A reign last forever? Possibly not. In 2014, Google has already purchased Nest, a smart home device company, and DeepMind, a UK-based artificial intelligence company, for a combined $3.6 billion. That’s nearly double what Apple spent in all of 2013, so unless Apple has some big purchases up its sleeve—which, judging by its current trend of smaller acquisitions, it very well might not—Apple may only be able to enjoy the throne for one year.
What Have These Acquisitions Done For Apple And Google?
Now, what is perhaps most important about these M&A is essentially, “What have you done for me lately?” Comparing the financial numbers, you may not get a clear vision as to how exactly Google’s M&A have paid off in the past couple of years.
“Over the past two years, Google's gross profits have increased by $11.3 billion compared to Apple's profit growth of $25.5 billion, while its operating income has grown $2.3 billion versus Apple's $16.3 billion. Google's revenues grew by $21.4 billion, compared to Apple's revenue growth of $63 billion.
In part, this can be attributed to the fact that Apple has rarely sought to acquire huge companies, and instead has aimed to buy smaller firms that can deliver a technology (or be tasked to work on a new project) that has a high potential for immediate sale or strategic advancement.”
With those kinds of numbers, it appears that Apple is winning in another arena—figuring out which companies to acquire that can make it the most money in the shortest period of time. Google has experienced buyer’s remorse from time to time when its acquisitions have left the company with superfluous employees it must lay off and undesirable infrastructure that it has to auction or abandon.
A perfect example: In January, Google sold its $12.5 billion acquisition, Motorola Mobility, to Lenovo for only $2.91 billion. Google maintains many patents, which many assumed was the main purpose of the acquisition, but still. Ouch.
With Apple sitting pretty on its mergers and acquisitions throne, Google needs to step it up in 2014—not necessarily in the amount of money it throws at M&A but in terms of the types of companies it acquires and the benefits the company earns from each one. Google may be off to a good start thus far with Nest and DeepMind, but only time will tell where these acquisitions will take the company in the future.
For now, congrats, Apple, and keep up the smart M&A if you want to continue sustaining the high profits you’ve enjoyed over the past several years.