Apple’s next big move? Buying Nintendo

“Apple needs its next big thing — fast. With its shares down nearly a third in the past three months and the financial guidance bombshell earlier this year, the burning question turns to what Apple can do to spark a turnaround,” Tae Kim writes for Barron’s. “Apple has hinted that it will act boldly to revive its fortunes.”
“CEO Tim Cook reminded investors in a recent letter that Apple’s goal is to be ‘net-cash neutral’ over time, meaning that Apple needs a use for its $130 billion in net cash,” Kim writes. “So far, that has meant buybacks and dividends. But in a recent CNBC interview, Cook made it clear that the company continues to ponder large acquisitions, as well: ‘We’ve elected so far not to do those because we haven’t found one that we said, ‘Wow, that’s a nice intersection of Apple.’ But I’d never rule it out.'”
“The best fit for Apple may be Nintendo, its stylistic twin in Asia. Like Apple, Nintendo likes to make money. Both companies have similar attributes: mountains of cash, gushing profits, beloved brands, loyal customers, and sticky ecosystems of software and services,” Kim writes. “Nintendo has struggled to gain traction beyond its home consoles. Apple has a few things to offer there: Think iPhone, Apple TV, iPad, and maybe even the Mac… Apple could help Nintendo aggressively scale its Nintendo Switch Online paid subscription business, which enables robust multiplayer online services and access to a classic games library. All told, Apple’s ecosystem powers 1.4 billion active devices.”
“Perhaps the best part of the deal? Apple may be able to acquire the highest quality videogame publisher in the world at a reasonable price,” Kim writes. “Nintendo has a market value of $34 billion, but Nintendo is conservative with its capital and has approximately $9.6 billion in net cash. That gives the company an enterprise value of about $24 billion. If Apple offered a 50% premium to Nintendo’s market value—a deal that Nintendo would have to consider—the price tag would come to roughly $40 billion.”
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“Nintendo Co jumped 4.6 percent, which traders said reflected reaction to a Barron’s article suggesting that Apple Inc buy the Japanese game console maker to spark a turnaround,” Ayai Tomisawa reports for Reuters. “‘Investors are taking heart from the article. But the rally will likely be short-lived’ as the potential consequences of any merger or purchase are not clear, said Hikaru Sato, a senior technical analyst at Daiwa Securities.”
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MacDailyNews Take: Certainly, there’s a lot of crossover and synergy there. Whether Apple would ever make the leap from their largest-ever acquisition ($3 billion for Beats) up into the $40 mega acquisition realm is the question.
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