An Apple Buyout of Sony Is a Bad Idea: 10 Reasons Why

by Don Reisinger

Remember when Steve Jobs came back to Apple and eliminated the vast majority of the company’s products? He realized at that time that Apple couldn’t survive with so many product lines, and he saw no reason to try to be everything to everyone. Jobs wanted to focus Apple on the products and solutions that mattered. Sony has too many moving parts to be a successful part of Apple.

If Ellison’s comments are to be believed, Sony believes that it’s worth more than it really is. And why not? Sony has a long history with a brand that people know across the globe. While Apple should pay for that to some degree, there’s a good chance that Sony would want to make the iPhone maker pay more for the brand than it’s really worth. Sony is Sony, but it’s not Apple. The trouble is, only one of the companies knows that.

As of this writing, Sony is valued at $19 billion, according to its market capitalization. Assuming Apple would be forced to provide a premium on the current stock price and pay for the “goodwill” Sony has in its brand, Apple could pay a significant amount more than the $19 billion. Considering how much money Sony has lost over the last few years, would anyone really want to pay that much for the company? I think not.

Some have said that Apple could derive value from Sony through its television division. Apple is reportedly working on a TV set, and acquiring Sony would expedite that process. However, Sony’s TV division is losing market share and hemorrhaging cash. The company’s shareholders are calling on CEO Kazuo Hirai to sell it off. Why would Apple want any part of that?

Buying Sony isn’t just about electronics. If Apple were to buy Sony outright, the company would be forced to become the owner of the company’s own record label, managing talent and song royalties. Such a move puts Apple in direct competition with labels that it relies on to generate so much revenue through iTunes. It doesn’t seem practical, therefore, to bite the hand that feeds you, does it?

One of the most important aspects of Sony’s business, and part of the reason the company is worth so much, is its Finance business. Sony provides financial services, insurance and related offerings to customers. Apple has no expertise in that industry and would have no reason to acquire it. The division just further complicates an acquisition and reduces Sony’s potential value to Apple—something that Sony’s executives wouldn’t like to hear.

Apple might have all kinds of cash in its coffers, but that doesn’t mean that it needs to make a blockbuster acquisition, like some suggest. Apple can continue to build up its cash and use it for a safety net, to boost its stock price with dividends, and keep doing what it’s doing. To argue, as some analysts have, that Apple should put its cash to work through major acquisitions is nonsense.

All of this talk about Apple and Sony supposes that Kazuo Hirai wants to sell his company. The truth is Hirai feels that he’s on to something with his “One Sony” initiative, and while some units might be up for sale at some point in the future, right now, he wants to stick with what he has. At least publicly, it appears Sony is in no position to even entertain a deal with Apple.

According to Ellison, the talks between Apple and Sony occurred when Steve Jobs was still running the company. Now that Tim Cook is in charge, the chances of an acquisition feel even less likely. Cook has shown himself to be very practical and risk-averse. In other words, it’s highly unlikely that he would want to spend the tens of billions of dollars it would take to buy Sony just to get his hands on a few worthwhile projects or divisions. Cook isn’t about spending money; he’s about making money. And it’s hard to see how Apple would see a positive return on any investment in Sony.

Could Sony and Apple eventually come to an agreement? It’s possible. But that’s only if the companies are willing to make deals by division. One could see Apple having some interest in Sony’s PlayStation brand if it wants to build out its set-top box services, and there’s even a possibility that Apple would like to get some patents from Sony’s television division for any iTV it might have planned. As for everything else, it seems like a hard sell.