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  • Of Apple and Acquisitions

    December 7th, 2009

    Over the weekend, Apple confirmed the purchase of Lala, a Silicon Valley startup that specializes in music streaming. That was sufficient cause to start the tech pundits speculating on how Apple would use its new acquisition, and whether we’re in store for an iTunes music streaming service in the near future, perhaps focused on the iPhone and iPod touch.

    Of course, buying smaller companies is nothing new for Apple. With tens of billions of dollars in cash and investments, they can pretty much do whatever they want when it comes to adding technology to their portfolio. The price tag for Lala has been estimated at approximately $80 million dollars, which puts barely a dent in that cash hoard.

    Last year Apple purchased PA Semi, a chip designer specializing in PowerPC-based CPUs. At the time, Steve Jobs was quoted by the Wall Street Journal as saying that the acquired company’s technology would ultimately turn up in the iPhone and iPod touch.

    That, of course, hasn’t happened yet. It’s one thing to buy a company, and quite another to integrate it within a larger corporate structure that may have a different set of priorities. So even if a future Apple gadget, perhaps the tablet to start yet another rumor, contained technology based on the inventions of PA Semi, the timeframe of roughly two years since the original purchase would make quite a bit of sense.

    When it comes to Lala, once again it will probably take a year or two for Apple to deploy their technology into a media streaming service, if that’s what they plan to do. As many of you probably know, Apple is spending upwards of a billion dollars to build a server farm in North Carolina. Put the two together and you can see where, again, there won’t be immediate payback.

    Indeed, it’s quite possible that technology from Lala, PA Semi and other companies Apple has purchased in recent years won’t show up in any way that would make them truly recognizable. I suspect most of you expect a situation resembling that of iTunes. Apple bought a media player app, SoundJam, and morphed it into its own product. Even though they didn’t look exactly the same, it was no secret how iTunes came to be.

    From a practical perspective, these purchases are a good thing for Apple. There are lots of small companies coming online each and every year trying to develop new technologies and find their place in the sun. Some will attempt to sell the product or service directly, as Lala is still doing, while others hope to be acquired by a larger company with deep pockets, so they can get huge paydays, retire early, or just continue to do their thing without worrying about the source of their next paychecks.

    At one time Apple had a “not invented here” problem, where only a few outside technologies were licensed, and they kept trying to use their own expertise instead. Certainly that’s why there was once something called AppleTalk (now a relic of tech history) and you know that both FireWire and QuickTime an other technologies now widely accepted were invented there too, although some were ultimately embraced by other companies.

    These days, Macs use loads of industry standard technologies and components. Mac OS X is built upon a tried and true Unix-based structure, buttressed with Apple’s own look-and-feel overlay.

    When it comes to buying a new company, of course, there’s no certainty that the technology that comes to Apple will ever appear in a new product or service. Yes, that might be the plan, but sometimes plans change and the new employees and patent portfolio they bring to the table might be deployed in ways not originally anticipated. That, of course, isn’t going to be obvious for quite a while.

    Now it’s also true that lots of people check out Apple’s patent filings for possible clues about new products. Certainly those filings can be considered precursors to the arrival of the Magic Mouse, and brought to bear in many of the new input device’s unique capabilities. But that doesn’t always happen.

    You see, more often than not Apple will patent some new invention not because there’s an imminent product in the wings, or even something that might come out several years hence. You see, there are loads of patent trolls out there, companies that manage intellectual property portfolios but don’t actually build anything. They earn their income from license fees and often lawsuits filed in cities friendly to such legal matters, usually in Texas for some reason.

    As Apple has come to realize, they must take a defensive approach, going through the time and trouble to get first digs on a new technology even though the product in which the technology is contained may perish in the test labs. In the end, that process is far more sensible than having to pay tens of millions of dollars in legal and licensing fees later on after a protracted legal battle.

    So yes it’s nice to use company acquisitions and patent filings for clues about what Apple’s up to, but don’t depend on that information for reliable information. Sometimes nothing happens.



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