Rumors abound about Apple's (NASDAQ:AAPL) potential interest in acquiring Box (NYSE:BOX) or Adobe (NASDAQ:ADBE) to help its enterprise business. Pundits are building off of a note released by FBR tech analyst Daniel Ives. The speculative news has investors scratching their heads and wondering if either of these two companies may be useful to Apple in the near future.
In this video segment, The Motley Fool's Sean O'Reilly and Dylan Lewis talk about where Adobe and Box are as individual companies and break down why an acquisition of either would not be a strategic business move for Apple.
A full transcript follows the video.
This podcast was recorded on Dec. 11, 2015.
Sean O'Reilly: Next one that the FBR note listed was Adobe.
Dylan Lewis: Yeah, and I kind of want to lump Adobe and Box in together here, just because ... so, again, GoPro is really the only one of these four that moved on this news. Adobe was actually up 4% before we started taping the show, when I checked this morning.
O'Reilly: Because of this note?
Lewis: No, had nothing to do with the note.
O'Reilly: OK, I was like, what?
Lewis: They reported sales and earnings delivered solid sales and surprised by, like, $0.02 per share on earnings. So analysts were pretty happy with that. That's what that uptick is.
O'Reilly: Surprising the price-to-sales multiple on these guys, though.
Lewis: Yeah, Adobe, a market cap of $45 billion, price-to-sales, 9.7. Again, that would make it a pretty rich target for Apple to go after. Box, much cheaper and also much smaller in their footprint. Market cap of $1.6 billion, price-to-sales at 5.6. Didn't move at all in the news.
Both these companies here, Box and Adobe, would be kind of enterprise-segment plays for Apple. You know, it's one of the things we talked about when we did our earnings update on Apple was, oh, Apple's got this, like surprise ...
O'Reilly: Enterprise business that nobody talks about.
Lewis: ... a surprisingly big enterprise business that no one talks about. And the play with Box would be enterprise storage. To me it seems a little weird that Apple would acquire someone in the cloud storage space when cloud storage is not a very lucrative business to be in. It's something that you kind of offer to build out your platform and make your offering more robust. And given that ...
O'Reilly: Also, given Apple's cash hoard and the market caps that we're talking about, and the army of tech people that are there in Cupertino, I have to think they could replicate a lot of this on their own.
Lewis: Yeah, and also when you're thinking about building out a platform, so, like, what [Amazon.com] does with its Prime, where they make cloud storage available, or obviously what Apple does with iCloud, you don't need to acquire customers from people that are loyal to this one service already. You already have the brand name; you just need to build out the offering in your existing product. So it's not a customer acquisition, either.
I think Adobe would kind of be more of a productivity play. They have a lot of applications that are focused on documents and marketing. So it would be just kind of handling that kind of stuff from an enterprise perspective.
I don't know if I really buy that one, either, particularly like we talked about with the market cap being what it is and its price-to-sales being what it is. It seems like a very rich acquisition, and I'm not really seeing that one, either, for the time being.