Twitter, barely three years old, is being touted as a takeover target by the rumor mill fueled by every media outlet in North America. The unsubstantiated rumors claim that Apple is planning a $700 million cash buy-out for the still profitless social networking San Francisco company. If this were true, it would suggest that Apple’s senior management has suddenly become careless and dimwitted.
Apple controls a healthy war chest in the neighborhood of $30 billion including receivables, which means it can weather the current economic storm, and continue to invest in the development of new technologies. Having very successfully returned from the brink of disaster, Apple Computer built its cash hoard carefully and diligently. It is not about to blow a major hole in that bank account by acquiring a temporarily fad-sustained-platform that it has the technology and engineering depth to build for itself.
Twitter’s business model has not shown any possibility of sustaining itself over the long term. Publications with influence, such as Businessweek, are suggesting that such an acquisition would keep Twitter out of the hands of Google, Microsoft and Facebook. That’s good business? Isn’t it more likely that Apple would wish that a Google or other, blow a billion on a company with a questionable future? It is more likely that Apple does not care either way. Folding a young corporate infrastructure into a mature stable company is almost never a successful endeavor. It also strains the senior management of the acquisitor beyond its capacities as it bends to the newly transplanted egos intractably flexing their wills against new directives.
Apple’s iPhone/iPod applications will satisfy the needs of all Twitterers until their fleeting affections and mores decide that a new and more useful platform has arrested their insubstantial attention. The media will follow. The rumors that Google was a potential buyer of Twitter only a few weeks ago fizzled into the Silicon Valley ether. Google’s management, it seems, had some common sense.
Through the past decade, Apple has shown an unusually high degree of foresight and has been fastidious in controlling the quality of its offerings. While Apple has stubbornly held onto its own version of the NIH syndrome, it remains one of the most potent engineer magnets in America. Common sense will continue to prevail in Cupertino, and Twitter will continue to deplete the venture capital sustaining its current luster in the media glare, as momentary as it might be. Stories of an Apple acquisition should prove to be little more than wishful media musings about a current fad.
Going all the way back to ’81 when Apple established an alliance of sorts with Logo Computer Systems for the Logo programming language that solidified Apple’s position in the world of education, the hardware manufacturer has a history of establishing effective relationships to solidify its market presence. Spending $700 million on Twitter doesn’t fit that blueprint, and Wall Street very probably does not have the influence on Apple’s Board that it did on eBay’s when eBay acquired Skype for reasons that strained common sense. Even if Twitter continues its growth trend over the mid term, Apple should stay away.
James Raider writes The Pacific Gate Post