Reportedly, Apple Inc. (AAPL) is planning to acquire the Israel-based flash storage solutions provider Anobit, for approximately $400 million to $500 million. Anobit chips are already used in Apple devices such as iPhone, iPad and MacBook Air.
Based in Herzeliya Pituach, Israel, Anobit also supplies Memory Signal Processing (MSP) technology, which improves the performance of flash storage products and systems and also makes them cost-effective. Anobit also supplies its chips to Samsung and Hynix. Incidentally, Hynix recently became the main flash memory supplier for Apple's iPhone 4S.
Apple is not known for multi-million dollar acquisitions unless absolutely necessary. If the deal goes through, this would be Apple’s second acquisition where the company would have invested more than $400 million. The first such deal was the NeXT acquisition. Apple had purchased NeXT, a computer programming services company, for $404 million.
More importantly, Apple has always acquired software-based companies. In the company’s long history, this would be Apple’s third acquisition in the hardware space since it acquired P.A. Semi in 2008 and Intrinsity in 2010, for $278 million and $121 million, respectively.
This acquisition would enable Apple to amplify and boost the memory volume and performance of its devices. Moreover, Apple would get a grip on technology that could differentiate it from competitors. With its robust balance sheet and solid cash structure, Apple has the strength to go in for further acquisitions that would fix its hardware-related supply-chain constraints.
Apple has been a leader in the technology space and has always wooed its investors with its innovative product line. We believe that Apple’s ability to spur the popularity of its products in developing nations, where pricing is often an important consideration, will go a long way toward deciding the company’s future growth. The company’s sizeable cash balance will no doubt come in handy.
However, the most important factor for Apple’s growth is the number of innovative products it is able to launch going forward. Apple is renowned for its innovative devices and investors are always eager to see something new from the company.
The company is entangled with patent related lawsuits with several companies such as Samsung, and Microsoft Corp. (MSFT). Legal issues may be expected to act as a headwind going forward.
We maintain our Neutral rating over the long term (6-12 months). Currently, Apple has a Zacks #2 Rank, which implies a Buy rating in the near term.
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