Apple: Buying Cool…

Apple’s $3.2 billion acquisition of Beats is about buying cool? It can’t be paying for headphones or the some 111k users of the streaming service. How do those increase sales of iPhones, iPads or Macs? A bit of a stretch to claim a natural add-on for the wearable market/iWatch market. So it must be buying for cool.

The trouble with cool is it’s better worn by independent companies not branded by large behemoths like Apple. Certainly the shine is off the apple symbol of cool, but how can Apple translate Dr Dre’s cool factor back into the ecosystem is created. Simply – it cannot do it.

The fact is that Steve and Woz did not care about what others thought of them, they just built something they thought was cool. The Mac gained initial success being brought into corporations by the back door for desktop publishing. Mac was the under-dog to IBM and Microsoft. It was cool to be a non-conformist and advocate Macs in business and to be an early adopter.Screen-Shot-2014-01-08-at-1-8-9.50.37-AM

Too some degree, Apple is suffering from its own success. What do do next when everyone owns an iPhone, lots of business folks and consumers have iPads and the Apple is no longer a sub-culture, rather its mainstream.

So instead of being radical in product or by design, its listened to the mainstream and reversed Job’s notion of the finger to “The Man” by returning $130 billion to “long term” shareholders with share repurchases and dividend increases and a $12 billion debt offering to support it. Like an aging rocker, it’s no longer cool to watch Mick Jagger on stage or Madonna performing with younger artists to “pass on” the baton.”images Face it, Apple is mainstream, not a radical subculture with cool products. Beats for $3.2B dose not have a wow factor of either technology, IP, innovation or a brand that will translate into higher sales of 76% of its core business. In fact, what are the traditional synergies of the acquisition?

Was returning $130 billion to shareholders the best use of cash for an innovative technology company or to re-invigorate growth? Is $3.2 billion the best large acquisition to augment the $4 billion iTunes segment or help position iRadio? Most importantly, will Beats really augment the new wearable and iWatch strategy? Sorry Apple, you cannot buy cool and now are relegated to a value play for investors to clip coupons.

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