Tim Cook on How Apple Acquires Companies, Big and Small

“We’ve averaged about an acquisition every other month”

Speaking on Apple’s modus operandi regarding acquisitions, CEO Tim Cook told analysts at an investor conference this week that “Cash is not burning a hole in our pocket,” implying that the company makes only smart purchases.

Asked about the mentality behind acquisitions, Cook pointed investors’ attention to the last three years, saying, “We’ve averaged about an acquisition every other month.”

“The kind of companies that we’ve purchased have been companies that either have really smart people and/or IP,” Cook said.

He elaborated: “Generally speaking, in many cases, we’ve taken something that they’re working on and moved the skills to work on something else.”

Cook mentioned Apple’s PA Semi acquisition a few years back when the company wanted to make its own chips. He suggested the purchase has paid out tenfold.

“We bought a company called ‘PA Semi’ a couple years ago. We were in the process of creating the engines in [iPhone and iPad]. These were an incredible group of guys,” said Cook.

As a result of the PA Semi acquisition, Apple has been able to produce the first A4 SoC (system on a chip) which powered the iPhone 4.

Soon thereafter came the A5 in the iPad 2, the A5X in the iPhone 4S, the A6 in the iPhone 5, and the A6X in the fourth-generation iPad with Retina display.

Weighing in on Apple’s small-level acquisitions, Cook said, “We’ve done many many others that are similar in nature to that. We will do more of those. We really like to control the primary technology.”

“In terms of large acquisitions,” he said, “we have looked at large companies. In each case, it didn’t pass our test for various reasons. We will look again, I’m sure we will. I think we have the management talent and depth to do it.”

Ensuring investors that cash wasn’t burning a hole in Apple’s pocket, Cook concluded, “We don’t feel pressure to acquire revenue…we want to make great products.”

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