Apple: Enhancing its Products with Acquisitions
“Apple buys a company every two to three weeks on average”, Apple’s CEO Tim Cook said in a recent interview with CNBC. Since its inception in 1976, Apple has grown from a personal computer company to a multinational with diverse offerings like consumer electronics, online services and software applications. The company is known for acquiring smaller companies that boost Apple’s innovative product portfolio or are aligned with its business vision. According to CrunchBase, Apple has made 106 acquisitions as of March 2019.
The largest of Apple’s acquisition reflect its strategy of developing cutting edge products by acquiring other companies and their intellectual assets.
Many of the features in Apple’s products are built on the technology that came along with the acquired companies. For instance, Apple acquired Anobit Technologies and Dialog Semiconductor for chip performance, developed maps with C3 Technologies and purchased AuthenTec which made its fingerprint-enabled payment solution Apple Pay possible.
In this report, we take a closer look at Apple’s inorganic patent assets, focusing on around 9,630 currently active patent applications that the company has acquired via acquisitions or asset purchases, out of a total of 46,192 active published applications it currently owns.
Key Acquisition Trends
Apple views its acquisitions as a means to further its product innovation and development rather than a mere addition to its revenue streams. In another quote, Tim Cook has said that the kind of companies Apple buys are the ones with smart people or intellectual property.[caption id="attachment_3521" align="alignleft" width="300"] Figure 1: Publication Year Spread – Organic Vs Acquired Portfolio Segments [Click on image to enlarge][/caption]
A little over 20% of Apple's patent portfolio consists of acquired patent applications. Figure 1 shows the year-wise spread for both organic and inorganic patent assets in terms of when they were published or granted. Apple’s publication trend shows a sharp growth for organic patent assets after 2011 while the year-wise spread of the published or grant dates of the acquired applications shows a decline post 2016.
[caption id="attachment_3522" align="alignright" width="300"] Figure 2: Key Geographies of Acquired Portfolio Segment [Click on image to enlarge][/caption]
Along with the US, Apple’s acquisitions have significantly strengthened the company’s patent coverage in the jurisdictions of Korea, China and Japan, as seen in Figure 2.
Apple’s largest acquisitions corroborate the company’s strategy of buying technology that enhances its product development. It bought PA Semi (Palo Alto Semiconductor) for $278 million in 2008. PA Semi specialized in building powerful and low-power silicon chips. Apple used the company’s expertise to design efficient semiconductor logic and develop micro-processors for the new generations of its iOS devices.
In a similar approach, Apple acquired Beats Electronics in 2014 for $3 billion in cash and stock, making it Apple’s largest acquisition. As the world's largest seller of premium, mass market notebooks, phones and devices, Apple needed high quality audio hardware to incorporate in them. The company redesigned Apple Music and began selling the Beats line of headphones in its retail stores post the acquisition.
In 2010, Apple purchased Polar Rose, a Swedish company that developed facial recognition software, for around $29 million. It also acquired Israel-based RealFace, an AI facial recognition company in 2017. These acquisitions enabled Apple to build on security, near-field facial recognition, 3D image reconstruction and other related features in their products.
Apple’s most significant acquisition in terms of total patent applications is Nortel which constitutes 836 active patent applications in its portfolio. Out of the total $4.5 billion spent on Nortel’s patent acquisition by the consortium of companies that included Apple, Microsoft, Sony, RIM, Ericsson, and EMC, Apple paid $2.6 billion. Nortel’s portfolio largely included patents related to telephony, internet search and social networking, mobile phones and networks, data networking and semiconductors.
Apple’s overall portfolio has a Relecura star rating of 2.57. The organic portfolio has a star rating of 2.65 and the acquired portfolio of 2.25. Typically, a patent with a Relecura Star Rating of 3 or more is deemed as one of high-quality. The Relecura Star rating ranks each patent on a scale of five. It is a proprietary composite metric incorporating multiple criteria. The metric combines different technology, business, and litigation related factors.
The high-quality acquired patents in Apple’s portfolio relate to the technology categories ‘digital interface arrangements’, ‘reading or recognising printed or written characters’ and ‘hardware or software aspects of TV signals’.
Read our report to get all of our insights into Apple’s acquired patent assets, to better understand its impact on Apple’s business strategy.
Apple’s approach to patent acquisitions has been strategic and has contributed to its preeminent position in the consumer technology space. It would be interesting to see what other IP acquisitions Apple makes in 2019 and beyond, and how these acquisitions impact its brand and offerings in the future.Doing technology due-diligence for M&As? Get a Relecura demo today to know more.