Andrew Ross Sorkin wrote Tim Cook a shopping list in the New York Times this week. Sorkin laid out how Cook should spend $100 billion of Apple's (AAPL) $117 billion cash hoard. The remainder can remain as "walking around money" for Apple, Sorkin said.
I don't mind people making a case for why Apple should buy a given company. I've made the case in the past why they should buy Twitter for example.
But Apple is not going to spend the vast majority of its cash in one manic shopping spree. Apple will want to keep a lot of cash as protection for the unthinkable happening, as they never want to be 90 days from bankruptcy again. Also, they now have a dividend to pay. And don't forget most of their cash is offshore and can't be touched for American acquisitions.
I think Sorkin acknowledges Apple's not going to go out and spend $100 billion on his shopping list any time soon. He seems to be more making the case for the kinds of companies that Apple should buy at the moment.
Top of Sorkin's list for Apple is Nuance (NUAN).
"This is the one no-brainer on the list. Nuance, based in Burlington, Mass., provides much of the speech recognition technology behind Apple's Siri and dictation functions. Right now, Apple has merely licensed it and integrated it into both its mobile devices like iPhones and iPads as well as its new Macintosh operating system. Most users think it is Apple technology, but those services wouldn't work without Nuance.
It should go without saying, but the importance of speech recognition is only going to increase in the future. Nuance has more patents for it and has developed the technology further than just about any firm in the world. At some point, Nuance will be able to hold Apple for ransom. Google and Microsoft are steadily building their own speech recognition technologies and they are catching up quickly. Nuance's market value is $6.3 billion. Even if Apple paid twice as much, it would be a worthwhile investment."
Here's the thing about Nuance. The vast majority of the company is a medical transcription business, not speech recognition software.
Nuance is a roll-up of almost everyone in the speech rec industry over the past 25 years. Its CEO is a deal-maker and I'm sure he'd love to sell to Apple if he could.
Apple has known its product road map with Siri for a while now. If Nuance and its speech recognition were as important and strategic as Sorkin thinks, the time to buy it would have been in 2009 at $10, not in 2012 at $20 (or $40 as Sorkin implies it is worth).
Apple did do a deal with Nuance prior to launching Siri. I don't know, but I'd guess that in exchange for lots of speech rec license revenue to Nuance, Apple got a right of first refusal that lets them buy the speech rec stuff they need if someone tries to buy it first. In other words, there's no need to buy Nuance.
Someone once told me that Apple has a lot of OK speech people, but some superstar artificial intelligence people. AI is what's really the key to Siri and Apple's future, not speech rec, which is pretty much a commodity now.
So, don't be so quick to buy Nuance on the recommendation of Sorkin. Based on the market reaction since his article came out, most people aren't.