Apple’s not known for using its gobs of cash to make big acquisitions. And on the rare occasions it does, those investments tend to be software-related, such as the 2002 purchase of German company Emagic (for an undisclosed amount), which…
Apple’s not known for using its gobs of cash to make big acquisitions. And on the rare occasions it does, those investments tend to be software-related, such as the 2002 purchase of German company Emagic (for an undisclosed amount), which ultimately helped Apple develop what became GarageBand. So the news that Apple has quietly paid $278 million for a small, fabless PowerPC chip designer, PA Semi, understandably caught a lot of industry watchers off guard on Wednesday.
True to form, Apple is being tight-lipped about the purchase, including the reasons behind it. Still, it does fit rather nicely into the Cupertino’s company standard acquistion and investment MO. Here are four reasons why this acquisition makes sense for Apple.
Buying Secrecy
When we asked Creative Strategies analyst Tim Bajarin to weigh in on how Apple might spend its growing cash reserves, he told Wired.com that the company’s “stockpiling…has more to do with its money management than anything else.” In other words, Bajarin says, the company “uses its cash reserves as a way to buy secrecy.”
Bingo. If you think about it, this PA Semi purchase actually fits in rather nicely with that strategy. While some characterized the move as a slap in the face to Intel — who just released its own low-power processor, the Atom — the fact of the matter is that Apple has never been married to one particular chip architecture. Need proof? Just look at the mishmash of components Apple uses in its iPhone.
To that point, Yankee Group’s Carl Howe says that one of the reasons people were excited when Apple switched from PowerPC chips to Intel was because the latter company tends to be very vocal about its roadmap. “People realized, oh gee, if we just look at Intel’s roadmap, we can get a sense of what Apple might be up to.” Well, not any more.
The acquisition of PA Semi makes it all the more difficult to predict when and what types of devices Apple will release. Furthermore, it’s a way to differentiate in a market that’s obsessed with commoditizing consumer hardware.
It Was Dirt Cheap
Given that Apple currently has a cash balance of over $18.4 billion, the speculated price of $278 million is but a miniscule drop in the bucket for the company. In fact, at that price, the PA Semi acquisition would even be a good investment simply for the smaller company’s IP.
Continued Interest in Low-Power Chips
Apple, like everyone else, is obviously interested in low-power processors for portable devices. But as Howe notes, there are many dimensions to low power platforms. Low-power chips generate less heat, which means less reliance on fans. You can also pack chips closers together on a low-power platform. PA Semi currently has a dual-core chip with two 64-bit PowerPC processors, two memory controllers, and a bunch of other system-on-a-chip features. Is Apple interested in applying that low-power know-how to its own products and possibly using PA Semi’s 2GHz, 5-13 watt chip in a product like Apple TV? You bet!
The Need for Flexible Architectures
When Apple unveiled the MacBook Air at this year’s Macworld Expo, one of the most interesting parts of the announcement was that the company was able to convince the world’s largest (and arguably the most influential) chipmaker, Intel, to devote a substantial amount of time and energy to shrinking one of its most popular chips for a piece of hardware that is still very much a part of a niche market. Indeed, one of the reasons it takes Apple longer than other PC manufacturers to update its products (even now that it’s using Intel) is that the company’s engineers must often create customized motherboards and rejigger specs so that new processors can be incorporated into the slim form factors many of the company’s products tout.
It just so happens that PA Semi co-founder, Dan Dobberpuhl, has substantial processor design chops. He was the lead designer of the DEC Alpha series of microprocessors, a series of power-efficient ARM microprocessors. The rest of the PA Semi team also has extensive chip-building experience, with executives that designed the Opteron, Itanium and UltraSparc chips. Given that fact that Apple is undoubtedly committed to releasing slim and sexy devices, I would imagine that kind of collective knowledge should come in handy in coming years.
Via [wired.com]
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