+- Twitist Forums (http://twitist.com)
+-- Forum: Facebook forums (/forum-14.html)
+--- Forum: Facebook Marketing (/forum-12.html)
+--- Thread: Why does APPLE Co. purchase investments? (/thread-48030.html)
Why does APPLE Co. purchase investments? - leena - 12-03-2012 08:07 PM
Large fluctuation in C/F accruals in Balance Sheet probably was caused by large fall in cash flow from investments, and then we see increase in net purchases of investments.
- Hank Apotomous - 12-03-2012 08:15 PM
Apple, like most tech companies, invest in other companies to establish competitive advantage. This can be done both to eliminate competition or foster technological innovation that they hope to capitalize on.
1) Apple may purchase a tech start up that is developing a technology that could compete with their own, or become useful to competition. Investing, or owning a controlling stake in that company provides Apple with the influence to make sure that technology is used for their benefit, vs. the benefit of their competitors, or in development of a new competing technology.
2) Apple may fund a tech start up developing a technology that can benefit them directly. Facebook is notorious for this. They have funded and invested in companies that develop applications, facial recognition software, photo album software, music streaming software. Sometimes its easier to purchase something already developed, vs. developing it from the ground up and facing problems with patent or trademark infringement by coping someone else's work. Also tech start ups often have great ideas but are under funded, so they are seeded by larger companies that can benefit from their work.
Companies like Apple just have so much cash, that it's easier to purchase the companies, or invest in the companies than become clients of these organizations later on. The competitive advantage for Apple is that the tech never makes it to the overall marketplace, thus reducing overall competition within the marketplace.