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Thursday, March 20, 2008 9:13 AM/EST

Weathering the Google-Apple Fallout

 

It can useful for a reporter to have the skin of a twice-baked potato. Well, not rough and leathery, but thick-thick. So I have no problem with getting ripped for my slide show on the top five reasons why Google should or shouldn't buy Apple.

Here is the piece. If nothing else, read the ensuing conversation thread.
 
The piece, which evolved over the last few weeks after an analyst and I were riffing about how Google might counter Microhoo, stimulated some interesting viewpoints in the thread, including the notion that killer bees would invade Antarctica before Google and Apple merged and the twisted reference to Apple loyalists as Branch Davidians.
 
Apple makes millions of dollars making consumers happy, which is what it sets out to do. It's hard to criticize a company for that. The iPod is marvelous; the iPhone will probably be sublime in the second go-around.
 
That said, let me address the serious points. Of course, Google can't afford Apple, and yes a merger would be more likely the way the numbers look now. For those pragmatists, let me say this: Don't ever count a deal out where money is concerned.
 
Companies are ingenious at creative accounting (Apple knows a little something about this re: stock options), so never underestimate their ability to not let the money, or as Barron's helpfully pointed out in this post, stock, get in the way.
 
If these companies wanted to do the deal, they would find a way to get it done. Of course, Apple would have to give consent. Unlike Microsoft in its bid for Yahoo, Google has no leverage over Apple, and as has been pointed out in the thread, Apple actually has more cash on hand.

Moving past the fiscal challenges, is this really so hard to imagine happening? Dismissing such a deal on its face assumes that the market conditions aren't going to change. If someone told me five years ago that Microsoft would try to buy Yahoo I would have laughed it off. So, why has Microsoft bid $44.6 billion for the company?

The market changed. Microsoft realized it needed to do something drastic to catch up to search and online ad leader Google if it is going to challenge the market leader for presence on the Web.

Is it really so hard to believe Google might feel similar pressure in a couple years? If we are headed into a recession that will depress the online ad market, Google will see its click-through rates plummet. Those who have the most will lose the most.

Its enterprise and Apps businesses might be a able to float a startup through a recession, but not a hungry beast like Google, which has about 17,000 employees to feed morning, noon and night. With Apple, Google would have some popular consumer gear to fall back on.

Philosophically, Google tends to be open and Apple tends to be closed, sure. But where the Web is concerned, particularly the mobile Web, Google and Apple are more closely aligned than people realize. There is a reason why Schmidt is on Apple's board. In my slide show, I considered the possibility that Apple would have a negative effect on Google's fun, approach.

Let's flip that. What if Google influences Apple to be a little more open, and the company begins to work with other carriers?

A recession might hurt clicks, but I don't think people will stop buying great smart phones for Christmas, particularly if the price drops and the gadget comes loaded with Apps that consumers and working stiffs must have. And people won't suddenly stop buying iPods; they're viral devices.

I really believe Google and Apple would be indestructible, weathering not only Microhoo's furious assault on its castle walls, but any impending recession.
 
Finally, one reader pointed out that a combined Google-Apple entity should be nicknamed Goople, not Gapple. Goople sounds much better.

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