Apple Plans to Purchase Universal Music

mrbiiggy writes "Apparently Apple has been plotting to purchase Universal Music for $6 billion, reports Spiegel Online (read the Google translation). Who knew Apple even had that kind of cash? (The L.A. Times is also reporting this, free reg required.)"

Comments

who knew apple had that kind of money?

[IRNI]

lots of people. remember when their stock took a hit a year or so ago and people were wondering what the fate of apple would be? then also remember that news came out they had over 12 billion in cash assets. yeah apple is a huge company. they may not have market share yet in the OS world but they are a very very large company. make no mistake.

Apple has cash, not all of it though

[Kip]

According to Apple's financial reports, they had 4.4 billion dollars in cash reserves. Vivendi, who currently own Universal, has somewhere between 6 and 7 billion dollars of debt, so I don't think Apple is going to be able to pay part cash, part stock. Vivendi is just looking to get out.

What I'm waiting to see is how this interacts with Apple's new music service which supposedly debuts next month. Nice catalog of music to choose from.

Full Story.

[Anonymous Coward]

Some anonymous Google translation doesn't do this justice. This is Big. Very big. Changing the way the world does business big.

Adapt or die, as Lessig says.
Wow.

(Not logged in due to copyright infringement, and fear of being called a Karma Whore...)

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Apple Reportedly in Talks to Buy Universal Music
A deal could yield up to $6 billion for parent firm Vivendi and make tech maverick Steve Jobs the most powerful figure in the record business.

By Chuck Philips
Times Staff Writer

April 11, 2003

In a pairing that would alter the architecture of the music business, Apple Computer Inc. is in talks with Vivendi Universal to buy Universal Music Group, the world's largest record company, for as much as $6 billion, sources said.

Such a seemingly unlikely combination would instantly make technology guru Steve Jobs, Apple's co-founder and chief executive, the most powerful player in the record industry.

Universal, which reaps about $6 billion in sales annually from artists such as 50 Cent, Shania Twain, U2 and Luciano Pavarotti, would be controlled by a maverick who revolutionized the computer market and coined the mantra "rip, mix, burn," which many in the music business read as an invitation to electronic piracy.

The discussions, a closely held secret for several months, could founder over unresolved issues. Apple hasn't made a formal bid but may offer $5 billion to $6 billion for the music company before Vivendi's April 29 board meeting, according to the sources.

Jobs and other Apple representatives declined to comment, as did representatives of Universal Music Group and Vivendi Universal.

The Cupertino, Calif.-based computer maker's surprise play for Universal Music could alter the dynamics of the bidding for Vivendi's entertainment assets. The French giant, in a move to reduce debt, seeks to raise $7 billion this year by selling assets that probably would include some or all of its Universal film, television, theme park and music units.

Investor Marvin Davis has offered about $13 billion for 65% of the entertainment assets and has been the only known bidder to express serious interest in the music company. A separate sale of the music operation would appear to work in favor of Liberty Media Corp. and others that are focused on the company's other entertainment properties.

Jobs' pursuit of Universal comes at a time when Apple, with less than 3% of the desktop computing market, has been struggling to find its next wave of growth and the music industry has been buckling beneath the pressure of online piracy and falling sales.

Defying conventional wisdom, Jobs apparently is betting that music is finally on the verge of becoming a profitable presence on the Internet. Apple has been quietly testing a service that some music business insiders believe could pave the way for widespread online distribution of songs.

People who have tried the service, expected to debut by the end of April, say it makes downloading and purchasing music as simple and nontechnical as buying a book from Amazon.com. It allows users to buy and download songs to their computers with a single click and to transfer the music automatically to their portable MP3 players.

The computer maker, known for its iMac desktop computer and other high-profile products, posted an $8-million loss on sales of $1.47 billion for its fiscal first quarter ended Dec. 28 -- marking the company's first back-to-back quarterly losses since Jobs returned to the CEO post in 1997. Apple has annual sales of about $5.74 billion and had about $4.4 billion in cash, cash equivalents, and short-term investments as of Dec. 28.

Jobs, who also is chairman of Pixar Animation Studios, helped found Apple in 1976, then stepped down as its chief nine years later to launch Next Inc. He returned to Apple when it acquired Next.

Universal Music Group, which saw operating profit slide 23% to $510 million last year, dominates the industry in 63 territori

For those seeking a motive...

[mblase]

...remember that Apple has been planning its own online music-buying service for a while now, having announced it just last month. Obviously this is a BIG step towards making that successful for themselves.

Re:Apple Records?

[James_Duncan8181]

The settlement does not prevent them entering the music industry as such, it merely prevents them from entering it under the Apple name.

Since they are buying Universal, which is an established brand...I would imagine that they will merely keep the name but make them a legal subsidiary of Apple.

Re:What's your plan, big guy?

[BJH]

I've done a run of 30,000 CDs for around 30 US cents per CD. With higher volumes, that would obviously be lower.

If you were doing a million, I dare say the cost would be under 10 cents each.

Wall St never approves of anything Apple does

[Erisynne]

Hence why their cash reserves make up most of their stock price. It's ridiculous. Apple is the bastard child of stocks, with a ridiculously low price-to-earnings/price-to-assets ratio because nobody actually invests in it but fanatics, while some people do pump-and-dump (they let others pump; they only dump) around MacWorlds.

Re:What's your plan, big guy?

[AvitarX]

I don't work at a record store, but I have worekd in retail. usually the suggested retail value it double the cost the the retailer. that means that CD's that a seggested for 16.00 to 18.00 cost the retailer 8.00 to 9.00.

the cost of cd stamping, printing, assembling, and distribution I have heard is around 2.00 a CD in reasonable volume. most CD's at stores I go to cost around 13 to 16 dollors.

that means the store is making between 5 (13 minus 8) and 7 (16 minus 9) dollors a CD. and the record company makes between 6 and 7 dollors a CD.

Of course there my be a middle man between the two not owned by the record company that drops the companyies cut some. But if not the profit is about equal and slightly favoring the companies.

Sosumi - No, really

[automandc]

This is particularly ironic, given that Apple Computer once claimed that it would never do anything that might compete with Apple Records (the label the Beatles were on). At the time Apple Computer was created, sound capabilities were so rudimentary on computers (essentially the bell), Jobs & Co. felt confident assuring Apple Records that they would not be competing with them in any form.

When the Macintosh II came out with greatly expanded sound capabilities built in (not as an add-on MIDI card), Apple performed one of the most famous corporate "jokes" of all time, naming one of the new, high-quality system alert sounds "Sosumi" (Pronounced "So, sue me"). I don't think Apple Records (if they are even still around) ever took them up on it.