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Apple Inc. (AAPL - Analyst Report) is on an acquisition spree. The iPhone maker recently acquired Swedish software and data performance startup company AlgoTrim. The current deal follows the back-to-back acquisitions of mapping company, Embark (Aug 2013), HopStop.com and Locationary (Jul 2013). These were preceded by the takeover of WiFiSLAM earlier this year.

AlgoTrim’s technology can be used to make files smaller, which helps in improving the performance of a computer. AlgoTrim specializes in data compression, mobile imaging and video and computer graphics.

This type of software primarily helps to improve performance of mobile devices by reducing the amount of memory used. It also reduces the computational effort required for various files when they are stored and accessed.

These acquisitions indicate that the company is acquiring smaller companies to get hold of new technologies. Also, Apple’s strategy of acquiring start-up technology companies is prudent considering the fact that the total acquisition cost is much lower. Moreover, Apple targets companies which can be easily integrated into its current product portfolio.

These acquisitions also enable Apple to deliver tailor-made solutions and technological know-how for specific problems. We believe that this acquisition policy will benefit Apple in the long run.

This a crucial time for Apple as the company is facing tough competition from Google Inc. , Blackberry (BBRY - Analyst Report), Samsung and Nokia Corp. (NOK - Analyst Report). Apple’s continuing acquisition spree will help the company to innovate in order to outsmart competitors.

As per industry sources, Apple is expected to launch a new version of its iPhone on Sep 10, followed by an updated lineup of iPads. We believe that the technology acquired from AlgoTrim may also add to the features of these upcoming devices.

Apple has a Zacks Rank #3 (Hold).

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