Apple CEO Tim Cook (R) greets customers as he attends the grand opening of a new Apple store at The Grove on November 19, 2021 in Los Angeles, California.
Mario Tama | beautiful pictures
Peloton can be sold. (Or, maybe not quite, if you think New CEO there will be enough time to transfer the correct ship.)
On Friday, breaking news The Wall Street Journal that Amazon considering Peloton. Then it came out that Nike was over. And then we repeat the same M&A fairy tale that has played out since before Peloton went public: What about Apple?
Some of the best Apple followers think this could be a serious discussion within Apple. Dan Ives, an analyst at Wedbush, wrote Sunday night that Apple could buy Peloton as a defensive move against a Big Tech rival like Amazon that is embracing it first. He called the potential acquisition a “strategic fit.”
Many others have thought the same way for years now, and Apple is back on the conversation now that we know that a Peloton sale is more likely than ever.
But there are more reasons why Apple decided to pass Peloton, if its history is any guide.
Apple rarely makes major acquisitions. Peloton’s market capitalization was more than $12 billion as of Tuesday afternoon. Apple has never even come close to buying such a large company. The biggest acquisition to date is Beats for $3 billion.
Besides, most other acquisitions are too small for Apple to meet the requirements to report them. We usually only learn about an Apple acquisition after someone in the press covers it.
Apple tends to acquire companies in terms of their technology and employees. This is called an “acquisition,” which is when a larger company buys a smaller company and integrates its employees and technology into new or existing products. For example, the weather app on your iPhone got a major update last year because Apple bought a company that makes a weather app called Dark Sky.
Apple is obsessed with producing its own hardware and software and maintaining high profit margins. Peloton makes giant Android tablets with complex software, which are connected to exercise equipment. Plus, Peloton continues to lose money, and its margins will affect Apple’s own margins if the two companies merge.
Pelton’s fourth quarter earnings report from Tuesday morning paints a bleak picture for the company’s 2022. The company reported disappointing subscriber numbers, canceled plans to build a $400 million factory in Ohio, and laid off 2,800 employees. It’s hard to imagine what Apple would find intriguing in that report.
Apple doesn’t need Peloton subscribers. Peloton has 6.6 million subscribers, a relatively small number compared to the 785 million paid subscribers Apple says it has through its App Store apps. Plus, some Apple subscribers including Peloton customers signed up through the App Store, meaning Apple got a cut of Peloton’s subscription revenue today.
But wait! Can Apple surprise us like it bought Beats? Sure, if you want to compare stationary bikes with LeBron’s favorite headphones.
Apple bought Beats primarily for its music streaming service, which was transformed into Apple Music a year after the two companies merged. On top of that, Beats had a profitable headphone business that could be improved upon by Apple’s technology. (Just look at Beats headphones these days, full of the amazing tech you’d find in AirPods.)
Apple needs the already existing Beats music streaming service to take the leap to market leadership Spotify. Remember this was eight years ago, in the early stages of Apple’s transition to growing its digital services business. Music streaming is a natural place to start.
In Peloton’s case, Apple doesn’t need an online fitness service (it already has one), and it doesn’t seem like they started out making treadmills or stationary bikes to lose money.
Instead, growth in Apple’s fitness business will come from where it’s always been: Apple Watch sales (which continue to grow) and compatibility with other fitness devices, like in the gym. Equinox exercise or classes, like at Orange Theory.
