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Rumor of a Suitor Ripens Apple Stock : Computers: Speculation that Motorola may attempt to take over the company sends shares soaring 12%. But some see an equity investment instead of a buyout.

October 06, 1994|MARTHA GROVES | TIMES STAFF WRITER

SAN FRANCISCO — The stock of Apple Computer Inc. soared 12% on Wednesday on speculation that the company will be the subject of a takeover attempt by Motorola Inc., its partner in the PowerPC chip venture.

Despite official and somewhat surly "no comments" from both companies, investors bid up the price of Apple stock by $4.125 a share to $37.875 on Nasdaq, with 6.3 million shares changing hands. Motorola stock fell $1 to $50 on the New York Stock Exchange.

Takeover speculation boiled over after Motorola, based in the Chicago suburb of Schaumburg, disclosed plans to build a low-cost line of desktop computer systems, including personal computers, to boost demand for its flashy PowerPC microprocessor.

The fact that Motorola supplies the chips for Apple's fledgling Power Macintosh computers--and that it wants to become a PC manufacturer itself--apparently led some stock traders to conclude that Motorola might buy Apple to gain an instant foothold.

Another scenario has Motorola making an equity investment in Apple and gaining a license to build "clones" of the Power Macintosh.

Several industry analysts said they doubt a takeover is likely.

"It doesn't make that much sense to me," said Bruce Lupatkin, research director at Hambrecht & Quist, a San Francisco investment firm.

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For starters, Lupatkin said, Apple appears to have turned itself around after a couple of rocky years, and "I'm not sure they need a marriage partner." And for Motorola, he noted, there would be cheaper ways of getting into the PC manufacturing business, given that a strategic buyer would be forced to pay upward of $8 billion for Apple, by his estimate.

Lupatkin expects Apple to report soon that earnings in its fourth quarter, which ended last month, reached 65 cents a share on $2.3 billion in sales. That would contrast with a profit of 2 cents a share on sales of $2.1 billion in the same period the year before.

Pieter Hartsook, publisher of a Macintosh market newsletter in Alameda, agreed that Apple would frown on the idea of becoming another company's wholly owned subsidiary.

However, he noted that Motorola would logically be one of a handful of companies to license Apple's computing technology and produce clones. Last month, Apple announced long-awaited plans to stop hoarding its technology and let others produce Macs.

"Apple needs a large, U.S.-based multinational corporation to announce as a licensee," Hartsook said, adding that having a stronger strategic relationship "makes an awful lot of sense."

In recent years, Motorola has become one of the nation's most successful technology companies, with a strong presence in the computer chip business and a dominant position in cellular telephone equipment and pagers.

When Wall Street frothed last year with speculation about an Apple takeover, AT&T was the rumored buyer. But AT&T's announcement of a megamerger with McCaw Cellular served to squelch most of those rumors. Even so, in the trading frenzy Wednesday, AT&T's name resurfaced as a possible suitor, although few analysts took that prospect seriously.

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