Why Tim Cook Is Right to Avoid Big Acquisitions

Apple shareholders should be glad Eddy Cue isn’t running the iPhone maker. As a story we published today revealed, Cue has been an advocate for Apple making big acquisitions—including of Netflix and Tesla in the past—that CEO Tim Cook rebuffed. More recently, Cue has suggested that Apple should do bolder deals in artificial intelligence. The company’s executives have talked about an acquisition of AI search engine Perplexity or French model maker Mistral AI, neither of which has moved forward so far. If Apple shareholders are fortunate, Cook will again say no.

It’s no secret that in corporate America, big acquisitions can be a great way to lose a lot of money. AT&T, for instance, bought Time Warner in 2018 for $102 billion in stock, cash and assumption of debt. Four years later, when it unwound the deal by spinning off the media firm, AT&T got back about $40 billion, while its shareholders got most of the shares in the new Warner Bros. Discovery, whose value quickly fell. And in tech, Microsoft’s 2014 purchase of Nokia’s mobile business was a costly disaster that it quickly reversed. That’s not to say M&A isn’t a valid way to grow, but history shows acquiring a young company for a small price is a better bet.