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Apple may be forced to make deals; Without Jobs, change in direction is seen

Without Steve Jobs, Apple Inc. may start to embrace dealmaking after spending less on acquisitions than any of its biggest competitors.

Jobs, who transformed the near-bankrupt personal-computer also-ran into the world's largest technology company, used less than a billion dollars for takeovers in the past decade as he unveiled the iPod, iPhone and iPad. Apple's largest U.S. rivals have shelled out more than $15 billion on average to buy companies over the same span, according to data compiled by Bloomberg. Microsoft Corp. has lost a fifth of its value even after spending 10 times as much as Apple on acquisitions.

Apple became a $351 billion company as Jobs introduced devices that revolutionized the computer, music and mobile phone industries. Jobs, who was diagnosed with cancer and had a liver transplant, is now turning Apple over to former Chief Operating Officer Tim Cook. Boosting acquisitions in entertainment, patents and security with its $28 billion cash hoard may help Apple fend off Google Inc. and Samsung Electronics Co. without Jobs, observers said.

"Time will come for acquisitions for sure," said Arvind Malhotra, an associate professor at the University of North Carolina at Chapel Hill's Kenan-Flagler Business School, who has taught Apple's business strategies for a decade. Jobs "always grew from within. If lack of his vision and availability of his position causes the future pipeline not to be there, that's when the acquisition model comes into play. They're sitting on a cash pile," he said.

Apple's shares advanced 1.4 percent to $378.92 at 11:02 a.m. Friday in New York trading.

America's 10 largest technology companies have paid more than $140 billion on acquisitions of businesses in the past decade, data compiled by Bloomberg and filings with the U.S. Securities and Exchange Commission showed.

Apple, which introduced the iPod music player in late 2001, has accounted for less than 1 percent of those purchases with $910 million in takeovers.

Even without a single billion-dollar acquisition, Apple's value under Jobs increased by more than $300 billion in the past 10 years. Jobs has also doubled Apple's net income every two years since the company reported its last annual loss in 2001.

Microsoft, the maker of the Windows operating system that was founded by Bill Gates, has fallen approximately 21 percent in the past decade even after spending more than $12 billion on acquisitions to bolster earnings and boost shareholder value.

The total excludes the company's $8.5 billion agreement in May to buy Skype Technologies SA, the world's most popular Internet calling service, which has yet to close.

Jobs, who founded Apple with Steve Wozniak in 1976, was ousted by the board in 1985 amid differences over strategy. When he returned 12 years later, Apple had run up $1.86 billion in losses over two years. It was 90 days away from bankruptcy, Jobs would later say.

Apple's shares surged 9,020 percent from July 29, 1997, the day before the San Francisco Chronicle said that Jobs would be interim CEO, through his resignation this week. The company's equity value rose to $349 billion from $2.1 billion under Jobs, making it the largest technology company.

The company is going to have to add products to "blunt the force" of Google's Android platform, said Michael Yoshikami, chief executive officer and founder of YCMNet Advisors, which manages $1.1 billion in Walnut Creek, Calif.

Android was the best-selling smartphone operating system worldwide in the second quarter, with sales rising more than fourfold to give it 43.3 percent of the market, led by Samsung and HTC Corp., according to Gartner Inc., the research firm based in Stamford, Conn.

Howard Ward, who helps oversee $36.1 billion at Gamco Investors Inc. in Rye, N.Y., says that Apple doesn't need to pursue more acquisitions to remain successful and that Jobs will still have influence over the company as its chairman.

"The last thing they want to do right now is make it appear as if they're changing their stripes with Steve resigning as CEO," he said in an email. "Steve is still chairman."

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