Why Apple Will Acquire Disney

This deal will finally happen—and for the worst possible reasons

People have been predicting that Apple will acquire Disney for the last 20 years. I’ve heard the rumor countless times.

But like Walt Disney’s much awaited return from his cryogenic chamber (underneath the Pirates of the Caribbean ride), it never actually happens. The rumor just sits out there in permanent deep freeze.

So I’ve never taken this prediction seriously—until now.

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But this time it’s for real. (I’m talking about an Apple buyout—not Walt’s return from the freezer.)

Of course, Steve Jobs would never have done this deal. And that’s especially ironic, when you consider that Jobs was the largest shareholder in Disney at the time of his death.

Jobs got all those shares when he sold Pixar to Disney for $7.4 billion back in 2006. He took his payoff in Disney stock—receiving 2.3 shares in Disney for every share he owned of Pixar. At the end of the day, Steve Jobs walked away from that transaction with 138 million shares of Disney in his back pocket.

Over the next five years, Jobs had plenty of chances to consider a Disney acquisition. Not only did Apple have around $30 billion in cash, and almost unlimited borrowing power, but Jobs might even have led a Disney buyout as an individual. Disney’s market capitalization was around $65 billion back then, and plenty of investment firms would have happily worked with him on a deal to take the company private.

So rumors circulated. But they were foolish rumors.

Steve Jobs had zero interest in buying a Hollywood studio. His success with Pixar—as well as with Apple and Next—makes clear how this entrepreneur viewed the world. He wanted to create something of his own better than the old legacy companies. Buying a big entertainment company would have been an cop-out, an admission of defeat.

So when Steve Jobs died, he was still sitting on all those Disney shares, but had not acquired any more. They were inherited by his widow Laurene Powell Jobs—who thus became the largest shareholder in Disney. But she sold half of her stake (around 64 million shares) in 2016.

During the last five years of his life, Steve Jobs grew revenues at Apple at a compounded rate of 44% per year….This year revenues will actually shrink.

Her timing wasn’t great—Disney shares doubled in value over the next five years. (I was a shareholder myself at the time, but I sold all my shares in 2021, as described here.) But Disney shares are now even lower than they were in 2016, when she made those sales.

Is Disney at an attractive price now?

I’m not so sure about that. But I do think that Apple will be tempted to take the bite.

Tim Cook, the current Apple CEO, is no Steve Jobs. More than a decade after the latter’s death, Cook is still milking Jobs’ last innovation, the iPhone.

This, ironically, mirrors what happened when Jobs was fired by Apple’s board back in 1985. A decade later, the company was still floundering, and its biggest source of revenue was the Mac, the last major launch Jobs managed before being booted out of the executive suite. He came back and turned around the company—and it wouldn’t have happened without him.

But now Apple has stopped growing (again). You probably find that surprising, because this company is portrayed as invincible in the media. But the reality is much different from the image.

This Apple is starting to look brown and mushy. For a start, consider these numbers.