Shares of Apple Computer Inc. fell more than 8 percent on Friday after investors
learned of talks the company could be in to acquire Universal Music Group
from Vivendi Universal. Apple’s stock closed at $13.20, down $1.17 or 8.14 percent.
Comparing the deal to the AOL Time Warner merger, investors are concerned that an Apple/Universal deal would deplete Apple’s healthy cash reserve, estimated at over $4 billion.
Apple has positioned itself as the center of the Digital Hub for the past couple of years with applications like iTunes, iDVD and iPhoto, as well as with its popular iPod digital device. Having its own music label would put Apple in a unique position in the industry, but analysts are not convinced the deal is good, according to a Reuters
“While it can be argued that Apple could make some incremental revenue from the online sale of music, the company would not need to own a music company in order to do so,” Merrill Lynch analyst Michael Hillmeyer wrote in a note to clients. “In fact, there do not appear to be any synergies between a music company and a PC company, even one as innovative as Apple.”
Vivendi Universal is apparently shopping its properties to raise up to $7 billion this year. Billionaire Marvin Davis, who has made a $15 billion bid for Vivendi Universal Entertainment. Sources confirmed on Friday that
Davis would not pursue his bid
if Vivendi sold its music division or pulled it off the market.