2016predictionsIf my last prediction about the Internet of Things becoming a security nightmare seemed a no-brainer to half of my readers, as some commenters suggested, this prediction that Apple won’t buy Time Warner will probably be a no-brainer for the other half, simply because it is always easier to say an acquisition or merger won’t happen than that it will. But I think there is something to be learned from why I don’t think this acquisition will take place — something that says a lot about Apple as a company.

That this topic comes up at all is because, as frequently happens these days, activist investors are trying to bully Time Warner into selling all or part of itself, this after having already bullied the company into spinning-off its cable TV operation and then its print publishing operation. So now what’s mainly left at Time Warner are cable TV networks, TV and film production and distribution, and a modest online operation. All of this, but especially premium cable channel HBO, is supposed to appeal to Apple’s eye for quality.

The thinking is pretty simple: Apple wants to build an Internet virtual cable TV service and having an HBO exclusive will cement the success of that service.

If it were that simple I’d agree heartily, but there are a couple problems with this idealized picture. For one, even if Apple buys just HBO or all of Time Warner that ownership doesn’t convey anything like exclusivity. HBO has existing agreements with hundreds of cable and satellite providers around the globe and nothing exclusive can happen until those deals run out or are cancelled, which would take years or cost billions in penalties.

Apple might be interested in Time Warner anyway — and I might urge Cupertino to take the chance — except there’s a key acquisition benchmark that isn’t being met here, which is sales per employee. Time Warner’s is too low.

Who pays attention to sales per employee, anyway? Well Apple does and always has, and if you look at the acquisitions the company has done, none of them as far as I can tell caused Apple’s overall sales per employee to drop.

Apple’s annual sales per employee stand at about $2.12 million. Time Warner’s is $1.1 million, which is high by most standards (IBM, in comparison, has approximately $250K in sales per employee) but under investor pressure TWI’s $1.1 million is probably as lean as the company can get, meaning it simply isn’t an Apple-like business.

Adding 65,000 TWI employees to the 110,000 folks already working at Apple would inevitably change and hurt the company. At least that’s the thinking on this subject explained to me one day by Steve Jobs, himself, who I guess probably came up with it. Steve told me he wouldn’t buy a company unless it was strategic and matched or exceeded Apple’s labor leverage.

Even Apple’s controversial 2014 Beats acquisition meets the test. Beats had $1.5 billion in sales and 700 employees for an average of $2.14 million in sales per employee. Apple immediately laid-off 200 Beats employees, remember, raising sales per employee at both Beats and its new parent. The layoffs were done in the name of reducing duplication and redundancy, but isn’t that the entire point of this benchmark, making the overall enterprise even more efficient?

So Apple won’t buy Time Warner because doing so would be too disruptive to the acquiring company and Steve Jobs would appear in Tim Cook’s dreams to torment him about it. You know he would.

But this doesn’t mean Apple won’t make a big acquisition this year, just that it has to be strategic and meet the benchmark. I have an idea what such an acquisition might be and that will be my next prediction.

What company do you think Apple will buy in 2016?