For the second time in a little more than a month, reports of a music-related initiative by
have touched off a flurry of speculation.
But last week's article in the
Los Angeles Times
, which reported that Apple has been in talks for months with French media giant
to buy its Universal Music division for $5 billion to $6 billion, dwarfs last month's news of Apple's as-yet-unannounced service for downloadable music.
Some confirmation arrived Wednesday, when Vivendi director Claude Bebear told Bloomberg News that his company expected Apple to make a $6 billion offer for Universal Music.
Bebear's statement prompted a highly uncharacteristic denial from Apple CEO Steve Jobs Wednesday afternoon.
"Apple has never made any offer to invest in or acquire a major music company," Jobs said in an official statement. "The press statements attributed to Vivendi board member Claude Bebear are untrue, as Mr. Bebear has confirmed in a later report."
Of course, Jobs statement doesn't say Apple hasn't been talking to Vivendi about Universal Music, just that there's been no offer. And it looks like Bebear had his wrist slapped for speaking out of turn.
Wall Street took a dim view of the brewing deal on Friday. Apple's stock fell more than 8 percent, shedding $1.17 to close at $13.20, a five-year low. Vivendi's stock fell as well, though only by 4 cents.
In trading Wednesday, Apple fell 15 cents, while Vivendi's shares were up 25 cents.
Crushed by a $12.9 billion debt and a 2002 loss of $25 billion, Vivendi has been shopping pieces of itself since last year, but potential buyers haven't exactly been lining up.
Before the news of Apple's possible bid for Universal Music surfaced, Vivendi had heard only from billionaire oilman Marvin Davis, who has offered $15 billion for the entire Universal Entertainment group, which includes the music division.
Analysts struggled to interpret the news, with many concluding that while Vivendi certainly needs the money, the deal makes no sense for Apple.
The Wall Street Journal
expressed pessimism at the likelihood of the deal ever being consummated.
The general thinking is that the deal represents too great a risk for Apple, which has struggled over the past two years just to eke out a small profit.
Buying into another struggling industry -- the Recording Industry Association of America reports U.S. CD shipments fell 9 percent in 2002 and already are down a further 6 percent so far this year -- strikes many observers as unwise.
"It seems odd to me that Apple would acquire [Universal Music] unless they got it real cheap," said Roger Kay of IDC, the research firm based in Framingham, Mass. "The audio archive has already escaped," he said, referring to the illegal download services that started with
Apple, based in Cupertino, Calif., would need to resolve several very formidable issues if it were to follow through on purchasing Universal Music.
First, Vivendi needs cash, and Apple's cash hoard of $4.4 billion -- it only has a relatively small $320 million in long-term debt -- is well short of covering the $5 billion-plus it would need.
Apple could raise the money, but the transaction would turn its cash position inside out. The company's cash holdings translate to about $12 a share -- and for the past several years have served as a backstop preventing further erosion in the price of its stock.
Second, owning Universal suddenly would make Apple a rival to the other four major record companies that it reportedly has persuaded to license their catalogs to Apple's pending online music service.
Third, the combined entity would generate tension between Apple's traditional role as a computer software and hardware vendor and its new role as a content owner. Apple's "Rip, Mix, Burn" slogan of 2001 was criticized widely by music industry executives, who claimed it encouraged the illegal copying they blame for killing CD sales.
So, why would Apple do it?
Pundits spun a plethora of theories. Among them: