What if Google and Apple merged?

Ajoke news article that Google was merging with Apple was erroneously published by Dow Jones, briefly affecting share prices. The report’s tone and the putative price tag for Apple of $9bn, against the real enterprise value of $650bn, would quickly have alerted human traders that this was a spoof.

Yet there is a case for merging the world’s two highest-valued companies. Each wastes billions on endeavours the other has mastered. Google spent $1.1bn poaching phone engineers from HTC. It also pays Apple about $3bn a year to install Google search as the default on iPhones. Instead of messing about with hardware, it could just have the iPhone.

Smartphones still account for 60% of revenue at Apple. It could badly use some diversification as well as a host of Google technologies such as artificial intelligence. Alphabet, Google’s parent, generates 80% of its revenue from advertising. It also offers faster revenue growth, at more than 20% a year.

With this lack of overlap, antitrust issues could be managed, at least in theory. Google would probably have to spin off Android to ameliorate the duopoly in mobile operating system. In reality, the sheer combined power of the pair would force governments to think outside the traditional antitrust boxes to scupper the deal. Cultural problems are bigger still. Steve Jobs vowed to “destroy” Android and the two companies have spent years fighting each other, often in court.

The financial barriers are equally forbidding. As the larger company, Apple would be the acquirer. But even its cash pile buttressed with record amounts of debt would be insufficient to swallow $590bn of Alphabet’s enterprise value. A stock deal would be dilutive: Apple trades at a much lower multiple of 15 times forward earnings, compared with Alphabet on 27 times.

For all its theoretical attractions, Goople is a punchline, not a prospect. London, October 13.