By Don Reisinger
May 9, 2017

As Apple’s cash hoard grows, rumors continue to suggest the company might want to make a big acquisition. But at least one analyst believes most targets aren’t in Apple’s sights.

In a note to investors on Tuesday, UBS analyst Steven Milunovich said that the possibility of Apple inking a “mega-merger” deal with another sizable company is rather low. Milunovich said that while certain acquisition targets have been floated—like Netflix (NFLX) and Tesla (TSLA)—they don’t necessarily make sense.

“[Apple CEO Tim] Cook has said he is not averse to a large deal, but we think it would need to leapfrog Apple ahead in an area of interest, such as transportation, [augmented reality], health, home automation, and perhaps content,” Milunovich wrote to investors. “The majority of what has been proposed doesn’t fit, in our view.”

As Apple’s (AAPL) cash coffers have grown to a quarter of a trillion dollars, speculation has mounted that the company would—and perhaps should—make a major acquisition. Last year, Disney (DIS) and Time Warner (TWX) were briefly floated as possible options for Apple to grow its original content business. Apple is slowing building out a streaming-video business, which has caused other analysts to suggest a Netflix buy could also make some sense. And if Apple is indeed interested in breaking into the car business, buying a company like Tesla could be a good idea, some reports have said.

Apple has quietly acquired a slew of companies in recent years. However, the majority of those companies are small startups that can help the company improve a feature in its hardware or software service. Apple’s last big, flashy deal was in 2014 when it acquired Beats for $3 billion. Since then, Beats has stayed on as a headphone maker, and software it developed before the acquisition now powers Apple Music, the iPhone maker’s streaming-music application.

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Cook hasn’t shied away from conversations about acquisitions with both shareholders and analysts in earnings calls. And Cook has said that he’d be open to be a big acquisition if it makes some sense. But at least for now, Cook is content with smaller buys instead of the “mega-merger” Milunovich references.

Part of the reason Apple might not have made a major acquisition by now—and why it might not—is its culture, Milunovich wrote to clients. He said that Apple’s culture is “unusual,” which makes integrating another company into the Apple way of doing things rather difficult. He also questioned whether an acquisition of a content creator like Disney would even make sense, because Apple’s business model centers on selling hardware and services and not content.

Still, Milunovich acknowledged in his note to investors that Apple will likely need to make a big buy at some point in the future. Milunovich said that Apple’s heavy reliance upon the iPhone to drive revenue is a risk to its business, and it needs to catch up in “certain target markets” he did not identify. But Milunovich stopped short of saying that Apple would need to buy a company to boost its financial performance. Instead, Milunovich believes Apple will only buy a company if the target improves its product lineup.

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