Apple and Tesla not so unlikely

"Daily Octane" (dailyoctane)
02/20/2014 at 16:05 • Filed to: None

So, I currently work at a major smartphone company making a lot of money (that isn't Apple), but we understandably pay a lot of attention to Apple. Especially me, who is the competitive intelligence manager for the US.

I also have been trying to do a variation on the Doug Demuro, and have been trying to start an automotive competitive intelligence business. Which has meant lots of reading car stuff too (well, more like lots of writing, since I was reading already).

So that's my background.

On to Apple. I think everyone is being a bit too dismissive of Apple buying them.

In a recent interview, when asked about billion dollar acquisitions like Google does, Cook responded, " We've looked at big companies. We don't have a predisposition not to buy big companies.... We have no problem spending ten figures for the right company that's the right and that's in the best interest of Apple in the long-term. None. Zero." [ !!!error: Indecipherable SUB-paragraph formatting!!! ]

This comment was made just a couple days before the recent news broke about Apple/Tesla talks, but I haven't seen a single journalist put the two together.

A likely purchase for Apple? Maybe not. But with $160 billion in cash as of January 1st, it's not the pipe dream many seem to think it is. There is also huge potential with Tesla's planned battery "gigafactory."

While Tesla's market cap of $24 billion is likely more than Apple would pay, a partial stake in the company is not far fetched.

I'd also add that Apple is (should be?) at least somewhat concerned with their innovation reputation, and something like this could pay off in a big way. A $30 stock price increase would increase Apple's market cap by roughly $26 billion - which would be enough to compensate for the $24 billion price tag on Tesla (accounting for the premiums that usually go along with buying something like this).

I think Apple is absolutely thinking about it, and Musk's non-denial just makes me believe it even more. [ !!!error: Indecipherable SUB-paragraph formatting!!! ]

DISCUSSION (13)

JustWaitingForAMate > Daily Octane
02/20/2014 at 16:09

So does this mean I have to buy a new Telsa every 6 months when the new version comes out?

ssidd47 > Daily Octane
02/20/2014 at 16:10

(1) I aspire to your job. I think strategy is one of the neatest divisions at any firm. I've had the pleasure of interning with an A&D firm's strategy team and it was an incredibly experience.

(2) Excellent points. I also think a stake could get Apple out of the rut it's been in. There's only so much growth in the consumer electronics space, especially as cell phones, tablets, and laptops become commoditised.

Brian, The Life of > JustWaitingForAMate
02/20/2014 at 16:19

No, but if you did the resale value would be the best in the business! ;)

HammerheadFistpunch > JustWaitingForAMate
02/20/2014 at 16:20

Hmm, thats what happened to roadster buyers, now they have to buy the "S" model....sound familiar?

Manuél Ferrari > ssidd47
02/20/2014 at 16:28

The strategy on this is very interesting. Almost all industries have seen profits erode as their products/services become commoditized. This often drives companies to want to invest into companies that have a leadership position in something new and a lot of growth potential at good margins. But then the debate over whether to focus on core strengths vs diversify comes up. If you diversify too much then you become a conglomerate that runs a risk of becoming average in multiple areas instead of excellent at one or two.

I know this word is overused so much that it's become comical but it applies here - are the potential synergies strong enough to warrant diversifying capital into a different business line? In this case would making Teslas iOS devises be a big enough reason to invest into the company? Can Apple and Tesla make more money in the long run than they can now if Apple owns a share vs. being partners? I don't know the answer to that question.

Mercedes Streeter > HammerheadFistpunch
02/20/2014 at 16:30

And soon they'll have to buy the X model...

Daily Octane > ssidd47
02/20/2014 at 16:31

It is definitely really cool - but can also be incredibly infuriating (hence the trying to start my own auto competitive intel outfit).

I worked for GM after getting my MBA, and that was incredible. Alternative fuel investment, Volt batteries, and got to drive the "Blue Devil" before it became the ZR.1. I got laid off when they went bankrupt, though, so that kind of sucked.

One more time - one more reason to get my own thing going.

Daily Octane > Manuél Ferrari
02/20/2014 at 16:42

Synergy is overused by the same people who use the term "disruptive innovation" but don't know who Clayton Christensen is. If you don't know the guy who wrote the book - because you haven't read it - you're probably using the term incorrectly.

It's The Innovator's Dilemma and The Innovator's Solution , FYI.

And in this case, the synergies are crazy. The marketing, the fanboy buyers, the image being one of the key selling points, the lifestyle/image both exude alone are enough to make this worth it.

Add in the amount of tech in a car these days - especially a Tesla - and you're really smoking. Battery "gigafactory"? Now we're on fire. Connected (and driverless) cars? Radioactive. Big, big synergies here. Nonstop.

The next big thing is mobile payments. Hmm, what would Musk know about that?

I was talking with a co-worker about this earlier, and I can absolutely see Musk as Apple/Tesla CEO after a merger. Cook retires, with a legacy of ushering in a transformation of the market unlike the world has ever seen.

Evan, Pope Of Jalopnik by Self-Appointment > Daily Octane
02/20/2014 at 17:05

Also...when asked for comment, Musk said something to the effect of "it might not happen"...I too really think this might happen. And I'm pretty excited for it.

Korea Miéville > JustWaitingForAMate
02/20/2014 at 17:55

Wouldn't it be cool though if you could get a subsidized Tesla for $20k in exchange for a 2-year contract to only buy one brand of gas?

JustWaitingForAMate > Korea Miéville
02/20/2014 at 17:58

That...would actually be an interesting business model. I wonder if it'd actually be feasible.

Korea Miéville > JustWaitingForAMate
02/20/2014 at 18:29

Ahem, I only just now snapped to the "what's wrong with this picture" of signing a gasoline contract...for a Tesla...so....I, uh, guess it probably would be a crappy deal for the gas company.

biturboism, the cult > Daily Octane
02/21/2014 at 06:22

Good, I don't want them ruining an enthusiast car-brand. Let'em have Tesla, I couldn't care less.