In order for two companies to successfully join hands, there must be a vested interest. Both companies must benefit from the merger. The New York Times (NYT) believes that an Apple/Tesla collaboration is a match like no other. Apple could invest in Tesla, giving the company its much needed capital, while reaping the benefits of the automaker’s expertise in electric and autonomous vehicles.
This concept has been visited before and has fueled many jokes between the companies. We all know that Tesla CEO Elon Musk refers to Apple as the “Tesla graveyard”, due to employees leaving Tesla to join Apple. However, it has not been uncommon for Apple employees to head to Tesla.
It is clear the Tesla must find a way to generate a huge amount of money, and quickly. The company has already opted to acquire SolarCity, along with offering some other stock options to bring in funds. It is surely not enough, and the SolarCity deal seems to be losing steam.
Apple needs automotive experts, self-driving experts, and some clout in the field. The company could also benefit from better facilities and equipment.
The New York Times’ solution is simple. Apple could buy a 20 percent stake in Tesla. While not an acquisition or an official merger, Tesla’s money problem would be solved and it would cost Apple mere pennies in relation to the company’s cash flow. This would generate about 8 billion for Tesla to play with. It would also generate some of the most intense media impact of any such situation ever in the history of autos and technology. NYT explains:
For Apple, with more than $230 billion of idle cash, the investment would be close to a rounding error. Its shareholders would probably rejoice at converting a sliver of money in the bank for a placeholder in an emerging leader in self-driving cars. Unlike a full purchase, buying a minority stake will not dilute Apple’s profitability, either. The company has projected gross margins of around 38 percent in its next fiscal quarter.
How does Apple benefit?
While it has been reported that Apple is in a slump, honestly, the company is in pretty good shape. Shares are up 5 percent since the unveiling of the iPhone 7, and clearly, the company isn’t going anywhere. But, analysts and consumers want something new from Apple. Apple is in desperate need of a market-disrupting, pivot product. The company’s R&D spending alludes to the fact that Apple is on its way to something, but what? And when?
Elon Musk is sometimes compared to Steve Jobs, with his endless stream of ideas and innovations. His hands are more than full with Tesla, the Gigafactory, SolarCity, SpaceX, and the Hyperloop prospects. These are all ideas that Apple could bank on enormously. This is leaving out the myriad of other ideas that Musk is just setting aside, due to not having the time, the funds, or the support to even consider them. Apple could take on any of these ventures with Musk’s vision and support.
Addressing the issue of Musk and Cook is touchy. Who would be the boss? Would it be smart for Apple to try to completely acquire Tesla?
NYT feels that this is not a good option. Neither CEO really needs to be in charge. It would simply be the world’s most amazing collaboration. Musk is all about ideas, visions, and concepts. He serves as an intellectual component. Cook is a successful and trusted leader with business prowess. He serves as a traditional CEO, maintaining financial and management aspects. The companies can share goals and visions and work together, rather than competing. Both companies get what they need and want out of the situation. The poaching of employees would be a thing of the past as the two companies could utilize talent as they see fit.
Apple could build its electric, autonomous car under the Tesla umbrella. Cook and company could take on some of Musk’s aggressive ideas. Apple could assure that the financial needs are met, while leaving the automaking up to Tesla. Both companies could meet in the middle on the best use of talent, resources, and facilities, related to technology.
Win win? Will it ever happen? Your thoughts … ?
Source (The New York Times)