Analyst explains why he thinks Apple should buy Tesla
After being quiet for a few months, the drumbeat of "Apple should buy" Tesla has begun anew. This time it comes from well-known Piper Jaffray financial analyst Gene Munster, who recently gave an interview on Bloomberg radio where he talked about this, which isn't surprising now that Apple has over $200 billion in cash (when you have this much cash, everybody becomes very generous with advice on how you should spend it).
Particularly, Munster believes that firms like Apple have several cost advantages over more established auto companies. He explained that access to Tesla's battery technology could accelerate Apple's entrance into the car world.
Plus, "[electric cars] are part of what's in Apple's DNA," Munster said, noting the recent hire of former Fiat Chrysler executive Doug Betts to help oversee its planned foray into the automotive space.
The hiring of Mr. Betts is just one more telling hire in a long series of auto and EV battery specialist hires, some of which we discussed here. Electric car battery company A123 Systems even filed a suit against Apple, accusing it of poaching its employees, and Elon Musk has commented on the talent war between Tesla and Apple, with both companies trying to attract each other's employees.
Munster admitted that "people close to Tesla" told him that CEO Elon Musk probably wouldn't be immediately receptive to a buyout. However, Munster maintained that the executive has only two options at this point: "sell or get comfortable with Apple as a competitor." [...]
"Instead of having tens of billions of dollars to fund [his] dream," he said of Musk, "[he] could have hundreds of billions" if he teamed up with Apple.
When rumors of this type first started circulating years ago, I didn't think much of them. But more recently I've started to see how it could make sense. It's not necessarily my favorite outcome, but I explained in this post why I think it could happen: 9 reasons why I think Apple might buy Tesla. Here are 3 excerpts from the reasons why I think this might happen. For the other 6, you'll have to go directly to the article.
2) Elon Musk has said multiple times that his goal with Tesla is to change the industry and push forward electric cars (which can use clean energy directly). People might not believe him, but I do. If he just wanted to get rich, there were a million easier way than to create a new car startup (none had been successful for almost a century) that not only had to compete with giants, but also to do it using an entirely different technology that the general public didn't even trust at the time.
4) Apple also has the capital to help Tesla grow into a mainstream company that will change the world and help push the internal combustion engine into the recycling bin. The biggest challenge for Tesla is that if they face big problems scaling up, they might run out of capital (and lose the confidence of Wall Street). This is the fate of many fast-growing young companies, and in fact, Tesla almost went Bankrupt during the 2009 financial crisis. But if they are backed by Apple's balance sheet, then the only risk is execution (making good products). Building up factories for the Model 3 and other subsequent models, investing in R&D, building out service centers, Supercharging Stations, etc. All that would only cost Apple its pocket change.
5) Until recently, Apple had never done big multi-billion-dollar acquisitions, and never had a non-Apple brand as a major part of the company. But last year they acquired Beats and kept the Beats brand separate. This makes me think that a similar thing could happen; if Apple were to acquire Tesla, I think they would keep the Tesla brand (which is extremely strong) and just sell all their electric vehicles under that badge.
Via Yahoo Finance