I apologize kicking off the Apple talk last night and destroying todays thread. We should definitely be focusing on The Pickup Truck reveal date being announced and the S&P upgrade which led to this afternoons strong TSLA rally.
Having said that.....
re Apple.
I DO NOT WANT APPLE TO BUY TESLA (even though I’m an Apple shareholder and think it would be great from an Apple perspective). The potential ROI from my Tesla investments are way higher as a standalone company than if it was absorbed by Apple.
But, to lay out some of the advantages of Apple acquiring Tesla:
- Money. Obviously. Lots of it, Tesla would no longer have any debt to service (an immediate ~$700 million boost to net income), and Tesla would have virtually unlimited capital to build as many Gigafactories as it needs immediately. It also wouldn’t need to worry about short sellers or hitting quarterly targets.
- Customer base. Apples 1 billion users make up the majority of the worlds wealthiest people, the type of consumers who buy new cars. Its user base also leans liberal / environmentally aware. Having those billion users seeing Tesla vehicles having the Apple seal of approval (and backing) would lead to a lot more people jumping into a Tesla.
- Stores. Extensive global retail network (ever notice how Tesla stores are usually located near to Apple stores?). There is plenty of room in most Apple stores to display a vehicle or two.
- Chip design. Apple mobile chips are years ahead of competitors, no one matches Apple mobile chip performance on a performance per watt Basis, and undoubtedly be helpful for Tesla chip design.
- Business model: Similar to Tesla, entering commoditised markets and creating high margin products via superior software and industrial design, integrated ecosystem, and a direct to customer support network. (PCs, Mobile phones, MP3 players, Tablets, retail software are all very low single digit margin businesses for everyone else) Note: Apple current hardware margin is 31%, similar to Tesla target margin
(Apples company wide gross margin is ~38% due to its high margin services at ~64% GM). Apple also isn‘t afraid to sell low/zero margin products if it believes it furthers the company goals and/or will be profitable in the future (see App Store, which initially operated at a loss before becoming wildly profitable as it grew larger)
- Manufacturing experience: contrary to what many here seem to think Apple has for the past two decades been deeply involved with creating new manufacturing techniques for its products, and it also actually owns most of the manufacturing equipment installed at 3rd party assemblers in China.
- Security conscious: Of all big tech, Apple is the only one which doesn’t have an interest in selling user data, and goes out of its way to make it harder for others to do so. This will be increasingly an advantage as governments get more agitated by breaches of citizen privacy, which becomes very relevant for driverless cars and its associated constant vision capture capability.
- Environmentally minded: Apple makes large investments in renewable energy to power its data centres and facilities, and goes to extra lengths to ensure its products are environmentally friendly and as recyclable as possible. Of all the potential acquirers I struggle to think of anyone else that is as green as Apple, and that has the retail experience to add green energy & EV products to its line up.
- China Friendly: Tesla has done amazing work in getting China support for GF3, and Apple is really the only other large cap tech company that has a similar relationship with China leadership. Most other US tech is essentially locked out of china.
- Future product impact: Apples next major hardware product is going to be Augmented Reality glasses. The opportunity for impact on drivers is potentially large, and it would be better for Tesla to have integration with the next major consumer computing wave if it reaches mass adoption.
I also think the “Tim Cook only cares about immediate profits“ comments have it wrong. Sure Tim Cook has tripled the market cap value of Apple since taking over from Steve Jobs, but it has come from multiple many years long investments in R&D for new products and services. Apple first assembled its Project Titan team back in 2013, around the same time it was first in talks to acquire Tesla. It has invested a lot of money in EV & autonomous driving, and clearly thinks it is the future.
Apple also has a history of acquiring what it cant do itself - it acquires 2 to 3 dozen companies a year. Its biggest acquisitions are done when it realises it cant do it internally. It bought NeXt when it realized it needed a new operating system (also had the advantage of bringing SJ back). It acquired Beats when it realised it didnt have what it took to create a good streaming music service. It acquihired a hollywood executive team when it realised it had no idea how to make good TV shows.
To sum up, I don’t want Apple to buy Tesla, unless someone else attempts to acquire Tesla first, in which case I absolutely want Apple to buy Tesla.
Having said that.....
re Apple.
I DO NOT WANT APPLE TO BUY TESLA (even though I’m an Apple shareholder and think it would be great from an Apple perspective). The potential ROI from my Tesla investments are way higher as a standalone company than if it was absorbed by Apple.
But, to lay out some of the advantages of Apple acquiring Tesla:
- Money. Obviously. Lots of it, Tesla would no longer have any debt to service (an immediate ~$700 million boost to net income), and Tesla would have virtually unlimited capital to build as many Gigafactories as it needs immediately. It also wouldn’t need to worry about short sellers or hitting quarterly targets.
- Customer base. Apples 1 billion users make up the majority of the worlds wealthiest people, the type of consumers who buy new cars. Its user base also leans liberal / environmentally aware. Having those billion users seeing Tesla vehicles having the Apple seal of approval (and backing) would lead to a lot more people jumping into a Tesla.
- Stores. Extensive global retail network (ever notice how Tesla stores are usually located near to Apple stores?). There is plenty of room in most Apple stores to display a vehicle or two.
- Chip design. Apple mobile chips are years ahead of competitors, no one matches Apple mobile chip performance on a performance per watt Basis, and undoubtedly be helpful for Tesla chip design.
- Business model: Similar to Tesla, entering commoditised markets and creating high margin products via superior software and industrial design, integrated ecosystem, and a direct to customer support network. (PCs, Mobile phones, MP3 players, Tablets, retail software are all very low single digit margin businesses for everyone else) Note: Apple current hardware margin is 31%, similar to Tesla target margin
(Apples company wide gross margin is ~38% due to its high margin services at ~64% GM). Apple also isn‘t afraid to sell low/zero margin products if it believes it furthers the company goals and/or will be profitable in the future (see App Store, which initially operated at a loss before becoming wildly profitable as it grew larger)
- Manufacturing experience: contrary to what many here seem to think Apple has for the past two decades been deeply involved with creating new manufacturing techniques for its products, and it also actually owns most of the manufacturing equipment installed at 3rd party assemblers in China.
- Security conscious: Of all big tech, Apple is the only one which doesn’t have an interest in selling user data, and goes out of its way to make it harder for others to do so. This will be increasingly an advantage as governments get more agitated by breaches of citizen privacy, which becomes very relevant for driverless cars and its associated constant vision capture capability.
- Environmentally minded: Apple makes large investments in renewable energy to power its data centres and facilities, and goes to extra lengths to ensure its products are environmentally friendly and as recyclable as possible. Of all the potential acquirers I struggle to think of anyone else that is as green as Apple, and that has the retail experience to add green energy & EV products to its line up.
- China Friendly: Tesla has done amazing work in getting China support for GF3, and Apple is really the only other large cap tech company that has a similar relationship with China leadership. Most other US tech is essentially locked out of china.
- Future product impact: Apples next major hardware product is going to be Augmented Reality glasses. The opportunity for impact on drivers is potentially large, and it would be better for Tesla to have integration with the next major consumer computing wave if it reaches mass adoption.
I also think the “Tim Cook only cares about immediate profits“ comments have it wrong. Sure Tim Cook has tripled the market cap value of Apple since taking over from Steve Jobs, but it has come from multiple many years long investments in R&D for new products and services. Apple first assembled its Project Titan team back in 2013, around the same time it was first in talks to acquire Tesla. It has invested a lot of money in EV & autonomous driving, and clearly thinks it is the future.
Apple also has a history of acquiring what it cant do itself - it acquires 2 to 3 dozen companies a year. Its biggest acquisitions are done when it realises it cant do it internally. It bought NeXt when it realized it needed a new operating system (also had the advantage of bringing SJ back). It acquired Beats when it realised it didnt have what it took to create a good streaming music service. It acquihired a hollywood executive team when it realised it had no idea how to make good TV shows.
To sum up, I don’t want Apple to buy Tesla, unless someone else attempts to acquire Tesla first, in which case I absolutely want Apple to buy Tesla.
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