Until someone from Apple or Tesla confirms this, it should be treated as a rumor and not taken at all seriously. Investment bank analysts are full of shit, and the ones covering Apple doubly so. Remember Gene Munster and the Apple TV set he said was totally, definitely coming any day now... for a decade?
As a Tesla optimist, it seems like their biggest constraints are cash and the distraction of quarterly earnings calls with analysts. Apple could use that huge stockpile of cash to allow Tesla to continue playing the long game, without having to worry about their stock price fluctuating every day.
And you would think Elon could still be given free reign, but I suspect he would reject this out of hand because he wants to stay in absolute control.
We obviously don’t know everything behind this, but Tesla’s in perpetual turmoil internally and externally. They’ve done incredible things and at the same time put that in jeopardy. Elon has huge upside but can be his own worst enemy at times (get the fuck off of twitter)
Apple can't buy Tesla and let Musk have free reign because it will expose them to potential liabilities much larger than their investment in Tesla.
Example:
-Stock manipulation would now be manipulation of Apple stock.
-Autopilot related deaths and quality issues now create lawsuits against Apple's bank account and reputation.
Why would Elon Musk worry about the stock price fluctuating? How is the company affected by the stock price? The only thing I can think of is as follows: When the company needs liquid capital, they sell shares that they already own, and in that case a higher stock price is more beneficial.
Well, cash and a distraction of earnings calls is a symptom of the real problem, weak demand. The 3 has been cannabalizing the S and X, which before were the major high margin products that sustained the company.
If they have to keep raising cash just to keep themselves afloat, there’s never going to be any return for shareholders. It will all get eaten by debt and dilution.
The comparison is misleading because Tesla had 120M shares outstanding in 2013 versus 170M shares today. $240 per share at the time is equivalent to $169 per share today or $28B in market capitalization. It’s still 15% cheaper than today’s share price.
Because according to the comment above debt is 11B, and I happen to know that they have ~2B cash on hand, so roughly speaking enterprise value should be 9B larger than market cap right now, and it should have been less than 600M above market cap back then (their old debt value also listed in a comment above).
That depends on what you are trying to calculate. If you want the market value of a company it's the market cap, # of shares * share price. If you want the value of the company as a going concern it's market cap + debt - cash.
That's not right either. The (incorrect) headline isn't about what Tesla is "worth" to Apple, it's what the purchase price would have been. The market has already priced in things like growth expectations and debt load, that's the whole point of having a stock market in the first place.
As those below mentioned, you have to use TEV here. Based on TSLA Q2 2013 vs. Q1 2019 financials, you end up with a TEV in 2013 of $28.2B vs. today of $44.3B.
The 2013 calc is:
$240/sh * 118mm shares = $28.4B market cap, less $746mm cash, plus $576mm debt = $28.2B TEV
The 2019 calc is:
$204/share * 173mm shares = $35.3B market cap, less $2.2B cash, plus $11.2B debt = $44.3B TEV
For those mentioning subtracting the debt, that's incorrect. A company is capitalized with equity and debt. To buy the whole company, you have to buy both. But when you buy the equity, you get the cash, so you subtract that out, since buying cash isn't relevant. You then have to add the debt, because you have to pay off all the debt to own the company outright.
That comparision is also misleading, arguably more. The title should be "Apple tried to buy Tesla shares for more than they are currently worth": 2013 shareholders would have done much better by selling at $240 then rather than holding down to $205 six years later.
This has been openly talked about for a while. It makes all the sense in the world - Apple wants to get into this space, and has the pieces that Tesla is missing - supply chain optimization, good capitalization and strong marketing. Tesla has what Apple is missing - vision, electronics, deep learning experience.
This makes no sense. Apple makes computers. A car company is completely different, even it if Tesla's have bigger screens than other cars. There is no money in making cars, Apple is worth more than all the other car companies put together.
it's telling that the transportation market is late for disruption when you have to remind americans (or non-americans that live in the silicon valley culture, as most everyone here) that it is not just about cars...
There likely is lots of money in health. Almost everybody claims it’s the most important thing to them, the aging population gets more health problems and many of them also get more disposable income (kids left the house, fewer holiday trips due to declining health)
That’s probably a big reason for the existence of the Apple Watch and HealthKit.
Is this meant to be parody (car => phone) or real? I honestly don't know, but if it's not parody, then I'm super curious about "no money in making cars" part.
I don't know if it's perfectly true or not but the common wisdom these days is there's "no" profit in making stuff. Cars, airplanes, toys, clothes, whatever. The "real"
money comes from locking in some kind of monthly payment, whether it's a loan or a service plan or insurance or whatever. If they can't do that, they want to collect your data and sell that on an ongoing basis. I hear GM and some other car companies essentially use cars as a way to sell loans. No matter what you buy now, everyone wants to build a "relationship" (money pipeline) with you.
No, this makes complete sense. Tesla is opening up a huge new market, but it is under-capitalized. Also, Apple could give Tesla the design boost is desperately needs in the long term (those interiors barf...).
Those darn Tesla speculators were driving TSLA into unpurchaseable levels which in the long run may end up killing Tesla. Irony.
Why do we assume designing cars is the same as designing phones? Automotive design has been around for 100s of years before phones.
And why is this market presumed to be entirely new? Many of the auto manufacturing talents of old are still just as important in a new EV paradigm. Cars might not need combustion engines, but it’s not like the don’t need wiper blades, or seats, or paint, or branding, or a commitment to reliable manufacturing.
Where is their growth gonna come from though? Their margins on iPhones are not sustainable and there’s no huge growth in general purpose computing on the horizon. If ever a company was primed for a capital-intensive moonshot it would be Apple.
Elon Musk isn't the only person trying to take over the world, some private entities just go about it a different, more subtle way due to a lack of personality or humanity. The only way to continue growth for apple is to expand into other industries that can contribute to the "apple ecosystem".
Apple makes digitally enabled products that makes sense financially and is compatible with the brand. That's it. Everything is a digitally enabled product nowadays.
So the question is not what Apple is selling now, but what is compatible with their brand. They have the warchest to enter any market they wish.
This is exactly the same argument with Apple making a Phone. You can read what Palm, and Blackberry have said during the iPhone revolution era. And we all know how that turns out.
Your Phone isn't really a phone anymore. When was the last time you actually make or receive a call on it? Vs doing something else, Gaming, Content Consumption, Taking Photos etc. Despite using the name Smartphone, your iPhone is more like a Pocket Computer, or what Apple envision Newton in the 90s. A pocket computer that can also make a call when it needs to.
It is the same with Cars, AV ( autonomous vehicle ) will be nothing but a massive Computer with Batteries running on Wheels. Having said that, I think we now know Full AV isn't coming any time soon, at least not in the next 3 - 4 years. But there will be lots of R&D between now and then. Apple had lots of pieces of iPhone tech even before they started, and they still need 4 years to make it work. The Apple Car, or Project Titan will likely take a lot more time .
> You can read what Palm, and Blackberry have said during the iPhone revolution era. And we all know how that turns out.
The majority of comments made pooh-poohing the iPhone were made at public events, and intended to assuage the customers, carriers and partners present that those events. It's not reflective of what they actually believed.
In books like "Losing the Signal" (about Blackberry), journalists followed up with Blackberry execs and discovered that BB considered the iPhone a gamechanger, even if they doubted that the AT&T 3G network could handle millions of data-hungry iPhones. And in the early days, that was true. The first 3 generations of iPhones had significant complaints about dropped calls.
I think the fact that it comes with a mercurial CEO with discipline issues subtracts quite a bit from a potential acquirer's price.
Think about it - if you were considering buying the firm, what odds would you put on your first board meeting after being all about whatever the hell Musk got up to last week?
In the case of Apple, Tim Cook has spent quite a while working with Steve Jobs so he's no stranger to collaborating with a loose canon and could probably handle Musk pretty well.
I seem to recall that Steve was more involved with the Mac than the Lisa.
Also, in the context of the current discussion, the Steve that Tim Cook worked with was not young, reckless Steve, but an older and somewhat more mellow and responsible Steve.
The difference is Jobs' obsession was limited to consumer electronics, more or less, and he pushed the company to focus heavily on a very limited range of products.
Musk on the other hand will talk about cars one day, then solar energy the next, then the Hyerloop, then landing on Mars and making toy flamethrowers. The fit could not be more wrong.
Apple's acquired properties are quietly extinguished and replaced with Apple branding. Musk wouldn't have the temperament to play second fiddle to anybody else.
>Apple's acquired properties are quietly extinguished and replaced with Apple branding. Musk wouldn't have the temperament to play second fiddle to anybody else.
Beats as a brand is still around and producing new products.
A Steve Jobs that had spent some time in the wilderness away from Apple to mature and grow. Musk is probably more similar to Jobs before he left Apple the first time.
I don't think Tesla offer anything but common stock, and although Musk owns the largest portion it would be possible to buy out all the other institutional investors and obtain a majority. Probably would need a substantial premium on the price, but hey, everyone has a price.
I don't quite know what you mean by "offer". It doesn't matter what they offer/offered at IPO, we should be looking at their capital table, and their company bylaws, that determine what types of shares they have and who has how many and of what kind.
It's quite common that the founders have special shares and only common stock is put up on the market at IPO time. (And early stage investors usually got preferred stock, but they usually exit at IPO time.)
Shorting of a stock is used for both speculation and hedging a position. Tesla has been on a continuous downwards bear trend for the past YTD, so it is very likely that quite a bit of money has been made shorting Tesla up until now.
Just because a few players are able to buy Tesla entirely, it does not mean that shorting a position is necessarily bad.
Tesla has huge liabilities in terms of debt and (probably under-accouted-for) warranties. Even if the stock dropped to $1, wouldn’t this be the biggest Apple acquisition in company history? Tesla has 12+B in debt and other liabilities and is losing nearly a billion a quarter. That’s four Beats and another one per year.
What else are they going to do with their cash horde except make big acquisitions?
Strategically, I think this could make sense in the long term, even if it loses for a very long time, just for the battery research team and the foothold into the electric car business.
Why does having more cash make a business strategy better? Just because they have cash to spend, doesn’t instantly mean there are synergies.
In fact, most corporations tend to spend cash for acquiring irresponsibily. At the beginning of any MBA class discussing mergers and acquisitions, they’ll cite the fact that the majority of these fail to produce the intended value.
Apple could pay off all of Tesla's debt with like 5% of its cash reserves. Tesla is highly ratioed, but that's a function of its own financials -- to a company like Apple, the debt isn't very scary.
On the one hand, Apple has a lot of experience in domains where Tesla has been less than great (supply chain, manufacturing) and software is slowly becoming a key differentiator for the automobile industry so I can somewhat see where synergies might exist.
On the other hand, automobile is quite far from Apple core business. I know that there is not much growth remaining in Apple key markets but still if I were a shareholder, I'm not sure I would be comfortable with Apple making such a move.
I guess we are entering a new golden age for conglomerates.
I'm far from convinced Tesla actually needed so much robotics. Relying on robots so much might actually have been a strategic mistake due to their inexperience. It looks to me like this bet has still to pay off.
Nevertheless, Apple knowledge goes a lot further than supply chain optimization. They are actually quite good at manufacturing (both manual assembly and robotics).
They know how to design products optimized for large volume production. They know how to work effectively with third parties. They know how to do quality control which is extremely important for a system integrator. Apple is not a pure software company: they already have a manufacturing culture in place inside the company.
What they don't have is domain specific knowledge so if they really wanted to enter the transport market, I guess buying Tesla could make sense.
As we keep getting better at operating at scale, logistics will continue economically favoring conglomerates over smaller companies.
Amazon is the best example of this, and I don't see why the likes of Apple won't follow suit.
Apple seems to be aggressively hiring from top institutes for their self-driving team. So, they might just have decided to go about the whole thing by developing a 1st party product instead.
Let's not discount Apple's history of entering and quickly dominating huge established markets.
Also, Tesla already makes and sells pretty great cars. Customers are happy. The cars are incredibly safe. What do they need now that they've successfully built the parts of the business that are outside of Apple's core competencies?
> Tesla potential customers are not buying a Tesla in place of another batteries + sensor tech + gps
I feel like this is a poor comparison. When companies attempt to make luxury experiences affordable to the masses (yes, still more expensive, but at least within reach), the whole is greater than the sum of its parts.
Of course Tesla customers aren't going out buying cars instead of batteries. But what drives people to want to purchase Teslas? They don't just want cars, they want luxury cars, they want electric cars, they want sleek and modern cars.
The question is how does one build a car, make it out of the best parts so that the customer has the best experience, how does one build it inexpensively but still safely, securely, and maintaining the luxury quality.
If any old car would do, they wouldn't get a Tesla, they'd get a Honda Civic. That's not Tesla's target market.
Market segments. Whether us nerds on HN agree or not, Apple has a premium feel to their products — or at least that's how non-technical people tend to perceive them.
The only real attraction to a Tesla car is the deluxe nature of their marketing. Other companies are producing cheaper hybrids and fully electric cars, but Tesla isn't targeting the same market: they're going for the upper segment who're looking for a touch of elegance, sleekness, and premium quality — and therefore are willing to pay more.
I'm really hesitant to buy the notion that supply chain - and especially manufacturing - for cars is even remotely similar to that for hardware.
And the fact that Foxconn and other suppliers actually do most of the grunt work there.
And there's the other end: retail. A $1K gadget you can stick in your pocket is a not a $70 thing that has all sorts of other impacts and externalities.
would be interesting to see how much of this is real need for a pickup. there's a marlon brandon(?) movie where he buys the biggest ram truck, just to drive up and down the street every day :)
likewise, one could say that california has a need for SUVs, while everyone only drive them under 30mph in a perfectly paved roads under perfect dry weather, alone 90% of the time, and with a single kid the other 10.
At this point I think the america Lives on pickup truck production is just a fashion indicator that some car manufacturers love to disseminate to help their stock over japanese makers who are not heavy on pickups.
wasn't a big part of the pickup truck success story that the government required lower safety standards on them compared to passenger vehicles? like, it worked out that trucks were more profitable and less costly to the end consumer or something. so that's what car companies made.
Chicken Tax. The danger was the VW Transporter, they didn't want a rerun of The Beetle. So they taxed the vans/trucks VW were making with a tariff and added it to The Chicken Tax.
Emissions are also different for trucks, they would not make it as a viable product outside the U.S. due to the purchase and gas price incentives.
The VW Camper Van became a thing as adding seats to the van was a way of evading The Chicken Tax. That bit was a happy accident. You could blame the Germans for America's planet sized carbon footprint, had there not been the Chicken Tax then Americans might be driving cars more aero and fuel saving than these tank sized things. Incidentally some US pickup trucks are Sherman tank sized, albeit not as tall and not as well armed.
Not really in most places in the US with the current infrastructure there. Even in many places that have fine infrastructure for it (like Minneapolis in my experience) weather makes it a hard sell.
This piece uses Ashlee Vance as a source. Having read and checked on facts in his books, his factchecking is sketchy at best. It's a somewhat believable rumour, but of course take it with a pinch of salt and consider that analysts like making big calls as well (usually backed by "anonymous sources").
I have enjoyed his writing so far and haven't found reason to question his fact checking yet. Can you offer any example for someone curious about the sketchiness you mentioned?
and I recall some of his figures about initial tesla production being outrageous. Like body gaps of 40mm being deemed the target. Figures like that made me wonder if anyone had proof-read it because a 4cm gap in a car is enough to fit your hand through
I still see Apple making very, very good computers - which integrate with cars (made by others) - a much better scenario than Apple "re-inventing personal transportation".
It is an iron fist wrapped in a velvet glove. Never forget how much control is being lost by generations of people now, courtesy of the user-experience candy hit ..
User owns their computer, and user owns their data: this is not so great, all things considered, if we look at Apple and their compatriots from an angle.
There is still an effort to make open, honest computing platforms. At the moment, immense numbers of eyeballs are focused on their pocket-glass mirror. Honestly, there is something here which must be deconstructed, and it could happen with a new OS/platform ideology where Apple making cars would be an extremely poor future.
Apple's limitless access to capital would be one. Tesla has really had dial down many of their ambitions because of how expensive it is for them to raise capital.
Apple is known for its operations. Tim Cooke was head of ops before he was CEO, imagine Tesla produced the same cars as today, but when it wanted to ship its inventory to Europe it didn't tank an entire quarter of sales because of fuck ups? Or imagine if Tesla had a competent scale-up of manufacturing their Model 3. Those are the things that Apple could help a lot with.
Elon Musk is certainly innovative, but he's certainly not a saver. He seems to like to take resources to grow as quickly as possible instead of growing at a controlled, steady pace like larger companies do. Basically, he's more "go big or get more funding" than "slow and steady wins the race".
Jobs was pretty good at design and hyping up modest improvements. Elon just wants to wow everyone.
This makes sense to me, think about all the car related electronic components Apple can sell once cars start driving themselves. There are lots of opportunities.
Both brands have a reputation for design and customer satisfaction, and customers with a certain insensitivity to price.
Jaguar are reinventing themselves as a BEV company with the i-Pace. (Other car manufacturers like BMW and Audi are shoe-horning electric motors into their existing platforms, not redesigning from scratch).
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