Apple Tesla Rumor is about Perception of their Lack of Innovation
It all started with a report that the man in charge of Apple (AAPL) Inc’s Mergers and Acquistions, Adrian Perica, met with Tesla Motors’ Elon Musk, last spring.
Would they? Could they? It got everyone in a tizzy.
Apple has valued smaller purchases
Despite Tim Cook hinting the company had no fear of larger acquisitions in a recent WSJ interview, Apple has historically made much more bolt on acquisitions which add specific capabilities they need like Siri. Examining this Wikipedia page of Apple Acquisitions gives you an idea of how they tend to operate in the acqusition world.
Could Apple really want to buy Tesla?
While stranger things have happened and you never know what will happen in the future it certainly does make a sexy story to ponder “Apple and another super genius in Elon Musk”; it also seems very unlikely. Tesla (TSLA) along with its sky high hype has a sky high valuation even if it would barely dent Apple’s cash pile.
Tech mergers are tough but a tech company and a car company?
Look no further than the disaster that was Google’s acquisition of Motorola for $12.5 billion or Hewlett Packard’s Autonomy nightmares to see that big tech acquisitions rarely work and while a purchase of Tesla is more than buying a car company, it would be an even larger challenge.
It’s all about innovation
This isn’t just about Tesla, Apple, payments, and iCars. It’s about the ongoing narrative in investors heads. This is about the innovation that supposedly left Apple when Steve Jobs died. That is why people believe they need Elon Musk and Tesla.
That’s why Apple has a Price to Earnings of 13.5 despite being a finely tuned cash machine, while Google (GOOG) and its self-driving cars has one of 33.59.
The perception is that Apple needs to buy Elon Musk for $25 billion for innovation.