Peas In a Pod: Are Apple and Tesla Mulling a Deal?
Over the weekend, the San Francisco Chronicle dropped a bomb on Apple (NASDAQ:AAPL) fans, Tesla (NASDAQ:TSLA) enthusiasts, and technology and automotive market watchers alike. A source told the publication that Apple acquisitions czar Adrian Perica, formerly of Goldman Sachs renown, met with Tesla CEO Elon Musk in Cupertino, California, last spring. Spokespeople for both companies declined to comment to the San Francisco Chronicle, but the news is making big waves in an ocean already turbulent with speculation.
If it had been anyone else at Apple that Musk had gone to see, the wave of speculation wouldn’t be so intense. Given Apple’s push into high-end infotainment systems (think Ferrari FF, which runs its media on iOS and comes packed with auxiliary iPad minis), a meeting with hardware SVP Dan Riccio, design guru Jony Ive, or even CEO Tim Cook wouldn’t be too surprising.
Tesla’s flagship Model S packs a 17-inch touchscreen in its center console and appeals to exactly the kind of discerning consumer that is already on board with Apple’s premium image. At the very least, a partnership on an infotainment system seems like a viable topic of conversation and worth a clandestine meeting or two. And even if a partnership wasn’t on the table, it wouldn’t be surprising that top tech execs get together for coffee and a friendly conversation about innovation and the future of the market.
But it was Perica — and “probably” Cook, according to the San Francisco Chronicle — who met with Musk. Apple hired Perica, a former mergers and acquisitions banker, in 2009 to handle acquisitions for the enormous tech company.
By all accounts, Perica is a genius and one of the few humans on the face of the planet that Apple could confidently hand its purchasing power to. Until Perica took the helm, Apple’s acquisitions process was notoriously disorganized, but that reputation has turned around with the change in management. Apple has made at least 25 acquisitions under Percia’s watch, nearly as many as it had made in its entire history before that.
So because it was Perica who met with Musk and not Ive or Riccio or just Cook, the speculation is that Apple could be interested in purchasing Tesla. The price tag at current market cap? About $24 billion, with shares trading near $200. In spring 2013, when the meeting supposedly took place, shares were trading closer to $100 but were clearly on their way up.
The report in the Chronicle stirs a fire of speculation that was set ablaze when Berenberg analyst Andaan Ahmad wrote an open letter to Apple arguing that it should acquire Tesla. At the time — and still — the proposal seems far fetched, but it is an entertaining thought even if it doesn’t feel very likely. Even if a majority of Tesla’s ownership was interested in pursuing a sale, it’s not clear that purchasing the automaker would be a good choice for Apple.
However, there is an argument to be made in favor of the purchase. Apple made its name by designing category-defining products and taking over the premium side of the market as it grew. Tesla has arguably managed to do that with electric vehicles. Scale is the next step, and that’s something that Apple’s war chest could certainly facilitate.