Secret Tesla Meetings: Is This How Apple Will Innovate?
Apple (NASDAQ:AAPL) and Tesla Motors (NASDAQ:TSLA) seemingly have nothing in common, but they are two of the most innovative companies. Just about everybody knows what Apple does: It’s one of the greatest technology companies in history. Apple designs, manufactures, and markets mobile devices, personal computers, and portable digital music players, as well as a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications.
Surely everyone has heard of its products like the iPhone, iPad, Mac, iPod, and Apple TV. It also has a portfolio of consumer and professional software applications its own iOS and OS X operating systems, iCloud, and a variety of accessory, service, and support offerings. But what could this have to do with TSLA, a manufacturer of eco-friendly vehicles? I suspect that TSLA might be interesting in incorporating the technology of Apple directly into the vehicles, most likely harnessing iTunes and the use of the digital personal assistant, Siri. This is likely the case, because Apple has met with other automakers to incorporate its technology.
How do we know that Apple and Tesla might be working on something? Well, just this weekend, we learned that Apple’s merger and acquisitions chief, Adrian Perica, met with Tesla’s chief executive, the great innovator and entrepreneur, Elon Musk, in 2013. At the time, there were rumors that Apple could make a bid for the electric carmaker. This news was first reported by the San Francisco Chronicle in its online edition Sunday morning, citing an anonymous source.
The report suggested that a high-level meeting between two major Silicon Valley players is a sign that Apple is very interested in Tesla. There has always been chatter about the two coming together. Adnaan Ahmad, an analyst at the investment bank Berenberg, went as far as to write an open letter in October to Apple CEO Tim Cook, calling on him to buy Tesla at a time when Apple was coming under intense pressure to put its billions of cash to better use.
As part of the report, it was interesting to learn that the Chronicle also reported that Apple is looking at the medical devices business, specifically technology that can predict heart attacks. Apple is exploring ways to predict heart attacks by studying the sound blood makes at it flows through arteries.
It is unclear exactly which medical companies Apple might partner with at this time, but Phillips or General Electric, which design many medical devices, is a possibility. Regardless of the companies to be involved, these moves are the juice shareholders have been waiting for. I agree with the San Francisco Chronicle report that Apple’s “interest in electric cars and medical devices, areas far afield from its core business, is a clear signal that the tech giant is looking to take risks and expand beyond iPhones and iPads.”
This is the catalyst for growth Apple needs. It is unclear what type of revenues any pending deals could bring Apple. What is clear is that the company is definitely making strides to innovate once again. Trading at 13 times earnings with a 2.3 percent yield, the stock’s downside is limited. The upside, however, could reasonably be estimated at 10 percent to 30 percent through 2014.
Disclosure: Christopher F. Davis is long Apple.
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