As an Apple investor I'm not sure what to think of this.
On the one hand Apple has so much cash on hand that they can do just about anything that they want.
On the other hand I can see developing a car being a huge time and money sink with very little payoff in the end. Apple has huge margins on their computers/idevices while the automakers have razor thin margins on their cars.
I think I would feel better about this if they spun off a separate company to do this.
You assume it's very little pay off. You never really know what Apple would bring to the table if they did. Honestly I still can't believe they are trying to make a car. If they do it's very likely they know exactly what there doing.
Is the theory that Apple is going to be selling $100,000 to $150,000 sports cars? $90,000 SUVs?
Out of the last 30 years, Porsche also spent about half of that trying to just stay alive as a company.
And Porsche is an amazing outcome example, that's a world-class automaker with an extraordinary car brand and buyer loyalty built up over decades.
Apple is going to go through all of this trouble to hopefully one day in 20 years earn $4 billion in annual profit? Or the theory must be they're going to demolish other car companies, perhaps killing off Porsche and BMW, and maybe they can then earn $8 billion annually if they do that? (versus their $45-$50b iPhone profit business they have today).
Apple's business isn't $45-$50b profit. Last quarter was $42B revenue, $8.5B profit[0]. Volkswagen group, including Porsche had around $4B profit in the same quarter.
As an Apple investor I'm not sure what to think of this.
On the one hand Apple has so much cash on hand that they can do just about anything that they want.
On the other hand I can see developing a phone being a huge time and money sink with very little payoff in the end. Apple has huge margins on their computers/idevices while the mobile phone manufacturers have razor thin margins on their products.
I think I would feel better about this if they spun off a separate company to do this.
At the rate Apple is going, within another two years they're going to have a balance sheet with $100 billion in debt.
They're already at $61 billion, stacked against $178b in cash.
I'll play devil's advocate: they absolutely do not have so much cash that they can do whatever they want.
Another scenario is: via shareholder pressure, they keep upping their commitments to investors. Meanwhile they boost debt to $100 billion, while cash rots to $150 billion. Then they start investing billions into a low margin car business that won't see large profits for two decades. It's actually the setup for a disaster if anything happens and the iPhone loses favor in the market.
Doing that kind of comment is kinda cute when it makes some sense.
But no one thought that when Apple moved into phones. Phone manufactures had big margins[1], and the synergies between computing and phones were so obvious that it was assumed that Microsoft would take over the smartphone sector.
On the one hand Apple has so much cash on hand that they can do just about anything that they want.
On the other hand I can see developing a car being a huge time and money sink with very little payoff in the end. Apple has huge margins on their computers/idevices while the automakers have razor thin margins on their cars.
I think I would feel better about this if they spun off a separate company to do this.