An hour or so ago, Samsung announced that it is going to buy U.S based Harman International for a whopping $8 billion in an all-cash deal. Smart move by Samsung but one has to also wonder whether it's a desperate gamble by the company to play catch up with arch rival Apple in the world of automotive technology.
If approved by Harman shareholders, this will be Samsung's largest acquisition in history. The previous largest deal was the $800 million and change paid for AT Research back in the mid-nineties. AST, at the time, was the fifth largest computer maker in the world.
There is no doubt that this a brilliant acquisition for Samsung given the fact that Harman has a backlog of almost $24 billion which is over 3x Harman's current annual revenues with almost $16 billion of that backlog in the automotive technology space. In addition, the acquisition will allow Samsung to become a top-tier player in a world rapidly moving towards a marriage between mobile and automotive technologies.
With Apple's CarPlay technology already being used by over 40 automakers that between them have deployed the technology in over 100 models (mid-June 2016), one can't help wonder how desperate Samsung is to try and catch up to Apple. Already, Mercedes Benz, Cadillac, Chevy, GMC, Audi, Volkswagen, Honda, Ford, to name a few, have rolled out models with Apple CarPlay hardware already installed.
Even South Korean auto giant Hyundai have their high-end models which are already hardware enabled for Apple CarPlay. That probably was a major bone of contention and more than likely a major motivating factor for Samsung which is also a South Korean company. In addition, this is probably where the desperation came in for Samsung realizing that even Hyundai was using CarPlay technology in its vehicles , which more than likely led to this offer for Harman lock, stock and barrel.
With this acquisition, Samsung is indicating that it does not intend to be left behind in the automotive/mobile technology arena.
Now, if only Apple management can stop focusing on selling their stock and make an equally smart and strategic acquisition like Samsung just has, maybe the shares can stop going down, Donald Trump issues notwithstanding one single bit.
The techland acquisitions continue unabated as management finds companies still cheap enough to buy even though Wall Street keeps wringing its hands about how expensive markets are.
Think about that for a minute or two.
Wall Street pundits and swamis keep up their sweaty-palmed moaning about how expensive the market is but on the flip side keep advising companies to continue making mega billion dollar acquisitions.
C'est la vie.
(Long aapl shares and options)
PS: Congratulations to all of you that are long Harman. Great way to wake up on a Monday morning.
