Apple Acquisition of Tesla

Team Project: Apple Acquisition of Tesla

Hari Gonzalez, Hanh Huynh, Anudari Jamts, Hanh Nguyen

June 11, 2015

City University of Seattle

Apple Acquisition of Tesla

Founded in 1976 in California, Apple is the world's second largest information technology company nowadays. The company designs, manufactures, and sells mobile communication and media devices, personal computers, and a variety of related software and online services. Its best-known products are Mac, iPhone, iPod, and iPad. The company is operating in sixteen countries with more than 98,000 employees. In 2014, Apple is recognized as the world's most valuable brand in the Interbrand best global Brands report with a valuation of $118.9 billion. Apple trades in NASDAQ under the symbol AAPL.

Tesla is an automotive and energy storage company founded in 2003. The company designs, develops, manufactures, and markets high-performance electric vehicles, vehicle powertrain components, and stationary energy storage system. The company posted its first profits in the first quarter of 2013. As of March 2015, the company has been selling four models of cars: Tesla Roadster, Model S, Model X, and Model 3 with the total quantity of about 70,000. Tesla trades on the NASDAQ stock exchange under the symbol TSLA.  

Recently, Apple’s shareholders have encourage their CEO, Tim Cook to collaborate with Tesla and possibly leading to an acquisition.  Despite the fact that both company are in different industry, they both shares the same innovation driven culture. The acquisition strategy is to minimize the amount of goodwill and intangible that stay in the balance sheet. With Apple’s current financial position, it can certainly afford to buy Tesla at any premium to its current value. The acquisition will bring both companies high talented team of R&D to make wonderful innovative products with premium brand. This strategy will turn their current rivalry into an ally.

Apple's Financial Position

Apple has maintained a strong performance based on the financial results for its fiscal second quarter ended March 28, 2015. Apple has reported 27% revenue growth and 40% earning per share growth, setting a new record for its second quarter performance.

Apple's revenue of 2015's second quarter is $58 billion, compared to $45.6 billion of last year. Net quarterly profit is reported at $13.5 billion, which is 32.7% more than year-ago quarter. Earnings per share is $2.34 per diluted share in comparison with $1.66 per share last year during the same quarter. Moreover, Apple posted its gross margin of 40.8% in March 2015, compared to 39.3% in March 2014.