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.
Apple's profit margin is 24%
Porsche's profit margin is 18%
I'm unsure it's a great idea, but it's quite possible to make good margins on cars.
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).
It really seems to make no sense.
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.
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.
[1] Nokia's margin for March quarter 2007: 22% http://ycharts.com/companies/NOK/profit_margin
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.