Sep 6 2017

Here s the Simplest Reason Ever Why Apple Won t Spend More Than $50 Billion


Here’s the Simplest Reason Ever Why Apple Won’t Spend More Than $50 Billion to Buy Tesla

Not so fast Tesla (TSLA ) fanboys on the electric car maker becoming a subsidiary of Apple (AAPL ) in the near future.

Citigroup was the latest to fan the Apple-for-Tesla takeover flames, putting the company on a list of potential targets for Apple amid a more than $250 billion cash pile. Other names on the list included Netflix (NFLX ). Walt Disney (DIS ). Activision Blizzard (ATVI ). Electronic Arts (EA ). Take Two Interactive (TTWO ) and Hulu.

Rumors on Apple’s interest in Tesla have long existed.

Tesla founder and CEO Elon Musk fueled the rumors last year when he confirmed a meeting with Apple’s head of M A. He didn’t specify who exactly he met. Meanwhile, Wall Street analysts have pontificated it would be wise for Apple to buy Tesla for its battery and autonomous driving technologies. With Apple recently showing its hand on its autonomous driving ambitions, Wall Street may be onto something.

But there is one simple reason Apple won’t pay more than $50 billion for Tesla (Tesla’s current market cap is $52 billion), or perhaps any other mega business. It has never bought a company of any significant size before, and therefore may lack the expertise to integrate such an operation successfully.

Apple “could certainly [buy Tesla] if they wanted to. They certainly have the financial capacity to do so,” former Apple CEO John Sculley said in an interview with TheStreet. “If they chose to [buy a big company] I am sure they would only do it with a product that was intended to be revolutionary in a large addressable market. So an automobile maker like Tesla would certainly meet that criteria.”

However, Sculley explained the company “has no history of buying a really big company, so they would have to think about that a lot as to how they would incorporate it and manage it.” The last large business of any kind that Apple bought was headphone and music subscription purveyor Beats for $2.6 billion back in 2014.

Since then, Apple has continued down a path of acquiring small upstarts with promising future technology, while watching its cash hoard balloon.

On the plus side, at least Musk uses an iPhone and thinks Apple is a “cool company.”

Appleis a holding in Jim Cramer’sAction Alerts PLUS Charitable Trust Portfolio.Want to be alerted before Cramer buys or sells ( AAPL ) ?Learn more now.

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