Calling Uber a Silicon Valley unicorn is passé. Uber is a $62.5 billion monster that’s threatening to take down a nervous tech market.
The latest news is that Uber last week accepted a $3.5 billion investment from the Saudi sovereign wealth fund.
That means Uber now has $11 billion to fuel its growth. But what’s conspicuously lacking from that assumed growth is some type of exit strategy for Uber’s earlier investors.
Will there ever be an IPO? Not anytime soon, if CEO Travis Kalanick has his way.
There is another option of course: acquisition.
Conservatively, Uber’s acquisition value would be something like $80 billion. That’s a big bite. Tesla has a market cap of about $30 billion. General Motors is $46 billion. Ford is $52 billion.
None of those companies, nor many others, have enough cash to acquire Uber outright.
But one company that does is Apple.
Apple has more than $200 billion in cash and marketable securities. And while not all of it is immediately accessible without a huge tax hit, Apple could also use its stock to buy Uber.
So why would Apple want to buy Uber?
Apple is way behind on transforming transportation
Maybe Apple is building a car; maybe it isn’t. But Apple is definitely doing something on the mobility front. Unfortunately, it’s only a provider of a small piece of software to car companies: Apple CarPlay. CarPlay is excellent — I’ve only become a bigger fan as I’ve used it in various cars — but Apple has to want more.
Uber proposes to redefine mobility along the “de-ownership” model. Who needs a car when you can hail a ride using your iPhone? Others are jumping into this new space, including traditional automakers, such as GM and VW. Apple also lags behind Google on the self-driving front. And of course Tesla has been building cars for years now.
Apple just invested $1 billion in a Chinese competitor to Uber, Didi Chuxing, so the company is clearly interested in getting in on this action.
But buying Uber would allow it to catch up rapidly — and not incidentally, have a huge customer and user base for the Apple Car, if and when it arrives.
Stabilize the unicorn economy
Is Uber in trouble?
Not all signs are good. The company is burning through money at an alarming rate and relying on apparently insatiable funders to keep it going. It’s not having an easy go of it in Europe, its US rivals are hooking up with big carmakers — GM invested $500 million in Lyft — and it’s anybody’s guess how it will fare in China.
Uber is the most impressive Silicon Valley startup since Facebook, but unlike Facebook, Uber operates in the rough-and-tumble real world of human drivers, passengers, unions, unfriendly governments, and machines that can kill people.
Uber’s recent Saudi raise reminds me of a completely amped-up, unicornized version of Tesla, circa 2008. Tesla hadn’t yet gone public, but it had captivated the world. However, it was rapidly running out of money. It secured additional investment and received a loan from the US government, but it also sold chunks of itself to Toyota and Daimler (both later sold their stakes for a tasty profit after Tesla’s 2010 IPO).
We now know how desperate Tesla was. Bankruptcy was only a few weeks away in 2008, and only a new influx in investment at the end of December — Christmas Eve! — kept the lights on.
Uber doesn’t seem desperate, but we do know that it’s nowhere near making money. The goal is to get huge, to become utterly dominant around the world. But Uber is already dominant in the US, and that hasn’t been enough.
If Uber runs out of investors, it will either have to withdraw from certain areas of business, like China, or take a big cut in its valuation. That could spark a flight from tech investments like we haven’t seen since the recession of 2008.
Apple could become a Silicon Valley hero by making the Uber unicorn problem go away.
The investor of last resort
Does it make sense for users, who are Apple’s most important constituents? Kind of.
The Uber experience is frequently an iPhone experience, so there’s already an affinity. If Apple is building a car, and if ride hailing’s destiny involves fleets of self-driving vehicles, then Apple-plus-Uber is a juggernaut.
From a business perspective, Apple is also groping for its Next Big Thing. The Apple Watch hasn’t lit the world on fire yet. Rumored plans for a TV or TV service haven’t taken shape in the form of a great service people can actually buy. The car plans are going to take a while to get there.
I’ll admit that an $80 billion unicorn rescue strategy is pretty out there.
But the more money Uber inhales, the harder its fall could be. If the tech sector collapses as a result, the mothers of all chills sweeps through Silicon Valley. Sure, Apple is insulted. Sure, it might not care if the unicorns all die, as long as iPhone sales live on.
But an Uber doesn’t come along every day. Or even every century. You could make the argument that it has done for transportation what Apple did for personal computing and, later, the smartphone revolution. If it survives, it could change everything. So Apple could buy that. Or it could fritter away its cash with smaller acquisitions here and there, or it could seek another moonshot product.
And then there’s the notion that Apple is the godfather of Silicon Valley, with a higher purpose, one that goes beyond simply making money, and lots of it, every year.
So why not? You can save the unicorns, Apple. You can save all of them.
As reported by Business Insider