They say you should never start a sentence with a number. 19 billion dollars, however, is a significant number. This is the figure (not all cash) that Facebook recently paid to purchase WhatsApp. This is the beauty of the digital economy. Exorbitant figures like these paid out by Silicon Valley have become the “norm.”
In 2011 Google spent 12.5 billion dollars to purchase Motorola, which, only a few days ago, they partially re-sold (hanging on to the patents) to Lenovo for a little less than 3 billion dollars. In the same year Microsoft bought Skype for 8.5 billion, and last September they purchased Nokia for a little more than 7 billion dollars.
According to some, outrageous figures like these point to an economic bubble, which seems a far cry from what’s been happening in the world of automobiles. These numbers demonstrate how rapidly the world is moving in a non-traditional direction. The automotive industry has become known as an aging venture with reduced profit margins and high risks.
It seems no coincidence that a few hours before the Facebook-WhatsApp agreement, the Chinese Dongfeng acquired 14 percent of PSA Peugeot Citroën for 800 million euros. Translation: 100 percent of PSA Peugeot Citroen is valued at around 7.7 billion dollars, which amounts to less than 50 percent of the selling price of WhatsApp. Here are some other examples: in order to take over 41.5 percent of Chrysler, Sergio Marchionne paid 3.65 billion dollars to VEBA of the United Auto Workers Union, valuing Chrysler (similar to PSA) at much less than half of WhatsApp; Ford sold Volvo to the Chinese in 2010 for 1.8 billion dollars (one-tenth of WhatsApp); the Renault-Nissan alliance has raised its stake to a majority in the Russian automobile manufacturer, AvtoVaz, by investing 750 million dollars.
The only auto industry acquisition that could potentially come close to the amount Facebook spent for WhatsApp would be the eventual sale of Tesla Motors, the electric car manufacturer. Its current share value (according to NASDAQ quotes) of over 200 dollars each translates to a market capitalization of around 20 billion dollars.
Perhaps these kinds of figures have already been discussed during the conversations that have taken place between Elon Musk and the manager of Apple. Making reference to Apple during a Bloomberg interview, Musk was quoted as saying, “… I’d be very concerned in any kind of an acquisition scenario. . . .” Who knows? Maybe they’ve even talked about an Apple-Tesla iCar?
In order to see these kinds of figures within the traditional automobile industry, one has to go back to the 1998 Daimler 36 billion-dollar acquisition of Chrysler. It also seems like ancient history when we actually needed a car to go and see and speak to someone. Now all we need is WhatsApp and a click.