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Why Samsung is buying Harman?

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Written by Kamil Arli

The South Korean smartphone maker said Monday that it would buy U.S. auto-parts supplier Harman International Industries Inc., based in Stamford, Conn., for $8 billion in an all-cash deal that instantly makes Samsung a major player in the world of automotive technology.

The South Korean smartphone maker said Monday that it would buy U.S. auto-parts supplier Harman International Industries Inc., based in Stamford, Conn., for $8 billion in an all-cash deal that instantly makes Samsung a major player in the world of automotive technology.

The deal—Samsung’s biggest acquisition in its history—reshapes the pecking order in the global automotive supply chain, reflecting a quickening pace of innovation and an increased role for companies with deep pockets and a keen understanding of mobile services.

THE ACQUISITION IS SAMSUNG’S LARGEST TO DATE AND BIG DEAL FOR ITS AUTOMOTIVE EQUIPMENT

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You may best associate the name with audio equipment, but Harman is big on cars, too. The acquisition is Samsung’s largest to date and a big deal for its automotive ambitions. Around 65 percent of Harman’s sales — which totaled $7 billion over the last year — were for car-related products. Samsung added that Harman products, which included connected car devices and audio systems, are installed in an estimated 30 million vehicles worldwide.

Samsung lags Google and Apple on in-car entertainment and software systems (Android Auto and Apple CarPlay, respectively) so this deal will give it the kind of reach that could allow it to compete more evenly with its rivals inside the car.

“Harman perfectly complements Samsung in terms of technologies, products and solutions, and joining forces is a natural extension of the automotive strategy we have been pursuing for some time,” Oh-Hyun Kwon, Vice Chairman and Chief Executive Officer of Samsung Electronics, said in a statement.

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Terms of the deal will see Samsung pay $112.00 per share. That’s a healthy premium on Harman’s current share price of $87.65, and it gives the deal a total value of approximately $8 billion. The transaction is expected to close by mid-2017, at which time Harman will become a standalone subsidiary of Samsung. Dinesh Paliwal will continue to lead the firm as its Chairman, President and CEO, both Harman and Samsung said.

“Samsung is an ideal partner for Harman and this transaction will provide tremendous benefits to our automotive customers and consumers around the world,” Paliwal added via canned comment.

 With Google rapidly advancing its automotive technology and Apple reportedly developing an electric vehicle (or not), it is perhaps not surprising that Samsung has made ground on automotive itself in 2016.

This summer, it invested $450 million into China-based electric car maker BYD, which includes Warren Buffett’s Berkshire Hathaway Inc. among its investor base. Other reportssuggested that the Korean giant was also eyeing up a bid for Magneti Marelli, a manufacturing subsidiary of Fiat Chrysler.

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This investment will go beyond automotive, though, according to Samsung. The firm said it plans to marry its own electronics division and expertise with that of Harman for audio — both on the consumer and professional side of business — and connected devices, aka the internet of things, or IOT for short.

IOT is still very much a buzzword, but Samsung said it plans to utilize Harman’s 8,000 developers to “deliver the next generation of cloud-based consumer and enterprise experiences, as well as end-to-end services for the automotive market through the convergence of design, data and devices.”

Other notable acquisitions from Samsung of late include Viv, a highly regarded virtual assistant from the creators of Apple’s Siri service, and cloud computing company Joyent.

Sources: techcrunch

About the author

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Kamil Arli

Editor of DigitalReview.co. Digital Media Consultant

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