Gosh, the hardware business is hard, isn’t it?
That much was clear during Apple’s quarterly earnings call yesterday. The tech darling surprised investors (in a good way!) by posting better-than-expected per-share earnings of $1.42 on revenues of $42.4 billion. Apple stock jumped 6% or so on the news—but the real highlight for me was the Cupertino company’s continued emphasis on services. In the span of about a minute CEO Tim Cook mentioned the “s” word five times, a sign that the iPhone maker—long insistent that it’s a hardware company; don’t get it twisted—is pushing strongly into software as device growth dries up.
Meanwhile in the Nevada desert, billionaire entrepreneur/executive/Bond villain Elon Musk finally unveiled his new Gigafactory, Tesla Motors’ multibillion-dollar bet on lithium-ion batteries. Investors have been tough on Tesla recently, thanks to Musk’s proposed tie-up with SolarCity. But if you scrutinize the numbers you’ll see that what investors really like is all that potential value packed into what appears to be the world’s largest building. The running joke? Tesla is the world’s most valuable battery company with an automotive business attached to it.
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It’s clear that Apple and Tesla are moving in opposite directions: One’s pushing into software; the other’s doubling down on hardware. But the takeaway is about commonality. When faced with uncertain growth prospects, both companies are pushing strongly, passionately, and purposefully into adjacent businesses that will help reinforce their core. No promises that their bets will work out, of course. But if they do they have the potential to lift up the entire company.
And hey—if it doesn’t work out, I know a fabulous casino in Montenegro where both companies can recoup their losses.