Samsung's $8 billion deal to buy infotainment and audio hardware giant Harman (HAR) might not be disastrous for Apple's (AAPL) automotive efforts, given Harman's business model. But it does arguably show how Apple's hardware philosophy can be a problem.
The acquisition features a 28% premium to Harman's Friday close, but still only involves a moderate valuation of 15 times Harman's expected 2017 earnings. It gives Samsung a company that supplies infotainment systems to automakers such as Audi, Toyota, Jeep, Mercedes-Benz, BMW and Chrysler, as well as popular audio products for homes and cars under brands such as JBL, Bang & Olufsen (automotive only) and Harman Kardon. Parts of the latter business complement Samsung's TV business.
Harman claims that 30 million cars feature its technology, and that its automotive backlog stands at $24 billion. In addition to its core car and audio businesses, the company provides custom audio and lighting solutions to enterprise and entertainment clients, and IoT and analytics solutions for a variety of customers.
Harman lowers the dependence of Samsung's consumer electronics business on a smartphone business that has had some issues lately, and for which slowing industry growth and tougher competition from Google are going to be long-term problems.
It makes the company a top player in a connected car market seeing healthy if unspectacular growth as consumer interest in advanced entertainment, navigation and connectivity features grows, and also in an audio hardware market where Harman has been taking share.