As Alphabet chugged past it to reclaim the coveted-if-meaningless “most valuable” company designation based on market cap, Apple yesterday revealed a $1 billion investment in Beijing-based Didi Chuxing Technology, whose ride-hailing app is the chief rival to UberChina in the world’s most populous country.
“Didi exemplifies the innovation taking place in the iOS developer community in China,” Apple CEO Tim Cook said in a statement. “We are extremely impressed by the business they’ve built and their excellent leadership team, and we look forward to supporting them as they grow.”
He elaborated a bit in an interview with Reuters’ Julia Love: “We are making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market,” Cook said. “Of course, we believe it will deliver a strong return for our invested capital over time as well.”
And that is about as far as anybody would officially go on the reasoning behind the investment which, when all is said and done, takes a minuscule amount out of Apple’s reserves of $137 billion, or so, in cash.
“With sales of iPhones slowing on mainland China and Apple running into trouble with regulators there, [Apple may see its investment] as a source of new revenue streams and goodwill in the massive market,” Julie Makinen writes for the Los Angeles Times. “Apple recently introduced Apple Pay in the country, but it is up against fierce domestic rivals with a big head start, like Alibaba’s Alipay and Tencent’s WeChat Pay. Apple’s iTunes movie and iBook services were recently suspended in China.”
Reuters’ Love points out that the investment seems to reinforce Apple’s recent emphasis on increasing revenue from services such as Apple Music and Apple Pay. “After all the hints about the service business and what they would like to do in the future, it’s all starting to fit together,” Moor Insights & Strategy analyst Patrick Moorhead tells her.
“The development is the latest in the intense competition being waged between Uber and Didi Chuxing. Both companies are offering drivers and riders generous incentives to sign up for their services,” writes Melanie Eversley for USA Today.
“Apple declined to elaborate on the motivation for the deal,” Rick Carew and Daisuke Wakabayashi write for the Wall Street Journal. “However, the company has been working on building an autonomous electric vehicle with a team of more than 1,000 employees. Other ride-sharing services have shown an interest in autonomous vehicles. Uber has a large team of employees working on autonomous vehicle technology, while General Motors and Lyft are planning to start testing a fleet of self-driving taxis within a year.”
Jean Liu, Didi’s president, did not reveal a heck of a lot either in a conference call with reporters on Thursday evening.
“The first time we met with Mr. Cook, we shared with him a joke,” he said, Mike Isaac and Vindu Goel report for the New York Times. “Our company’s legal name is called little orange. We figured a company named after a fruit could always achieve something big.”
“The endorsement from Apple is an enormous encouragement and inspiration for our four-year-old company,” Cheng Wei, Didi founder and CEO, said in a statement in keeping with the murkiness of the reveal.
Uber isn’t saying anything either, by the way.
Back on Wall Street, “Apple’s shares have fallen 13% in the two weeks since it reported its first-ever fall in smartphone sales and put out a very cautious forecast for the current quarter,” Richard Waters reports for Financial Times, even as two forces are at play in the marketplace.
“One concerns the broader outlook for mobile computing. Even if Apple’s hardware sales recover next year, the growing saturation in the smartphone market means that much of the growth in the mobile industry will swing to services — one reason Apple has itself been emphasizing its service revenues this year,” Waters writes.
“The other question for Apple and Alphabet is whether they will be able to find new, long-term growth engines as their core businesses — smartphone sales and search advertising, respectively — slow.”
Slow, of course, is as relative a term as “most valuable” — as BlackBerry and print publishers everywhere will be the first to tell you.