Connecting instantaneously to the rapidly evolving automotive market, Samsung is acquiring Harman International Industries for about $8 billion in a deal announced by both companies this morning. Samsung has scheduled a call and webcast about the acquisition for 8 a.m. ET.
When the deal closes — mid-2017 is the target date — Stamford, Conn.-based Harman will operate as an independent subsidiary of Samsung under the leadership of Dinesh Paliwal, who is currently chairman, president and CEO. He has run it since company co-founder Sidney Harman retired in 2007.
“The vehicle of tomorrow will be transformed by smart technology and connectivity in the same way that simple feature phones have become sophisticated smart devices over the past decade,” Young Sohn, the president and chief strategy officer of Samsung Electronics, says in the release announcing the deal.
Founded in 1953, “Harman is the market leader in connected car solutions, with more than 30 million vehicles currently equipped with its connected car and audio systems, including embedded infotainment, telematics, connected safety and security,” according to the statement.
Paliwal “has pushed aggressively into the automotive world … and has secured billions in new business, including big contracts with General Motors Co. and Fiat Chrysler Automobiles NV,” Mike Ramsey and Jeff Bennett wrote for the Wall Street Journal in a piece last January.
“Samsung doesn’t plan to make cars itself, according to people familiar with executives’ thinking, but the company sees automotive technology, and the broader shift toward connected, driverless vehicles, as a promising growth area to sell more of its semiconductors, display panels and mobile services,” the WSJ’s Jonathan Cheng writes this morning.
“Samsung’s third-generation heir, Lee Jae-yong, has sat on the board of directors of Exor SpA, the controlling shareholder of Fiat Chrysler Automobiles NV, for the past four years, and Samsung last year assembled a task force to look into different ways to jump into the automobile world,” Cheng continues.
With the Harman acquisition, it will be fully immersed.
“Approximately 65% of Harman’s $7.0 billion of reported sales during the 12 months ended September 30, 2016 are automotive-related, and its order backlog for this market at June 30, 2016 was approximately $24 billion,” the release states.
Bt the impetus for the deal is clearly not just what is already on the books.
“Samsung said that it would also have access to Harman’s designers and engineers, which would allow for more collaboration on the so-called Internet of Things, in which devices and electronics can be connected to the Internet. It did not give details on what sorts of services they would aim to build together,” Amie Tsang writes for the New York Times.
“IOT is still much of 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,’” Jon Russell writes for TechCrunch.
“Harman has also diversified into software development and components for connected cars. Much of that has been done on the shoulders of major acquisitions such as a $780 million deal last year for Mountain View, Calif.-based software services company Symphony Teleca,” the WSJ’s Ramsey and Bennett reported.
“The South Korean company’s push into the automotive world will likely bring it into competition with other tech giants like Google and Apple,” writes James Vincent for The Verge.
“Although much of the focus on Silicon Valley’s car ambitions has been on self-driving capabilities, outfitting vehicles with more prosaic connected technology could be more immediately lucrative. Earlier this year it was reported that Apple had scaled back its car initiative, dropping plans to build its own electric vehicle in favor of developing software for existing automakers,” Vincent continues.
Sidney Harman — an engineer by training and a fitness buff and patron of the arts by avocation, died in 2011 at age 92. He had been undersecretary of the Commerce Dept. in the Carter Administration and purchased Newsweek magazine from the Washington Post less than a year before his death from acute myeloid leukemia.
Co-founder Bernard Kardon, an engineer who had been Harman’s boss at David Bogen & Co., sold his half of the company to the latter in 1956. The had each put up $5,000 to launch the company. Kardon died in 1993.