Apple invested $1 billion in Didi, a Chinese ride-sharing company. You might even call them the Uber of China, because the company owns that market in China, claiming 97 percent share with 14 million registered drivers and 11 million rides per day. Below are seven reasons why Apple might have wanted to make such an investment.
1.) Investment: The most obvious reason Apple would plunk down a billion bucks in a fast growing company in a huge market in an industry that's exploding is to make more bucks. Apple's interest in Didi could be nothing more than a reflection of the fact that is has more than $200 billion outside the U.S.—much of it in China—and it needs to do something with it. Apple hasn't openly made similar investments, but this one is big, puts a lot of its cash to work, and sends a message to Wall Street that it won't sit on its money forever.
2.) Message to Wall Street: Related to the first point, it's possible that today's Apple cares what Wall Street thinks. To wit, Tim Cook's appearance on CNBC's Mad Money with Jim Cramer, and maybe this investment. Steve Jobs used to talk about not worrying about the stock price—his stated position was that if Apple focused on making the best products in the world that the stock would take care of itself. It's possible (though doubtful) that Tim Cook thinks differently about Apple's stock.
3.) Diversification: One of Apple's biggest problems in Wall Street's eyes is how successful iPhone has been. Wall Street always worries about over-reliance on one product line because it represents a single point of failure. This is precisely what we've seen happen to Apple's stock price since the company experienced its first year-over-year decline in iPhone sales in the March quarter. An investment in Didi represents some diversification, even if it's relatively small in the grand Apple scope of things. Look for other big investments if this is the case.
4.) Overseas Cash: The most beautiful thing about this investment is that Apple gets to make it with its overseas cash, the cash it hasn't brought back to the States for tax reasons.
5.) Data for Maps: What better way to get the most accurate map data possible than driving the roads? Apple already has tens of millions of using Apple Maps, but a ride sharing service could certainly bring additional data that Apple can use to improve maps in China, and any other market Didi enters. It could certainly provide information on how people really drive, and this could be invaluable in China, a market where Apple is an outsider.
6.) The China Game: Many people immediately speculated that this investment is Apple bribing China, or to put it more nicely, that Apple is buying into the Chinese economy. I get this reasoning, but the reality is that I'm not sure such an investment will be looked on favorably throughout China's government. The more protectionist elements aren't keen on Western companies being big players in China at all. Your mileage may vary on this point.
Whether or not every Communist Party member and regulator is thrilled with Apple's investment, it will absolutely allow to more thoroughly integrate itself in the world's largest market. To that end, Tim Cook said, "We are making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market. Of course, we believe it will deliver a strong return for our invested capital over time as well."
7.) It's Not Uber: Ride sharing is one leg of the future of transportation, and it's obvious place for a technology company to be involved in. I'll be writing more about that separately, but by investing in Didi, Apple can get involved in ride sharing without being involved with Uber.
What's wrong with Uber? It depends on your perspective, but between Apple and Uber, one of them hasn't been accused of misogamy, cheating its competition, misuse of customer data, arrogance, a callous disrespect for both its customers and
employees contractors, threatening journalists, and having a penchant for saying unsmart things.
And one of them has.
This is pure speculation—or maybe pure projection—on my part, but I can see Apple not wanting to be associated with a company that has made so many mistakes during its meteoric rise.
*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.