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$1B is less than 1% of annual revenues to GM, and some portion of the deal was in stock.. It's really a small bet that could speed their own efforts considerabl
by mikeyouse 11y ago
$1B is less than 1% of annual revenues to GM, and some portion of the deal was in stock.. It's really a small bet that could speed their own efforts considerably. GM has a lab in Silicon Valley so the Cruise team will likely stay here and continue development with many more resources at their disposal.
- adventured 11y agoGM is also generating a billion per quarter in operating income and has $25 billion in cash. Given how important this area of technology is going to be to the future of GM, they can easily afford and justify making an acquisition like this every quarter.
- tardo99 11y agoBut, doesn't the price they pay matter? Doesn't paying more than 100x the amount invested in the company seem foolhardy?
- cheez 11y agoI used to think that as well but time to create the knowledge could be the difference between winning or losing.
- tardo99 11y agoI think that's true in markets where business cycles are measured in days or weeks. Cars take a long time to bring to market.
- mikeyouse 11y agoThe invested capital has very little correlation with the ultimate value of the company. You obviously want to pay as little as possible for a company you're acquiring but would you say that Google overpaid for Youtube? Youtube only had raised $11M but Google paid $1.7B to buy their team and technology after something like 18 months of operating. Many investments don't pan out, but when they do, they're worth every penny.
- tardo99 11y agoYoutube had a large and expanding user base and was clearly on the way to dominating a category. Cruise has no users and basically just a technology platform. GM will regret this buy.