Connecting cars to networks will allow them to learn from each other. It will also make our lives easier.
In early November Samsung announced a major Internet of Things play. It will buy Harman International (HAR), maker of car infotainment systems and connected hardware. At $8 billion, it’s a big deal for Samsung. The Korean technology company is notoriously spendthrift. However, it shows where technology is headed and how frantic big companies have become to ensure a foothold.
Commenting on the company website, Samsung’s President and Chief Strategy Officer Young Sohn said: “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.”
Sohn may be understating the impact. Because connected cars share data, they learn. This means information about traffic flow, light signal changes, weather and even potholes can be seamlessly shared. The end result is drivers avoid aggravation and possibly costly repairs.
That’s something car makers can sell to consumers. BMW, Volkswagen, General Motors (GM) are others clamor for Harmon’s gear. The Stamford, Conn., company recorded almost $7 billion in sales last year. More important, the order backlog swelled to $24 billion.
That is a healthy chunk of the sector. McKinsey and Co. believes connected car gear and data will grow to $200 billion by 2020.
Harman also fits well with Samsung’s core hardware strengths and software aspirations. It will sell more leading edge displays and microprocessors. And itwill find a home for Viv, its recently acquired digital assistant.
Many believe portable, artificially intelligent, voice enabled digital assistants are the future of computing. Cars are the perfect use case. Moreover, more than 30 million vehicles already have Harmon connected car, audio or telematics. That is a healthy head start on Apple’s Siri and Alphabet’s Assistant.
In the end, that may be what this is all about. All of the large technology companies are pushing hard to extend their ecosystems into the connected world.Forget the hype cycle and security woes. The Internet of Things is happening. Apple, Alphabet, Amazon (AMZN) andMicrosoft (MSFT) are all players. Samsung started with its SmartThings acquisition. Then came Viv. Harman is the latest piece. In fact, it may give the Korean company a big leg up on the competition as cars in the future become as important to entertainment consumption as movie theaters and our dens.
In the future, portable digital assistants will help us navigate our digital lives. They help us control home appliances from the office. Or summon our cars. Or keep track of the people and things that matter most.
Right now, companies in our Internet Shockwave buy list are investing to make all of this happen, which means that they are going to be considered new buys when the recent selling gale calms and reverses.
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About Jon Markman: A pioneer in the development of stock-rating systems and screening software, Jon Markman is co-inventor on two Microsoft patents and author of the bestselling books The New Day Trader Advantage, Swing Trading and Online Investing, as well as the annotated edition of Reminiscences of a Stock Operator. He was portfolio manager and senior investment strategist at a multi-strategy hedge fund from 2002 to 2005; managing editor and columnist at CNBC on MSN Money from 1997 to 2002; and an editor, investments columnist and investigative reporter at the Los Angeles Times from 1984 to 1997.