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Samsung to acquire audio powerhouse Harman to push its connected car business

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【Summary】South Korean electronics giant Samsung announced on November 14th that it will buy Harman International Industries with an all-cash deal—a whopping $8 billion’s worth.

Original Claire    Nov 22, 2016 11:30 PM PT
Samsung to acquire audio powerhouse Harman to push its connected car business

South Korean electronics giant Samsung recently announced it will buy Harman International Industries with an all-cash deal - a whopping $8 billion will be changing hands. 

The eye-catching move is speculated by many to allow Samsung to gain a place in connected car business. Since competitors such as Google and Apple are developing their own car driving systems, Samsung doesn't want to lag behind. By purchasing the American company with years of professionalism in connected car services and audio products, Samsung is showing its ambition in the automotive industry.

"Harman perfectly complements Samsung in terms of technologies, products and solutions, and joining forces is a natural extension of the automotive strategy we have been pursuing for some time," Oh-Hyun Kwon, Vice Chairman and Chief Executive Officer of Samsung Electronics, said in a statement. 

Founded in 1980, Harman is an American company headquartered in Stamford, Connecticut. It was previously an audio powerhouse, but after a series of expansions and acquisitions, it now designs connected products for automakers, consumers and enterprises worldwide. This includes connected car systems, audio and visual products, enterprise automation, and other ancillary connected services.

Over the past year, 65% of Harman's sales were contributed by its car-related products, which totaled $7 billion. In the public announcement, Samsung stressed there are 30 million vehicles around the world equipped with Harman's connected car and audio systems -  including embedded infotainment, telematics, connected safety and security.

"Harman's sustained track record of rapid growth fueled by technology leadership and an unmatched automotive order pipeline reflects its commitment to innovation and customers." Kwon added.

And just a few days after the announcement, the chief of Samsung's automotive division, Park Jong-hwan, hinted that Samsung's Galaxy S series of smartphones could use audio solutions developed by Harman in 2018. Clearly, adding Harman to its portfolio will not only make Samsung's automotive ambitions bigger, but also refine its cellphone products.

With the agreed cash deal, Samsung will purchase Harman at $112 per share. The latter's stock price rocketed from around $87 to the current $109 after the news was released. 

It was noted that: "Samsung is an ideal partner for Harman and this transaction will provide tremendous benefits to our automotive customers and consumers around the world."

Dinesh Paliwal, Harman Chairman, President and CEO, will still lead Harman from his original position. The company will become a Samsung's standalone subsidiary.

To advance into the auto industry, Samsung has made a series of steps so far. Early this past summer, it invested $450 million into Chinese-based electric car maker BYD. Bloomberg also reported that it is in talks with Italian automaker Fiat Chrysler to acquire part or all of its Magneti Marelli. Last month, it also bought Viv, an AI and virtual assistant system founded by the creators of Siri.   

This time, by pocketing Harman, Samsung says 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."

Time will tell how Samsung's own car project unfolds.

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