What's going on?

As selling smartphones becomes a more challenging business, Samsung is diversifying: on Monday it agreed to spend $8 billion to buy automotive equipment maker Harman. It�s a big bet on connected technology in cars – and the biggest ever foreign takeover by a South Korean company.

What does this mean?

Harman has grown from making speakers to becoming a global leader in connected car technology (e.g. in-car entertainment systems and safety systems) .With this purchase, Samsung is aiming to be a key player in the development of the next generation of automobiles (tweet this): those that are �connected� to the Internet of Things ecosystem.

Why should I care?

The bigger picture: Samsung is spending some serious dough to diversify its business.
Traditionally, Samsung has not been a company that makes big purchases of other companies (instead it has focused on growing its own business). But leadership of the family controlled conglomerate is being passed to the new generation. With this purchase, Samsung will gain an immediate foothold in the car parts industry – and relationships with key carmakers like Volkswagen and BMW. This should give Samsung an advantage as the car increasingly becomes a piece of software on wheels.


For stocks: Uhmmm� hello Apple?!

According to Bloomberg, Apple has given up trying to build its own car and will instead focus on building software that can used by various auto companies. This will, presumably, be similar to the sort of software that Samsung will look to develop following its purchase of Harman. Many investors have been pushing Apple to adopt a similar strategy and purchase a foothold in a new business line. So far, it�s resisted doing so – but Samsung�s change of tact could increase pressure on Apple, who is also looking to diversify away from its maturing smartphone business.