Google Inc. (NASDAQ: GOOG, GOOGL) is not the only company developing a self-driving car. Arrow Electronics (NYSE: ARW) is developing what it calls a semi-autonomous motorcar, or SAM. Arrow claims its technology is about five years from commercialization.
The SAM technology was used in the Corvette that former Indy race car driver Sam Schmidt drove in an Arrow commercial seen during NFL football on NBC. Schmidt hasn’t been able to drive since he was paralyzed in an accident in 2000. Like the Google Car, it uses a system of cameras and sensors to direct the vehicle’s movements.
The major difference is that the system is that it lets a driver operate the vehicle through sensors that track motion. Just like the Google Car, automatic systems kick in and direct the vehicle’s movements if it passes certain boundaries.
This could change the way we drive by making steering wheels a thing of the past. Instead a person could drive a vehicle with wearable technology or breathing through tubes. One possibility is that severely handicapped persons who have lost the use of their limbs could drive or at least steer a vehicle.
Arrow’s SAM technology proves that Google is not the only game in town when it comes to autonomous vehicles. The SAM effort actually justifies Google’s investment, and it indicates that a large-scale self-driving vehicle market could be just around the corner. It also provides a system that could be adopted by other auto makers, such as Tesla Motors (NYSE: TSLA), which have discussed their own self-driving car plans.
Is Arrow a Low-cost Alternative to Google?
Naturally, contrarians will wonder if SAM makes Arrow a low-cost alternative to Google. It is demonstrating some of the same capabilities with the sky-high share price. If you like companies with strong financials, the answer to this question is yes.
Some of the numbers that Arrow reported on June 30, 2014, included:
- A diluted EPS of 4.608.
- A quarterly gross profit margin of 13.17%.
- A quarterly profit margin of 2.25%.
- A return on equity of 11.35%
- A free cash flow of $130.28 million.
- A net income of $466.61 million.
Arrow’s revenue is also growing with or without the SAM technology on the market. The company reported a TTM Revenue of $21.96 billion in June 2014, up from $20.52 billion in June 2013—an increase of $1.44 billion.
Like Google, Arrow is a diversified company working in everything from aerospace to data centers to power management to supply chain solutions. It is also the leading distributor of passive electromechanical and connector products in the Americas, which gives a unique expertise for developing intelligent systems like those in self-driving cars.
Arrow is also developing the components that companies like Tesla will need when they start deploying autonomous vehicles. The company is positioning itself to be the supplier of choice for the autonomous vehicle market. Even if SAM is not adopted, companies like Tesla, Ford (NYSE: F), and Toyota (NYSE: TM) may have to go to Arrow for the components they need for their own self-driving vehicles.
If you think self-driving vehicles are the future but want to stay away from high-priced offerings such as Google and Tesla, Arrow Electronics is definitely worth a look. It is a good company that is doing some very exciting things with cars.