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Apple now has more cash than Microsoft

Friday, October 24, 2008 · 8:48 am · 45 Comments

“For the first time that I can remember, Microsoft closed the quarter with less cash than Apple. Cash, cash equivalents and short-term investments for Microsoft add up to $20.7 billion. Apple, meanwhile, closed the quarter with $24.5 billion,” Dean Takahashi reports for VentureBeat.

“Microsoft doesn’t even have enough cash to buy Yahoo! outright; it would likely have to finance an acquisition with some debt,” Takahashi reports.

“I never thought I would see this day,” Takahashi reports.

MacDailyNews Take: We did.

Full article here.

[Thanks to MacDailyNews Readers "Ken" and "Chuckles the Microsoft CEO" for the heads up.]

MacDailyNews Note: “The economic downturn may present extraordinary opportunities to companiess that have cash. Cash is king. We are very comfortable with cash in bank and it is not burning a hole in our pocket.” – Apple CEO Steve Jobs, October 21, 2008

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Comment Feed

45 Comments

« Previous 1 2 3 Next »

84 Mac Guy

Friday, October 24, 2008 - 10:52 am · Reply

Here is a fact: if you keep flushing your money down the toilet like Ballmer does, you will not have as much tomorrow.

Keep flushing Ballmer, I hear Redmond is enlarging their treatment plant.
Steveeee

Friday, October 24, 2008 - 10:52 am · Reply

@ Peruchito

Apple itself will bury MacBU sooner or later, with Pages, Numbers and Keynotes….. and tons of good software. Is there any good stuff coming from MacBU other than the bloated Office?
cptnkirk

Friday, October 24, 2008 - 10:57 am · Reply

Micor$oft and Apple depend on each other as the foundation of any claim that they are not monoploies. Buying M$ is not worth the bag of hurt it would bring on so many levels.

In my opinion, Apple should buy companies for the resources and facilities they provide. Otherwise they should build out their own facilities with the same money and bring manufacturing under their own roof. Really control the whole widget.
anthony007

Friday, October 24, 2008 - 11:09 am · Reply

Apple should buy something worth owning and synergistic, like Adobe
Peruchito

Friday, October 24, 2008 - 11:19 am · Reply

@Steveeee

not for the office brand, that will stay with MS. more for its people.

Apple can have a team specializing in business/corporate software. numbers pro? pages pro? keynote pro? corporate pro apps.

just an idea.
jjjj

Friday, October 24, 2008 - 11:24 am · Reply

No company is invincible. Not even Apple.
Jubei

Friday, October 24, 2008 - 11:51 am · Reply

This sounds great, but MS doesn’t care and has no worry. With Windows and Office monopoly, its guaranteed profits every quarter. Never running out of money.
3rdKidney

Friday, October 24, 2008 - 12:24 pm · Reply

“To be fair, Microsoft pays a dividend and has repurchased shares. Apple has done neither. Nevertheless, the news is stunning.”

Yea, they did this to make the stock value ‘appear’ to be more than they’re worth. It’s a trick companies do to make their stocks look good on paper. What they gain in stock value, they loose in cash. End result. They still suck.
Dave H

Friday, October 24, 2008 - 12:25 pm · Reply

I think it’s time for Apple to invest $150m in Microsoft shares, just to start a decade of rumours that Apple owns Microsoft
shen

Friday, October 24, 2008 - 12:53 pm · Reply

guys, the first post asked when it would be possible. it didn’t suggest it.

……nobody is that stupid.

unless…..

Balmer? do you read MDN?

and Dave H, i like that idea. too funny.
G4Dualie

Friday, October 24, 2008 - 12:56 pm · Reply

@Dave H

I was thinking the exact same thing…
Voice of caution

Friday, October 24, 2008 - 12:59 pm · Reply

I hate articles like this. It always prompts frigtards to say, “Apple should buy this…Apple should buy that…Apple should do this…Apple should do that…” Whatever. The truth is that if these two-bit pundits had any business sense, they would be Steve Jobs.

They’re not.

Apple has a habit of making very small, but strategically beneficial investments that generate a good ROI. That’s smart. To try to swallow a big fish is what famed investor Peter Lynch calls “deworsification.” I could not agree more.

Big mergers usually are train wrecks. They destroy the culture of a company, and the company acquired usually got way too much for what they offered. Often, as in the case of AOL, it’s such a mess that the company gets spun out a few years later.

By salting away its cash, Apple can weather just about any storm ahead. Factoring in cash on hand against the number of shares outstanding makes Apple stock a real bargain. And a mountain of cash makes professional investors a lot more confident that the dark days of the 1990s will likely never return. (Memo to Wall Street and the media: you can retire the word “beleaguered” when describing Apple.)

If anything, the cash on hand means that Apple can do some interesting things with R&D;. They can use it to come up with new innovations, new technologies, new manufacturing and distribution processes, expand its retail network, and hire talented workers. Apple has a history of profiting from its own inventions and making money (get ready for a word I detest – it’s business-speak) organically. (There. I said it. Kill me. Please.) And that, ladies and gentlemen, is a smart way to do business.

As for you who say, “Apple should give the money back to the stockholders”, I invite you to ask the same of Warren Buffett and Berkshire Hathaway. It’s interesting that when you push the argument that way, things get quiet. Quickly.

To Apple, I can only say, good work, folks. Kudos, Steve and the executive team. You should be proud of what you have accomplished in barely over 10 years since Steve returned.
Macslut

Friday, October 24, 2008 - 1:40 pm · Reply

I hate to rain on the parade here, but comparing cash on hand is pretty meaningless. Both companies have too much cash on hand. Apple just happens to have more. But do a comparison of the two companies and you’ll see that Microsoft is still much more ____ than Apple wherein ____ is what point the cash on hand was supposed to be making.

(Rough rounding of numbers below)

For example, if the two companies got in a bidding war, Microsoft would win. With a 200Billion+ market cap versus a 85Billion market cap, Microsoft can leverage a much bigger buyout than Apple could.

As others have pointed out, Microsoft has done stock buy backs and paid dividends. We’re talking tens of billions here over the past few years. Sure, MSFT stock would’ve tanked had they not, but it’s worth noting that the author here is comparing one company (Apple) with another (Microsoft) which has been purging their cash horde (as well they should be).

Look at other 1 year stats:
Revenue:
Apple 32 Billion versus Microsoft 60 Billion
Gross Profit:
Apple 8 Billion versus Microsoft 48 Billion
Quarterly Earning Growth:
Apple 25% versus Microsoft 40%

@voice of caution
Industry experts all agree that companies can have too much cash on hand. It varies by industry…auto makers need more cash on hand for example because of significant cycles in the industry. It’s also ok for rapidly growing companies to have too much cash on hand as it can be perceived that they accumulated the cash faster than they could figure out how to spend it. Apple fits into this last category, but they’ll only get a pass for it for so long.

There’s also the concept of velocity of capital. If a company has too much cash on hand, the investors are investing less in the business and investing more in the interest being paid on the cash on hand.

Apple needs to at some point:
1) Stock buy back
2) Pay dividends
3) Acquire or invest in another business

#1 & #2 allow investors to consider their investments in Apple’s business instead of interest in the cash.

#3 includes Apple internally building a new business. #3 is tricky, because they need to either invest in a business that will earn more profit per the investment than Apple is currently getting or brings about a synergy that increases profit overall.

This is where something like Adobe makes sense:
Adobe would cost something like 12-15 Billion, but doing nothing different with the company, just running it independently would bring in 3 Billion a year. This is more money than Apple is currently receiving on the 12-15 Billion by holding on to the cash. Not to mention there would automatically be some upside in regards to licensing fees. However, Apple wouldn’t have to run it independently and if they were smart about it, there could be some opportunities to increase profits on both sides.
Macslut

Friday, October 24, 2008 - 1:47 pm · Reply

I just wanted to add that Apple should maintain a large amount of cash on hand, and its growth rate has been astounding, but look at it this way in terms of “weathering the storms”…

If Apple had given away all of its goods and services in the past year for free instead of charging what they did, they’d still have cash on hand.

That is by every consideration, too much cash on hand.
@macslut

Friday, October 24, 2008 - 2:18 pm · Reply

“Industry experts all agree that companies can have too much cash on hand.”

Whatever… Are these so called experts the same cretinous blathering idiots who don’t know their butt from a hole in the ground and keep saying how the iPod and iTMS and iPhone and App Stiore will fail? Or how Apple will have to close their retail operations within a year of opening them?

Apples cash helped it during the dot com bubble burst and 9/11 economic slow down, and it will do it again now. Just like cameras and computers, (maybe moreso) You can never have too much cash on hand.

OK, maybe if they had 150Billion it would be time to do a little something **cough**adobe**cough** but until then, I’m happy to hear that the pakty 24Billion they have now isn’t burning a hole….
BC Kelly

Friday, October 24, 2008 - 2:46 pm · Reply

Sheez …. MacSlut or your twin brother – been peddling that tripe in here for a while

Please, go back to Wall Street and run some derivatives on your hedge funds, or whatever form of masturbation you guys are currently involved in

Cash is Cash

Better to have it than “market caps” or party hats or whatever other form of currency is the current fad with The Street

And please don’t come back with a lot of “fact and figures and anal-yst yip yap”

Well, yes, you can come back with that, but …..

Do it in a couple of years

And let’s see then how your “figures” are adding up at that time

Speaking of ‘facts’ ….

I’ll almost bet you, and your twin brothers, are possibly some kind of Microsoftian Terrorists coming here and other Mac Sites trying to cause confusion and .. well, terrorize the populace.

Go back to Redmond and play with your Monopoly Money

With Love, BC
- wooosh
  
  Saturday, July 30, 2011 - 5:45 pm · Reply
  
  “Cash is Cash”
  
  Well sure. You’re right. But it’s like comparing two people. Person A) has his home and vacation home paid off, owns three fairly new, high end cars, has a boat, and a job that pays 90k a year. He also has a lowly $50,000 in cash. Person B) has only one home, but has a huge mortgage and one car. However person B has $55,000 in cash. Guess which person is worth more? Guess which person could quickly convert to over a million dollars cash? PERSON A! So person B can run out in the street and yell that they have $5,000 cash more. Is that impressive? Not really. Buy yeah, technically he has more cash. Big whoop. Also, I’d bet you’re some kind of apple fant_ard by the way you talk. I mean, to defend the point that apple has more cash against MacSlut’s good point and then write about “Microsoftian Terrorists” would be something only an apple nut would do. Which means you probably have multiple apple products and want to defend them at all costs because it would suck to admit you were suckered on at least some of them.. And it also means you enjoy reading articles that show any apple “superiority”. Because that’s why this was written in the 1st place. People that buy multiple apple products and then blindly defend apple usually fall into the group of young, uninformed idiots that think Justin Long is cool. And are hence, the reason apple has so much cash. It’s not based on intelligence, but an iSheep, *BAaa, baaa*, following and herd mentality. … For the most part.
BC Kelly

Friday, October 24, 2008 - 3:52 pm · Reply

And to Dave H, et al

Screw Microsoft

In 6 months to a year, Apple may be in position to buy up a bunch of Banks and 1/2 of Wall Street

And why not ?

The “Microsoft Mentality” has been managing the Financial and Business World of recent years.

Imagine most can now see where THAT got us.

Time for the Apples of The World to come in and clean up the mess.

Think Different™
Macslut

Friday, October 24, 2008 - 4:49 pm · Reply

@BC Kelly,

*sigh*, you and the poster above you are doing that “proud of being ignorant” thing. I’ll try to simplify what I wrote:

Yes, having a buttload of cash is a good thing. Kudos to Apple. However, Steve Jobs doesn’t solely own Apple. The share holders own more of Apple, and they want a return on their investment.

I’m not bashing Apple here, quiet the opposite, I’m pointing out that Apple’s business is going to give a higher return on investment than putting the cash elsewhere.

In other words, if you had $100,000 and given only the option of the following, would you put it in Apple stock, put it in a savings account in your bank, or buy financial securities?

If you said “Apple stock”, then you chose wisely based on recent past performance.

However, moving forward, as Apple continues to build upon the pile of cash each quarter, you’re going to find that buying Apple stock is less of an investment in Apple’s business and more of an investment in the management of Apple’s cash.

If you don’t mind the idea of investing in the management of cash, why bother investing in Apple, when you could pure-play by investing in the same exact places Apple invests its cash? The more that Apple increases its cash horde compared to its business, the more relevant this question becomes.

So yes, I can come back in a couple of years, and Apple will continue to grow wildly, that is my prediction regardless of what Apple does with its cash.

However, if Apple keeps just accumulating its cash instead of using it (as described in my previous post), you’ll find that the stock price will be even closer to the enterprise value than it is now. Considering this will also mean that there would be no dividends paid out, you’ll start to see even more pressure from stock holders to do something with the cash.

I believe Apple will grow its cash reserves enormously over the next couple of years even if they did shed a few billion here or there. Simply put, at some point, Apple is going to have to start doing something, or else people will start arguing about whether or not Apple is a banking company as opposed to a software, hardware or media systems company.

Remember the ultimate mission of any corporation is to bring a return on investment to the shareholders.

And no, none of this comes from people who were trashing Apple before. This all comes from experience with very successful rapid growth companies facing the same issues Apple has today. Try looking up what problems some of the companies in Japan and Korea faced when they put their money in banking and real estate as opposed to dividends, stock buy backs or investment in their business/industry.
BC Kelly

Friday, October 24, 2008 - 9:26 pm · Reply

Macslut … please, stop thinking “money”

Appreciate you knowledge and understanding of Apple and Business, and your depth of tolerance in helping us comprehend the inner working of The Street, etc with your patient eloquence.

Your ability to explain the Global Monopoly Game™

Thanks, we have an opening for you in the Accounting Department

BUT

Your basic starting point is flawed regarding Apple and Steve Jobs.

You say …

“Remember the ultimate mission of any corporation is to bring a return on investment to the shareholders.”

Sorry, No

The Steve Jobs’s and Apple’s of The World are out to Change The World

THAT is the “ultimate mission”

Not make money

Think this way – Foundation or Association

Yes, we must make a “profit”

But – how much, who gets what, how is it spent, etc ?

Factor this into your spread sheet …

Who in their right mind would work for $00.00011 an hour ?

Steve does

Macslut … many folks have been talking about it for years, now few can argue against it.

We finally have The Global Village – The World is Changing

You, me, all of us – we’d be wise to Think Different

BC
taxi

Saturday, October 25, 2008 - 8:50 am · Reply

@BC

I’m sorry my friend but you are mistaken. in order to “change the world” you need money. you need it, if for no other reason that your staff can eat and pay rent. To get money you need to run your business using sound practices. When you have 20 bazillion dollars in the bank those practices become exceptionally important.

I’m sorry to point out that while Jobs may still take $1 per year as a salary, he flies around the world in a $63 million gulfstream business jet. He may not take a salary from Apple — but it’s purely symbolic. I’m sure he still has to pay for his food somehow.

The sad truth is that all successful businesses need to deal with money and “spread sheets”. If Jobs set out to change the world, the first thing he would have said to himself is, “how am I going to afford this?”