Some investors, analysts question Apple’s rapidly growing cash pile; currently $18.4 billion

“Talk about your apple juice: The computer company’s current cash position is $18.4 billion, up an astounding 20% in a single quarter,” Megan Johnston reports for Financial Week.

“Analysts and investors cite Steve Jobs’ legendary insecurity over Apple’s competitive position, rational or not, as the reason such a large pile of cash is idling away on the balance sheet. As a result, they have little expectation that Apple will issue a dividend, engage in a stock buyback or undertake significant M&A activity to reduce its cash stake. And that makes some of them angry,” Johnston reports.

“‘It’s outrageously high,’ Gene Munster, senior research analyst at Piper Jaffray, said of Apple’s cash position,” Johnston reports. “In its fiscal first quarter, Apple added another $3.1 billion in cash to its balance sheet.’ …Although Mr. Munster and others say they are frustrated by the size of Apple’s cash portfolio, it’s not likely that the company is planning to do anything about it anytime soon.”

We are, I think, managing the business very, very well. Stock buyback programs and other forms of returning the cash are discussed with the board from time to time. But our preference continues to be to maintain a strong balance sheet in order to preserve our flexibility to make strategic investments and/or acquisitions. – Apple CFO Peter Oppenheimer during Q1 08 conference call

Johnston reports, “Back in the 1990s, the once-mighty Apple was losing hundreds of millions of dollars a year as it watched rival Microsoft roar past it. ‘They want to be ready to make any and all acquisitions that they want,’ Andy Hargreaves, a senior research analyst at Pacific Crest Securities, said, ‘and their experience through the 1990s and early 2000s, when the company was literally threatened, I think has led them to lean on the side of having a large cash position in case the worst happens. It’s a little bit strategic, and a little bit emotional.'”

Johnston reports, “Adding a dividend or stock-buyback program seems equally unlikely. ‘I don’t think Steve Jobs would do a buyback even if the stock was $8,’ said Tom Telford, a manager for two American Century mutual funds, Technology and Ultra. American Century holds 5.4 million Apple shares. ‘He just doesn’t believe in them.'”

“The company spends 3% of sales on R&D, compared with 14% at Microsoft,” Johnston reports.

More in the full article here.

MacDailyNews Take: That’s a sorry indictment of Microsoft (to go along with their actual indictments). Redmond reported income of $6.48 billion last quarter. 14% of which is $907.2 million. Let’s hope and pray that Microsoft shareholders are satisfied with billion-dollar Big Ass Tables, bad iPod rip-offs, poorly faked Mac OSes — the latest of which is unacceptable even to their base of sufferers who are largely ignorant of superior alternatives — and that they never, ever question Ballmer about the massive waste he oversees or why Apple routinely out-innovates Microsoft by a large margin at a fraction of the cost. May Steve Ballmer continue to run Microsoft until the whole mismanaged mess meets the ground.

As for Apple’s growing pile of cash: ‘Tis better to be safe than sorry.


  1. a thought for the curious.

    Apple and MSFT have nearly the same amount of cash on hand. Apple could buy Yahoo the same way MSFT is trying to buy yahoo, with cash and stock.

    Of course Apple is smart enough to know that Yahoo is better off by itself, and a merger would be counter productive. MSFT isn’t that smart.

  2. apple‘s cash pile is obscene high. apple give the money back to us shareholders! (it is ours, did you forget mr. jobs?) or DO something with it. Buy something. having it on the bank or in short term investments is not an option. that means wasting money. make your strategic investments and/or acquisitions for god’s sake. buy nintendo, adobe, sony (half in cash, half in shares as microsoft wants to do on yahoo). do something or give it back! probably 23 dollars a share in cash at the end of this quarter. apple are you crazy?

  3. that they do nothing to stimulate the economy. The current tax cuts amount to less than $1000 per tax payer, and there are far fewer than 300 million tax payers in the US. That means that less than $1 Billion dollars is expected to boost the economy.

    Imagine what would happen if companies like Apple, Microsoft, HP, etc., were to invest $1 billion each in their employees by giving bonuses or pay raises to the average workers and skipping upper management. The recession would be just a memory.

  4. How much is Nintendo worth right now? Maybe there is a possibility for acquisition or at least strategic partnering that would give credibility to the rumored gaming suspect for AppleTV, iPhone, and iPod Touch.

  5. ralph from berlin,

    The U.S. economy is about to go through either a short sharp or a prolonged recession. As well, Apple derives most of it’s income from consumer purchases. One would expect some kind of sales hit from declining consumer expenditure. The reason for this is that in a recession the expenditure that takes a hit are discretionary expenditures. That means that people will defer purchases such as computers, ipods and cell phones.

    So ralph, the last thing Apple needs is to start spending money willy nilly. Besides, I reckon by the time this downturn is over (and it may yet spread to other countries) there’ll be some very attractive buyouts. For the time being Apple to needs to keep it’s purse well and truly buttoned.

  6. Apple shouldn’t let that cash pile get much larger than $20 bn. There doesn’t come a point in time when a cash pile just gets too big to be of much use, unless your plan is to get to the point where you can buy Adobe in cash. And as much as I see certain cheerleaders here applaud that move, it would be hyper-anti-competitive and should be rejected by our monopoly regulators.

    Stock buybacks are stupid, they help a small handful of shareholders who want to cash out.

    Once that cash pile hits $20 bn, a dividend is the most reasonable thing to do with the money. They help all shareholders equally and over time.

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