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. So I’m like, Um, excuse me, lady, now I’ll be the first to admit that I’m not an MBA and I was never very good at math since I’m totally right-brain and artsy, hence the black turtlenecks, but I have been around business most of my life and I’ve always understood that it was a good thing to have loads of money and no debt. But what do I know?

  2. Like missing the opportunity to split Apple stock when it was above $150, Apple managment can´t figure out what to do with it´s profits.

    What is the purpose of making a profit if Apple doesn´t invest it in it´s business or reward faithful stock holders? If Apple does not need profits I would suggest lowering the prices on all products so profits do not occur.
    Lots of consumers would like that.

  3. The cash pile enables Apple to make strategic acquisitions during the upcoming recession, when share prices will be down and there will be bargains galore to be had. This will position Apple well for the recovery.

    It will be smart technology purchases in emerging markets, not old dinosaurs like Sony or Adobe.

  4. They should keep accumulating the cash, and use it do what they do best, and start doing it worldwide !!!

    iPhones, Apple TV, iTunes movie rentals, Apple stores, SDK, the upcoming iTablet, etc… all that needs to happen all across the planet.

    Apple don’t need anything else, nobody else, but executing their vision worldwide.

  5. tommy, i agree. the point is not if apple should have enough cash on hand (they should) to make all their small strategic acquicisions (fingerworks, logic, final cut) but they won’t do a major acquicision on the scale of nintendo or adobe (as much i wish they would) this is not the companie’s culture. so what do they need the money for? starting to pay a dividend after 7 years in a row of earning money every quarter is a must. why the big stockholders like the mutual funds mentioned in the article don’t force apple to do just that is beyond me.

  6. @silverhawk

    it’s simple, the analysts often give lectures to university students studying accounting or finance. they are well recognised and cheered as they walk in a lecture…and likewise in society

    they analyse everything using flawed formulas, to predict the behaviour of a successful company…

    Apple’s isn’t microsoft. Microsoft worked in the 90s, but not now.

    The analysts don’t want to be in a position, where they’re wrong… for example, they rock up to uni, provide a theoritical explanation about why, companies need to use their excess fund for high risk investment to have a higher rate of return, as part of their survival and to maximise shareholders wealth…
    and then little tommy stand up and says, what about apple…

    And they’ll be pulling their hair out…

  7. Cash is a Current Asset on a company’s Balance Sheet. While there are obvious benefits to having cash on hand such as a better solvency position, better ratios such as the current ratio, quick ratio, and working capital there are some DISADVANTAGES.

    While proper cash management requires that enough is available to meet the needs of a firm’s operations, too much idle cash can be a net disadvantage as it provides a non-optimal return and loses purchasing power during periods of inflation (which we are in right now).

    An example. Let’s say a firm has $1,000,000 of cash and could earn 10% in an investment. That would mean that at the end of the year the 1 million would be worth $1,100,000 (a gain of $100,0000). On the flip side the economic environment is inflationary (let’s assume it’s 5%). So if the cash is left idle, the firm would need to $1.05 million at the end of the year to buy goods and services that could have been bought for $1 million at the beginning of the year.

    So the above demonstrates that cash by itself is not a productive asset. Cash over and above the levels needed for operations should be either invested (in income-producing areas such as short-term investments, long-term investments, or intangible assets) or returned to shareholders via a dividend.

    Apple is demonstrating through its large cash balance that it is not operating at its full potential because it has more cash than necessary for day-to-day operations. There fact that the cash balance is growing at such high levels demonstrates that Apple’s management is either being too cautious or is mis-managing the firm’s assets.

    My fellow MBA’s will understand what I’ve just described.

  8. Apple doesn’t aim to accumulate cash. They’ve been growing both R&D;and the retail stores at a manageable pace, so that the quality doesn’t get diluted. They made a key investment in NAND memory that has been paying back big-time.

    The real problem is people won’t stop throwing money at Apple. $599 for an Exchange-deprived smartphone? Yay! $3099 for a crippled MBA? Yay! $129 for an OS point upgrade? Yay! $49 for a screenless MP3 player. Yay!

    Now that should make the analysts, er, MS fanboys, really angry.

    ](please note the sarcasm)

  9. I agree. !! PS, its not really cash, just easy to make into cash investments. And Please note that those investment MAKE MONEY all by them selves.!!!

    MS is spending its money on foolish investments. Apple looks at critical need companies and is able to buy them with the interest it makes on its money.

    PS, buying a company in a downturn is always cheaper than buying it while on top.

    Just a thought,


    PS, let Apple stock dip to 116 one more time before the rise. I missed it last time and want a few more shares.

  10. The idea that Apple is ‘swimming in cash’ gave me the humorous mental image of Steve Jobs doing the backstroke in an olympic sized pool filled with $100 bills.

    Seriously though, with the USD being weak, how many acquisitions would be feasible at the moment?

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