“Apple Inc. shareholders haven’t had much to carp about, with the stock up 1,474% since 2003. But if there is one complaint, it’s the company’s refusal to do anything with the $20.8 billion in cash and short-term investments it has socked away. The cash just sits there, earning little more than the average savings account. ‘Our preference is to maintain a strong balance sheet in order to preserve our flexibility,’ Chief Financial Officer Peter Oppenheimer told investors earlier this year,” Peter Burrows reports for BusinessWeek.
“Apple’s about to get a lot more flexible. While it has been adding about $1 billion in cash each quarter, analysts predict the company’s hoard could surge to nearly $30 billion over the next year because of strong sales of computers, iPods, and iPhones. Apple may well pass Microsoft, which has $23.7 billion in cash. ‘[Apple] could have $40 billion in the bank [in two years],’ says analyst Gene Munster of Piper Jaffray,” Burrows reports.
MacDailyNews Take: If Microsoft keeps burning cash on stupidity such as this, this, and this, Apple won’t have to wait very long at all to pass Microsoft — a couple of weeks at most. (Disclaimer/Toast: May Steve Ballmer run Microsoft for as long as it takes!)
Burrows continues, “If Apple’s stock keeps rising, pressure from investors to do more with its cash will remain muted. Still, some experts think it makes sense for the company to make changes, given its hefty bank account. They say Apple could seek more acquisitions, probably small ones, to hasten its expansion into new businesses… Some analysts think the company should explore acquisitions in the music business, taking advantage of the major labels’ dire straits.”
More ideas about what Apple should do with their cash hoard here.
Dell’s market cap is hovering around 50B . . . Maybe Steve can do what Mikey only wished to do . . .
Why would Apple make acquisitions in the music business? To buy a dying business model?
Apple is in a prime position to recreate the music business by becoming the record label; however, Apple won’t do that until it manages to wrest away control over how music is distributed from the record labels.
Right now Apple’s playing the game – iTunes is the place to go for music, and an iPod is the cool music player. Apple has great relationships with big artists like Bono, Seal, etc. Apple can blame DRM on the music labels, and basically play the good guy role. As the record labels’ power wanes, Apple will be in prime position to step in and save the music business from itself.
Any idiot who complains about Apple having a large pile of cash is your typical MORON. Hasn’t anybody heard about “saving for a rainy day”? Or being “debt free” Or “having leverage”? Total ridiculous to be trying to a healthy company to SPEND SPEND SPEND. These same people who want companies to SPEND SPEND SPEND are the same ones trying desperately to pay off their mortgages and credit card bills every month. Steve Jobs is a smart man for keeping his company well in the BLACK.
Time to buy Adobe.
One word, “dividends”.
@MacBill: I certainly think it’s harsh to call someone a moron for questioning why Apple has 20 BILLLION in cash reserves. That’s far too much money for a “rainy day” fund.
However, I think Apple has a plan. I suspect they have been holding that money for a large acquisition but the proper opportunity has not yet arisen.
To reiterate. Holding 20 Billion for a reason is good. Holding it for no reason is bad. I’ve watched Apple for a long time. They don’t do anything without having a good reason. As always, it’ll be interesting to see what happens.
I want Apple and iTunes to actually become a music company to make it possible for composers to upload and actually get their song heard.
MDN, I’m just waiting for the headline ‘MS Commits a BILLION Dollars to revive terminal boredom, um, interest in XP SP3, er, Vista.’
It would be hilarious!
And while MS pursues this cash burning fool’s errand, Apple would be putting their billions to actual use, like developing technologies and creating new platforms…
Imagine what would happen in the windows world if Apple bought Adobe! There would be terror and screams of panic. And therefore, vast amounts of entertainment for Apple folks.
Bwahahahahahaha
@MacBill
The people who own a company (shareholders) do have right to care about what a company does with its cash. It’s the company’s responsibility to get the maximum value from all the assets that it holds for its shareholders. While having a cash cushion is a good thing for a rainy day, if your excess cash beyond a prudent cushion can be put to work doing something that generates higher returns, it should be. If it can’t, it might be given it back to the shareholders in the form of a dividend so they can invest it in other opportunities that generate more return than cash can.
oh right. the point of owning shares is to have better returns than my savings account at the bank. or a mutual fund.
Never mind.
“Time to buy Adobe.”
And it begins. Trust me, this would not be a good idea. Even though it would mean that I’d work for Apple (at least until they started cutting…!)
@Blue Dream
http://www.tunecore.com/
It probably suits Apple to have Adobe as a competitor anyway, in such much as they have a rival to base, say, Aperture off. In other words, if you own all the companies liable to create photo apps, where do you get the competition or even impetus to actually bother?
Apple (and I believe Steve said this once) benefits from competition as it gives them a guide to creating new things or doing better than their rivals.
No company wants to be a monopoly, really, as the logical conclusion of it manifests into consumer hostility, lazy management, decline, stagnation and death.
The fall may be slow, but it will happen.
Apple is where it is today because they didn’t listen to these stupid shit-for-brains analysts in the first place.
I think I will put my trust in Steve Jobs and company. Thanks anyway.
Andy,
“Apple (and I believe Steve said this once) benefits from competition as it gives them a guide to creating new things or doing better than their rivals.”
That’s the difference between a leader with vision (Steve Jobs), and a leader without (Steve Ballmer).
Apple is making SMART acquisitions, such as P.A. Semi. Making acquisitions for the sake of spending money is a really moronic suggestion.
I think they should buy enough Microsoft shares to elect Steve Balmer CEO for life (maybe even get Larry and Moe on the board, to keep Curly company)
I’ll preface this by saying I’m the furthest thing from an expert in the world of corporate acquisitions, but couldn’t it be that Apple wants all that money on hand to make it very difficult or impossible for Microsoft to ever try a hostile takeover?
I’m assuming the shareholders would have final say in that situation, but I wonder how many people who invest in Apple do it because they love the company and its products or just love to make money.
If you thought the dark ages of computing were prior to 2006, imagine if Microsoft somehow got its grubby hands on OS X.
Just a thought.
The LAST THING in the world Apple should do is invest in the music business, at least as long as the old guard is still there.
Apple should buy a law firm to handle all the people trying to sue them and to help protect their intellectual property. Would save them tons in legal fees.
Apple could buy Nvidia.
As for MacBill’s rainyday fund, you know, $20B growing to $40B is a big rainyday fund. The point is how big a rainyday fund does Apple need, and most everyone agrees that $20B is too much.
It’s like this, that $20B is either cash or cash-like instruments, earning 1%. If you invest that money in a business like Apple’s, you expect them to return 15% or more. In other words, having that much cash sitting around is a lag on earnings. This concerns shareholders who want to see Apple put that money to use.
Better hurry to spend that monney: banknotes will be worth nothing in about 5 or 6 years from now!
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@ChrissyOne
You are right about it not being a good idea for Apple to buy Adobe. The only thing they would want would be Photoshop and it would be FAR cheaper for Apple to just develop their own answer to it or just fold all those features into Aperture.
Or Apple could buy News Corp! Just for the heck of it. Think of it as a public service.
Piling more cash than MS is not a goal.
We should remember that in the old days, Shareholders used to mean people that wanted to own a growing business and share in its wealth.
Today, shareholder (usually
” width=”19″ height=”19″ alt=”grin” style=”border:0;” /> means a greedy bastard who would like Apple (or other company ) to give out huge dividends to the shareholders which would then drive up stock prices so they could sell their stock and make lots of money. Screw Apple as a company.
Sound about right.
en
@dallas “Or Apple could buy News Corp! Just for the heck of it. Think of it as a public service.”
Apple’s not liberal enough to want to bring down Fox News. They may have Al Gore on the board, but a lot of their actions are very right-wing. They are classical liberals (the common use of the word liberal in the US is backwards from it’s true meaning), in that they are capitalists, and desire low taxes with high levels of personal freedom.
Just a thought. Maybe Apple is saving up to buy Microsoft. They could then announce a three year program to replace all the crappy MS software with better Intel versions of Apple software.
Sell millions of copies of Almost good as Apple for PC buyers, and top of the line Apple hardware and software.
Apple and Microsoft (owned by Apple) operating systems would then sell to 99% of the market.
LOL Just a thought.
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en
Invite everyone over for cookies and milk
Or pizza and beer
BC
Apple needs every dollar in that fund ($40bn in 2009?) to fund the cash-flow they will require to manufacture enough product when the world, the whole world that is, refuses point blank to buy another Windows computer.
You think I’m joking don’t you?
And with $20,000,000,000
I mean EVERYONE
Apple’s been hoarding cash for a while now. Even back in the 1990s when they were in dire straits, they kept a few billion in cash. (I remember one point when their cash on hand was about equal to their stock value, which meant the stock was absurdly low.) Originally I think they kept the cash for emergencies. But now I think they like having that amount of cash on hand because it makes them dangerous. Just like Microsoft used to be. Basically, Apple can buy just about anyone. You think Steve Jobs doesn’t use that as leverage when negotiating for parts? “Uhm… well, if you don’t lower your price and give us a better deal… I might be your boss next week. Trust me. You don’t want me as your boss.”
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Nation wide wifi to cut out the telcos?
Actually, I believe Steve’s next coup de grace is ‘sharks with frickin’ laser beams on their heads’. They will come in two models known as iShark and iShark Extreme.
MS’s response will be to take a cow and sellotape a projector to its head and call it Microsoft Cow 3000 Super Pro Edition!
hey poo
Am a bit surprised Apple, in team with Google, didn’t spend a huge chuck of it on that recent 700mhz TV auction – that ‘spectrum’, as I understand things (which isn’t THAT much) is more effective than WiFi
Now, that being said, and as far as we know – perhaps Apple *is/was* doing something with this new ‘wireless spectrum’ in partnership with those who did win it: ATT, Verizon, etc
Something of that nature, and the potential it represents, is still a few years into the future.
Perhaps Apple has some Great Plans™ for the iPhone 5G, now being developed in the basement of 1 Infinity Loop behind closed doors with those involved able to expect a ‘one way ride’ into the mountains if they even think about thinking about leaking any info on the subject, if ya know what I mean.
But, we CAN count on this:
Wireless is the future
And with $20,000,000,000+ IN the Bank, and growing
(minus any expenses for cookies/pizza/milk/beer)
Apple WILL be THE Player in the Game
And you can take THAT to the Bank
BC
They’re going to use the cash to take the OS to 11!
It’s great to see that an innovative company such as Apple is wise enough to squirrel away cash for that rainy day that may come or to acquire a company or technology that is the next big ” app “, as they say.
With all the crap and financial trickery that’s present in the financial markets today, it’s good to see some conservatism. I trust Apple’s management to run the company and provide a return to shareholders by growing the value of the stock.
Give some of the cash to MS so they can do more lame advertising and give Ballmer a bonus.
Steve is planning the first hotel in orbit with iShuttles to take visitors to and fro. (“MobileMe” will take on an entirely new meaning.) Oh, and there’d be a new Apple Store in orbit, too. But all of this is just a stepping stone to Luna and Mars and beyond.
@Sir Gill Bates:
“Apple is where it is today because they didn’t listen to these stupid shit-for-brains analysts in the first place.”
Amen brother. The most insightful thing I’ve read all day. Hell, I’m putting that in my blog as Quote of the Day!
Apple’s lack of cash on hand back in the Dark Days helped fuel the perception of “beleaguered Apple”. Steve is NEVER going to let that happen again.
Their cash stash is for times just like RIGHT NOW, otherwise known as a recession, whether “shit-for-brains” Wall Street types will admit we’re in one or not. A $20B cash hoard helps them ride out the storm while whole industries get shaken out.
As a long-time Apple watcher myself, I love that they have the discipline to sit on that money until the right time to strike, like with P.A. Semi, Fingerworks, and other purchases this decade. As a liberal (actually, progressive), I applaud their conservative approach with their moolah.
Peace.
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Olmecmystic
P.S. The observation of leaving M$ with a VERY bad taste in their mouths if they ever came calling, like they tried with Yahoo, is a good one.
Doesn’t having all that cash make them a target for a hostile take over? I guess Apple having the share holders all wrapped up ( Share holders lovin Apple just the way it is) makes it hard for a guy like Kekorian to buy shares and try to take over.
Asmodeus,
Why thank you. It’s nice to be appreciated by a dark lord.
buy me, again.
why buy Adobe ??
forgot the Claris adventure ?
IF they buy Adobe, they will never force them to develop exclusively for Mac OS, because that would destroy Adobe.
they could spend money to buy competitors they want to destroy (RIM) but the iPhone can do that on it’s own.
(that would have been the Microsoft approach).
nah, just keep the money, pay your employees well, buy small innovative company’s (and ME !)
not Adobe, for god sake !
that would not make any sense at all, they are great, but there is nothing to gain by owning them.
Buy avid
It’s reserved for research to fund the development of a system to keep Jobs alive and well forever so he can keep running Apple. His mind will live permanently on the Net or the Cloud powered by XServe X like the Major in Ghost in the Shell.
Dividends. Lest ye forget stocks are shares of ownership. Owners of profitable businesses are paid in two ways, dividends and share buybacks to increase owner equity.
maybe they can take some of that 20 billion, hire some programmers, etc and write a directx-like SDK for osx so game developer will develop/port games for OSX. About the only smart thing microsoft ever did was directx- made game development much more cost effective than it was previously and hence pushed windows as the ‘game platform’ for many and thereby the os of choice. No games then a huge number of users aren’t going to shift to osx. Simple.
@ macbill: you took the words right out of my mouth ! very well said !
(mdn word: taking; as in taking the the words oiut of my mouth)
If Microsoft keeps burning cash on stupidity such as this, this, and this AND DON’T FORGET THE LASTEST… THE “BALL”!
They should buy Intel…wouldn’t that be a hoot…
Buy ACDSystems and junk iPhoto.
Buy Powerdesk and junk Finder.
That advice all for the discounted price of $20.8 Billion, a bargain of 50% off the regular price of $41.6 Billion.