Apple’s cash pile may soon exceed Microsoft’s

“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.

54 Comments

  1. 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.

  2. 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.

  3. @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.

  4. 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…

  5. 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

  6. @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.

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