“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.