“Jobs recently shot down the idea that Apple would return to shareholders any part of the massive cash hoard it’s amassed from the booming sales of its shiny gadgets. The high priest of the Church of Apple justified his stance by arguing that the company’s cash and investments, which now total more than $40 billion (larger than Guatemala’s GDP, for those wondering), gives his company ‘security and flexibility’ when it comes to making future moves,” Jhonsa writes. “However, even a quick look at Apple’s acquisition history makes it clear that this isn’t a company with a habit of doing high-profile deals that take a huge bite out of its balance sheet.”
Jhonsa writes, “The one area where I could see Apple truly opening up its purse strings a bit is in deals with media companies. Given its squabbles with Hollywood studios regarding the availability and pricing of iTunes content, the company might decide to use some of its billions to make “strategic investments” in the likes of Disney and Viacom, or maybe gaming giant Electronic Arts, with the goal of guaranteeing the long-term success of iTunes (and indirectly, Apple’s consumer electronics hardware). But if the history of such moves is any guide… the total cost of the deals are unlikely to come anywhere near $40 billion — never mind the $60 billion or $70 billion that Apple might soon have on its hands, given its tremendous cash-generating ability.”
Full article here.
MacDailyNews Take: If nothing else, Apple’s cash pile does two things just by sitting there: It assures product buyers that the company is here for the very long term and it frightens the you-know-what out of competitors. Twin missions accomplished, all the while generating interest.
[Thanks to MacDailyNews Reader “Marty S.” for the heads up.]
Clone armies don’t come cheap.
It’s simple.
The iTrash
http://www.hulu.com/watch/131076/saturday-night-live-undercover-celebrity-boss
Obviously MDN thinks that the owners of the company are better being ripped off by its managers than paid their rightful earnings in the form of a dividend.
Even at 4%, it still earns a 1.6B in interest annually…I could use some of that…
ADBE
Mkt cap 18.29B
he could buy Dell and have 15B to spare for a rainy day…
On second thought, buying Dell is like burning money or paying to implant a cancer…
Nah…
Apple could have plans to become a one shop Information Service Provider.
No reason in this Apple future to go to separate cable, phone, internet service providers who all treat Apple consumers like second and third rate freak customers.
Steve hoards the cash to POOP (piss off obnoxious pundits).
$40 billion is a lot of money (it’s more than twice what I made all last year).
But, to complain about Apple keeping it on hand is just stupid.
Comments such as “high priest of the Church of Apple” and the comparison with “Guatemala’s GDP” just undermine the author’s credibility.
Conventional business management says to borrow money, get the company in debt, and if your plan doesn’t work, declare bankruptcy to restructure, then try, try again. It also calls for kissing shareholder’s butts.
Conventional business management is resulting in poor quality products, poor balance sheets, massive layoffs when Wall Street deems you not living up to their expectations, and an inability to borrow or generate cash because your debt is so high.
Jobs is placing Apple and its’ customers above “conventional business management” ideas and kissing shareholder butt.
Wow, what a novel idea! Concentrate on the product, on making your customers love your products, and you will make money hand over fist. The shareholders win (stock goes up dramatically) and company is the envy of others.
Sounds to me like more companies should forego conventional business management.
MW: “freedom”, as in Apple’s got it where Dell doesn’t!
Buy the USA when it’s not worth anything, which will be soon.
This Johnsa guy is a psychic… how did he know I was wondering what Guatemala’s GDP was!!
I wonder if Eric Jhonsa owns stock in Apple. I do and I don’t have any issue with the pile of cash. I think it is a very wise policy. Most stockholders have seen the company appreciate since they bought, since Apple is near its all time high. Tech companies, particularly large ones, require an enormous amount of capital to do the R&D;it takes to constantly innovate to maintain growth. Apple does this better than any other company around as noted by their past 10 years of constant growth. Developing the iPhone took a tremendous amount of time and money. Same with the iPad. Same with the things in the pipeline we don’t know about. The $40 billion will serve a useful purpose under the current management.
Now – has Eric Jhonsa written articles questioning the cash stockpiles of Cisco, or Microsoft? They are in the same mode.
Finally, for the shareholders, while it might be nice to get a dividend, ultimately the stock price should in some way reflect the value of Apple having all this money.
And one last thing – Steve Jobs definitely learned from the decline Apple suffered in the 80s. He won’t let that happen again. He will use the competitive advantage that only Apple has as a fully vertically integrated manufacturer, to ultimately achieve market dominance. That will be a long ride, and he has a lot of money to pay the tolls and for the turnpike food. But, he will deliver value to the stockholders for the money that is on hand.
Coming on the heels of the worst economic climate since the Great Depression, isn’t it comforting to know that someone, anyone is saving up cash?? I wish my balance sheet looked like Apple’s
Like I’ve said before: As a AAPL stock holder, I’d be happy to see hord a few hundred Billion Dollars. Why because the more of that cash Apple holds onto the more my stock is worth. If Apple grew it’s cash holdings to ten times what they are today the stock price would increase by 10 to 15 times the current price.
Share buy backs do not increase outstanding share values because shares bought back by a company are just recycled back into Share grants given to Executive Management and Board Members. Which keeps the outstanding shares at the same Number even after a buy back.
Gee- unheard of by today’s “standards”. A company making money; not depending on VC, government bailouts, bloated R&D;budgets, exorbitant spending. Wow- REAL profit. ????
Go Apple – Go SJ
I tend to agree w/Mungo. Apple is still mostly concerned with filling the holes in their product line, but soon the spotlight will turn to the next weakest link…. Data delivery
Smart investors couldn’t care less about dividends…their goal is a healthy stock price when it comes time to sell. My in-laws have a pretty diversified portfolio, and do get small dividends…but right now I don’t care about the dividends but rather the value and health of those companies when it comes time to cash in those stocks to pay for their care.
If more companies during the dot-com boom had saved money or invested in R&D;instead of buying high-end furniture and foosball tables, they might have been able to weather the bust and reinvent themselves. Jobs and Apple know their Silicon Valley history; their making sure they can weather the next downturn and not become a victim…and perhaps pick up some scattered pieces of victims along the way.
I hate to mention politics, but, Financial Security is long term security. That is one lesson the government failed to learn after 9/11. That’s how Apple do things since Jobs return – long term.
Their=they’re; posting from iPhone still sucks.
And if my dad-in-law had bought 1000 shares of AAPL back in the mid 90s, I’d be a lot less worried about paying for care…
Hey, Tommy Boy. Sell some shares. The dividend is built in and you might even get favorable long term capital gains tax treatment, to boot.
A corporate decision not to pay a dividend (the company has never done so, to my knowledge) is *not* equivalent to being “ripped off by its managers.” The first is legal, the second would be illegal.
Growth companies typically do not pay dividends. One could argue that Apple is no longer a classic growth company. But Apple’s Board of Directors is in charge unless the shareholders vote them out. If you don’t like what they are doing, you should sell your shares and encourage others to protest similarly. A steeply falling share price with a message might get through. But I sincerely doubt that you will be successful.
Stevie goes to Hollywood, then buys it bleeding. We will always listen to music and we will always want to be entertained, and they build on the current products…
I think they should at least buy those shares which they use for management compensation out of the market. So the total number of shares would ramain constant, and my share in the company (including my share of $40B) would not be diluted again and again and again and again…. this $40B is hardly earning any interest for the shareholders, due to dilution.
I want to keep my relative share!!
Never mind Guatemala. The US could take a lesson from Apple. Don’t live beyond your means; and save up for that future rainy day (like the retirement of the baby boomers). Money directed into consumption (like most of the US budget) is money lost.
The only think that concerns me is how much of that hoard is in US dollars. Given how global Apple has become, and ongoing pressure on the dollar, a little diversification might not hurt. But I assume Apple’s CFO has already considered that.
As they say in B-school, “Cash is King.”
It’s for building Cylons (for those who watch “Caprica”).
Two words: Warren Buffett. His little company, Berkshire Hathaway, is famous for not paying a dividend either. Buffett believes a dividend is not in the best interest of investors. Last I checked, people tbd to agree with The Oracle of Omaha.
Leave it to unsuccessful pundits to tell successful businesspeople what to do.
Steve and the leadership at Apple know what they are doing.
I own stock. I do not care about no stinking dividends.
Apple will buy Microsoft.
Jim is correct, buy Microsoft and fire Balmer.
“ripped off”?!?
During the greatest recession of our times, keeping alot of cash seems to be a winning strategem. Look at all the companies without cash that failed. Look at all the money Microsoft saved by not buying Yahoo!
Sure, I wouldn’t mind if Apple did a sharebuyback or a one-time dividend, but I’m not worried about the cash sitting there, yet.
Motley Fool… not exactly setting the world on fire – a bunch of amateurs who have a convincing track record – of being a bunch of amateurs.
To the insta-pundit who pointed out Adobe’s capitalisation of $18bil – their desperate and doomed attempts to impose Flash on the rest of the world show what a terrible investment they would be. But if you want Apple to pay $18bil, I think I’ll wait till next week and get it for half the price (or the week after at a quarter).
I’d never question job’s decisions. He seems to have not not too bad
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Shut down one of the two overlapping services and use the satellites to deliver data to Apple TVs and Macs without the data bottleneck of the ISPs.
SiriusXM is chump change.
The remaining service can be rebranded iTunes radio or sold off.
“The high priest of the Church of Apple.”
Oh for pity’s sake, where do they get these writers? Come on, he’s an effective and visionary ceo of a company that makes superior products. Just because pc users are indifferent to, or actively hate, their machines, they can only explain Mac users’ strong affinity as some kind of cult indoctrination. No, their devices are simply better tools, which inspire a brand preference.
And why is Apple’s cash burning a hole in everyone else’s pockets? A lot of cash is a good thing in this industry, and makes things like the $B cloud facility and acquisitions, a matter of writing a check.
join the dots people… you either believe Steve Jobs is a genius, or you don’t. if you do, then allow that he knows what he is doing with apple’s cash. if you don’t, then why are you here?
i can think of sefveral ways apple could spend a pile of cash: search; content providers; high speed networks; cable companies… chances are though, i’m completely off the mark. after all, who ever outguesses Apple?
What the heck is wrong with “saving up for a rainy day”? Sheesh. All these Wall Street types just wanna spend, spend, spend.
Quote: “The high priest of the Church of Apple…”
Funny.
There is always Possibility B: Steve Jobs knows something that Eric Jhonsa doesn’t know and Steve wants Apple to have a large cash hoard because it (*shock*) gives the company “security and flexibility”—as Steve stated.
The man lived through a time at Apple when many questioned that the company would survive; no doubt a nasty-ass feeling. I should think “the high priest of the Church of Apple” sleeps quite soundly knowing the company has a war chest sufficient for any conceivable rainy day.
Adobe. Adobe. Adobe. The only downside is anti-trust. that is whom they need, and they can now afford it. The only question is why they are waiting.
Apple is a very conservative company. that is why they are accumulating wealth.
Jobs is saving to buy Verizon… Market Cap: 82 Billion… This also explains why Verizon doesn’t have an iPhone/Pad, yet… We wouldn’t want to increase its value.
Long time shareholder… so far, as an owner I do vote with my stock.
As soon as I see a problem with the vision, I’ll let the company know… in the meant time, Jhonsa… feel free to buy some shares and get something on the shareholder agenda.
buy sprint for like 15b sell/spin off nextel/boost….cut costs down to the operation of the sprint cmda network, only allow iphones and other apple products on the network. sell a no contract service for a slight profit but mainly use the low cost and full control over user experience to sell more hardware! they could do all that and still have 20bil in the bank
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@ KingMel & @justme2: Wrong, smart investors look for dividends. Speculative investors, or “gamblers” as they are known in Las Vegas, or “Bush Republicans” as they are know in Washington, look for massively increasing stock prices.
Apple is going to buy Sprint PCS.
Apple would then own the complete user networking and phone experience with Sprints’ new 4G technology.
Apple could provide ISP and phone services to almost every customer.
A dividend would give me money / shares in the hand. I doubt it would affect the stock. @ $1 per share and 1BB shares outstanding then that would cost them $1BB. Still it wouldn’t be much cash so probably isn’t worth it.
Tommy Boy,
You’re wrong. Not all “smart investors” always look for dividends. It’s also AAPL’s decision whether or not to institute a dividend. As a stockholder in for the long haul, my main concern is that the company produces great products that people want to buy, enabling the company to remain solid on the balance sheet. If they can deliver the product, the rest will take care of itself. Sure, it would be great if they decided to offer a dividend, but I don’t expect it, and that’s not why I bought AAPL in the first place.
Why the hoard?
Survival, obviously.
I say: Thank you Apple for going the opposite direction from the typical company, typical US citizen, typical state, typical country, and SAVING MONEY instead of going into unrecoverable DEBT.
Apple shall survive when most others will go bankrupt.
And Microsoft, do hurry up and go bankrupt.
Buy Adobe and set us FREE!! Please!!!
-Pi
apple is saving up to buy china
buy sony
What a dumb ass. If Apple was to buy a content provider they would be in competition with all the other content providers that they depend on. That would be a disaster.
If Best buy bought Dell would that strain relations with HP, ASUS, Acer and Sony? Yeah Baby!
The real issue here is that Apple as a business vastly outperforms the performance of its cash investments. Worse, Apple could invest in companies through acquisition and have a greater return even with a 100% hands off approach.
I’m looking at you Adobe.
Apple could buy Adobe and do nothing with it but watch its current management run it as they have been and it would add more to Apple’s bottom line than their cash investments do now.
Of course if Apple did buy Adobe, there could be consolidation of product lines, operational cost savings, patent sharing that could lead to new products, and all kinds of product bundles and marketing opportunities.
Furthermore, this could give Apple a strategic edge when it comes to developing for their own platform as a priority where it made sense as well as shaping what direction the industry goes.
Apple could either fix Flash, abandon it, or evolve it into a HTML5/app development tool as best as it sees fit in the larger picture of its core product lines.
Ok, if not Adobe, there are plenty of other companies that Apple could easily afford that would return greater results as-is than what they’re getting now, let alone companies that could be acquired and turned into much better performing operations.
Apple hasn’t done anything big before, because it hasn’t had the opportunity to. Now that it has the cash, it has the opportunity to do something, it will be interesting to see what it is.
This article is nothing more than a demonstration of how The Motley Fool got its name.
how long before they can buy microsoft?
Basically it means that Apple does not have to bend over for the banks. Very very important.
Having that much cash means that Apple doesn’t not need to ask anything of anyone ever again. Everyone remember 1997?
Its at the point that if Apple seriously misstep(ed) they could lose billions a year and still be there.
So let the “smart guy”s on Wallstreet opine about what Apple SHOULD do all they want.
Isn’t the new age mentality great? Must everyone be in debt? I think it’s great and very smart for Apple to have a healthy bank account. Makes them safer, and more able to do what they want at a moment’s notice.
It’s like individuals. It’s the norm now to be in debt and you’re weird if you have a savings account or drive an old car to take time to save for the next one.
@Dude “Having that much cash means that Apple doesn’t not need to ask anything of anyone ever again. Everyone remember 1997?”
$40 billion certainly makes that $100 million look VERY small!
Having that amount of money also adds weight to the 800 pound gorilla Apple has become at ANY business negotiation it has with ANY company.
Apple is not beholden to Wall Street’s wisdom and the financial gurus of voodoo economic. Unfortunately many US companies have succumbed to the arrogance and ignorance of the Wall Street’s pundits and have paid dearly for such voodoo advice. While they are slaves to the Wall Street shark loaners, Apple has jealously guarded its freedom from financial ruin.
Did anyone forget that Apple was king back before M$ licensed out their trash to 3rd party trash. Jobs hasn’t forgotten that, but we have.
Let’s also not forget that Dell was a smooth running engine for awhile, but not today.
I think they probably have a $50 billion goal for pure cash, and the thought of creating and purchasing your own satellite to deliver your own content intrigues me.
Regardless, the answer lies somewhere with what’s going up in NC…noone really knows what that is for, and it is a massive undertaking. Sure, it was cheap, but the location in NC has a purpose also other than cost.
Truth is, shareholders will about face on AAPL in a heartbeat, given some rumor or scandal, and Jobs knows that.
A la Dave Ramsey…Cash is king.
Amazingly, Apple attained this point in it’s history of such substantial financial substance while never dominating any market. Looking at other Companies that have achieved this level of success, they did it with virtually monopolistic hold on markets.
Apple, never having more than 10% share, well this is a very very impressive result.
I had the same idea. However, Apple doesn’t need to buy Adobe, they just have to have a majority of equity in the company to pressure them to offer better products and services that are in the interest of their core customer base of creatives.
Steve Jobs might like to take Apple private. I assume he is the largest stockholder. Forty billion buys, what, 20% more of the company? He has a way to go. Sell Disney. Buy Apple. Just a thought.
“Nobody is going to kick me out of my own company again!”
Apple is going to buy GOOGLE! MS has yahoo with Bing and Apple needs something better:-) So that’s why he need so cash:-)
… to sue HTC back to the stone age.
Build a Green eco-friendly chip and manufacturing foundry in the USA and move manufacturing and assembly to the USA.
Imagine the Apple margins once they make their own chips when the the clean technology becomes cost effective. With such margins, Apple could employ 1000s of workers at good wages.
The catch now is that Silicon chip manufacture is very toxic, and non-silicon chips are not yet cost effective. Whoever develops clean technology first before the Chinese, could bankrupt china, who has invested trillions in dirty chip technology amortized over 10-20 years.
Ha, this makes me laugh. Why keep a huge cash hoard? Duh, what a no brainer. Isn’t the Global Financial Crisis fresh enough in the minds of people to realize that Apple was and is the exception.
Why hoard cash? Well sure beats living beyond your means, which is what a lot of people do.
Oh how people laughed at me for buying Apple stock a couple of splits ago. Second best performing stock on the planet over 10 years.
Keep hoarding.
People, for good reason, always think of computer companies buying computer companies.
However if I were Steve Jobs I would look to change industries who don’t understand the future. Media companies. If Apple was to buy a large media house they would own content to computer. That cuts out middle men and could force the rest of the media companies to come into the 20th (yes 20th) century.
They could make huge profits!