“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.”