“Do tech’s titans really need to be acting like they grew up in the Depression, hoarding their dough? And will they eventually spend it wisely? Or foolishly? Apple, to take just the most absurd example, holds some $51 billion in cash and equivalents,” Tiernan Ray reports for Barron’s.
“Apple’s cash may rise to $72 billion this year, according to a report that Gabelli analyst Hendi Susanto put out Friday,” Ray reports. “That’s $78 per share in cash, perhaps going to $103 in 2012, Susanto estimates.”
“Though the cash hoards will seem even more ridiculous next year, reasons for companies to hold onto their war chest will increase markedly. Apple, for one, will need to invest to meet a major challenge,” Ray reports. “No matter how many iPads and iPhones it sells in 2011, the competitive focus is shifting to the ‘ecosystem.’ This comprises not just computing devices and software, but also ‘services,’ which basically means content and functionality that is hosted on Apple’s own computers in its data centers.”
Ray reports, “Apple is certainly gearing up for big investments. Its capital expenditures are expected to jump more than 55% this year, to $4 billion, according to Caris & Co.’s Robert Cihra, mainly for online infrastructure.”
Full article here.
MacDailyNews Take: By SteveJack:
HBO has long produced compelling original content in order to retain and attract new customers. For example, Boardwalk Empire has an annual budget of $65 million. Other series are far less costly, yet still quite successful. Plus, HBO routinely tops critics’ lists and awards which generates free publicity and even more consumer interest.
Imagine if Apple took less than 1/50th of their cash on hand ($1 billion annual production budget equals 15+ Boardwalk Empires) to bankroll the production of exclusive content for iPhone, iPod touch, iPad and Apple TV? Last quarter – 90 days – Apple’s net profit was $4.31 billion. Take a mere 20 days of profit and roll it into exclusive, compelling content. As we all know, getting the old guard media to play has always been an issue with Apple TV.
Apple has already sold some 130+ million iOS devices. Apple could more than double that figure in 2011 alone (150 million more iOS devices). By mid-2012, Apple could have sold more iOS devices than there are people in the United States.
What if Apple began to invest in quality original content? What if Apple used the broadcast and cable networks as a testing ground and then began to outbid for hit series? Even better, and also far less costly/risky, what if Apple simply allowed talented producers and directors to go directly to an audience of hundreds of millions via iTunes (70/30 split with Apple, naturally)? Think the next Boardwalk Empire producer can make more signing a contract with HBO or by selling directly to their audience via iTunes? And, BTW, promising series like, say, Jericho, FlashForward, and many, many others that fail to reach critical mass within a traditional broadcast network model very well might be profitable in a direct-to-iTunes model. They wouldn’t have to be abruptly cancelled, they’d just move to the iTunes Store and continue production for as long as they remained profitable. Or, what if Apple and HBO/other networks partnered somehow? With quality exclusive content, how many extra Apple hardware sales would result? And how would Apple’s iAd fare? (Very well, if I had to guess.)
There are many more questions and possibilities, but almost all of the answers require a huge war chest.
SteveJack is a long-time Macintosh user, web designer, multimedia producer and a regular contributor to the MacDailyNews Opinion section.