“All of us were reminded over and over and over during the last few days that Apple has more cash on hand than does the U.S. government,” Bob Cringely writes for I, Cringely.
“There’s a mystery about Apple’s cash and that mystery has to do with Steve’s strategy for holding all that money.,” Cringely. “What’s it for”
Cringely, “The predominant theory seems to be that Apple intends to make a huge acquisition and periodically there are rumors of Cupertino buying this big company or that, with Hulu being the latest supposed target. And maybe Apple will buy Hulu (actually, I don’t think so, but let’s assume they do) but that will still leave Steve with $74+ billion, so the Apple money story won’t be going away. I think Apple has raised all that money for the sole purpose of….. having a lot of money. I don’t think Steve intends to make any major acquisitions at all, though that says nothing about a post-Steve Apple.”
Read more in the full article here.
I think Steve likes to swim in the money like Scrooge McDuck.
“Is it moral to let some fat greasy man roll naked in a dirty pile of cash when it could be used for something good, like sending Noreen to college?”
Who’s Noreen?
Only if you plan on Stealing Harvard!
People who ask that question are so ignorant that they’ve become immoral. This is why the rich get richer and the dumb get dumber.
I’ll tell you what it’s for. It’s for buying Microsoft.
Hell hath no furry like a CEO scorned. 🙂
I’ve had this fantasy of the day when Apple could afford to buy MS with cash. It’s still a pipe dream, but not that crazy relative to just 4 years ago.
I’d love to see them just have enough so we could rub it in the Windows fanboys collective faces. Their heads would asplode!!!!!
With times such as these, it would be prudent for Apple to wait for other companies’ values to steeply depreciate further, maybe Adobe down to $5b; Microsoft, $50b; Disney, 15b; Dell, 2b; Amazon, 15b. Then buy them all up at fire-sales prices.
“Their heads would assplode!!!!!”
Why are their heads up Ballmer’s butt?
Its the margin of error after Steve jobs leaves apple they will need the cash.
Why would a smart guy like SJ pay good money for a major PITA? However much fun M$ is not for consumers, it has to be even less fun for M$. Who needs that?
I can think of a couple fAntasy purchases I wish they would make. How about a purchase of nintendo! That would do wonders for Apple Tv combined with a version of Wii. And, the Wii u tablet could become a true gaming iPad complete with joy pads. It would be an awesome marriage for gamers! The other would be a purchase of a top tv network to convert to ala carte tv. It’s all about traction in the home entertainment center for this fantasy.
I’ve long thought that an Apple/Nintendo merger would be glorious.
Never. Really.
I heard he is looking to buy a really sweet watch. One of those real good ones.
Patek Philippe… best in the world. Museum quality.
You never really *own* a Patek, you are simply a short-term steward of the time-piece while you’re alive. It is then passed on to another steward for them to enjoy.
http://www.patek.com/
“Museum quality”. What the heck does that mean? They have museums for everything from mummies to pickles. I want a watch to wear, not impress some conceited fool who worships money. I’m still wearing a self-winding Seiko that my wife got me for my birthday in 1978. Besides, I’ve seen better looking watches at WalMart.
Probably what they have been using it for: buying up capacity for components that they need for their own products.
Except that’s not what they’ve been using the overwhelming majority of it for. In fact, the cash they have coming in is far more than all of those lock-in deals and operating expenses combined.
The majority of their cash is pretty much just setting there doing nothing. Yes, it’s getting interest, but the yield isn’t significantly greater than the rate of inflation and far lower than the opportunity cost.
But opportunity cost is outweighed by opportunity lost, which is the result of most major acquisitions. AOL? Macromedia? Skype? There is a long list of bad and worse acquisitions. I would rather that the money earn a little than flush it down the toilet.
Succinctly put.
@kingmel,
You’re thinking that the only options are putting the money on the shelf as they are now (overwhelming majority earning very low yields) or taking a loss on any purchase.
AOL and Skype are money losers, sure. Macromedia isn’t a company any more (owned by Adobe). And there are countless other companies Apple could buy for a loss.
The idea isn’t to pick from a list of the top worst investments, but from the list of top best investments.
Adobe is making money, and has been for quite some time. Apple could purchase Adobe and do nothing but run it as is and still bring in a *much* higher yield than what they’re doing with the cash now. They could purchase Adobe for a fraction of the money they’ll make in the next 12 months.
Adobe is the kind of purchase Apple should make. Imagine if Adobe products were produced to Apple standards… I might use them.
The problem is, much of Adobes products compete with Apple’s and thus this would raise “antitrust” issues. (Not that there’s anything legitimate about any “antitrust” issues, but thats the political environment we live in.)
If apple bought adobe and merged the premiere and lightroom teams with apple’s teams, then there’d be less return on the money than adobe is making separately, right?
I quite agree.
It appears to me that the experience of being ousted at Apple and almost going bankrupt with NeXT and being told by this uninspired Dull guy to give the money back to the shareholders has resulted in this attitude of “you don’t make fun of me ever again”. And the best protection actually is having a lot of money.
I can’t see them buying competitors. Apple ends up outpacing competitors with better solutions they develop themselves and I suspect their cash hoard is more for acquisitions that will bolster their ecosystem.
I’d like to see the buy assets like wireless frequencies and infrastructure… Perhaps likethe new 60mile radius wifi antennas.. And gain independence from wireless carriers and their apple product crippling data caps.
I’ve been speculating about this for a while. I think Apple goes forward with this. Connectivity is the one part of the user experience Apple doesn’t control, and they hate letting their user experience get ruined by a third party.
I give it 3 years before this starts to take shape.
The sweetest deal is done in two pieces:
1. Buy Sprint/Clearwire. Get a controlling interest in the 4G WiMax platform with licensed frequencies that can reach 70% of the world’s population wirelessly at 10 times the speed of cable/DSL. Goodbye Comcast/Verison/AT&T/etc.
2. Buy Disney. Bundled in that acquisition is ABC/ESPN/Pixar/Touchstone/etc. Instantly Apple becomes a mega-content owner and provider.
The end result is a seamless, vertically integrated, hardware/software/ISP/content provider that can thumb its nose at all of the media giants as they quickly go out of throttling, gouging, customer abuse business.
You’re looking at this from a US perspective. Apple is an international company with most of its profits derived abroad, so why would it simply invest that kind of money in one Market?
totally agree with this idea. But all I really know is it is available to bid for but I really have no clue as to HOW they make it work. I just can’t help but think it might be comparable to how Steve described BR as a bag of hurt. Maybe they’ll assist others in acquiring it for prime usage.
I agree. That would make a lot of sense.
So if they bought Banes and Noble and installed the 60 mile wifi in every store across the country they would effectively have their own national wifi telcom and broadcast network.
That makes real sense to me
I think Apple plans to purchase the Moon, then add a giant reflective Apple symbol to its surface.
Now *that’s* a great idea.
Think Bigger: blow out a chunk of the moon to match the logo instead.
Yes! And then… then… set fire to the blown out space! (I know, no fire in space but really)
Remove the chunk then donate all the cheese to charity, huge write off.
BRILLIANT! Love it! Then use the rest of the cash to tie up contracts on future deliveries of di-lithium crystals.
Those with cash and those without cash. Only the surviving companies that are going to grab market share will have cash now.
• Only companies with cash will be able to get product from their vendor sources first locking others out.
• Only companies with cash will be able to float sources that don’t have cash to manufacture it.
• Only companies with cash will be able to prepay for all available resources at a cheep rate.
• Only companies with cash will be able to buy companies that can stay afloat to supply products.
• Only companies with cash will be able to produce a million or so devices for first day releases.
• Only companies with cash will be able finance the expansion of a vendor when they need funding.
• etc.
As money now gets harder and more costly to get from banks, companies without cash will die off or give up market share. Has any one seen the buy 1 Android get a 2nd FREE from Motorola with Verizon yet? I have several times now. Road kill!
Acquiring large, well-known companies simply isn’t in Apple’s DNA. They only acquire startups.
There’s so many advantages to having a giant cash pile that people overlook:
– It gives them the freedom to try things that are a bit risky, because even if they stopped getting any revenue at all today, they’d be able to run off their cash hoard for years.
– It enables them to buy up massive supply chains cash-in-hand, giving them a huge advantage on pricing and availability of components (especially NAND memory).
– Apple is able to pursue any strategic opportunities that come up, like the recent purchase of Nortel’s patents, quite aggressively due to have plenty of cash to throw down when necessary
I don’t get why people think Apple’s cash hoard has to be “for” anything more than these kind of advantages.
…maybe they could buy Iceland.
I wouldn’t mind that. The country would certainly be better run with Steve at the helm.
And it comes complete with lots of geothermal energy and aluminum refineries for all of the Apple devices!
The cash pile is an insurance policy for when Jobs finally leaves the company or, God forbid, succumbs to cancer or one of its side effects. That huge pile of cash will be very helpful during the transition period. Basically it allows them to safely screw up a few times once Jobs departs, providing adjustment time to right the ship if necessary.
This obsession with Apple spending their cash is insane. With everything that’s happened in recent years, people remortgaging, getting credit and being unable to repay, companies borrowing millions… the best thing Apple can do with their money is exactly what they are doing – keep hold of it and save it for a rainy day.
To the people saying Apple should buy this company, buy that company, I have a question; what will you say when they have bought Adobe, M$ etc. and there’s no money left?
There’s a difference between not having money for a McMansion mortgage payment, and sitting on 74 Billion dollars.
As far as buying a company and not having money left…
Apple could now buy Adobe for a fraction of the cash it will add to its pile over the next year. The question isn’t what will it do when it doesn’t have cash left, but what it would do with the extra cash coming in at that point.
If Apple were to buy Adobe and do nothing with it other than let it run itself as-is, Apple would get a *much* greater yield than it does on the very low return of the cash investments. However, very simple cost savings and consolidation could return even more still, and on top of that would be new products they could offer from shared technology and engineers.
Really, buying Adobe is a no-brainer from every angle other than that Jobs & Co don’t want it. The executive team at Apple would rather have a “smaller” company, as it allows them to be more focused and work with what they want to offer.
When Jobs leaves, and others may leave with him, new management might have a different goals that reflect the business instead of personal interests, and for them acquiring Adobe (and others) will make perfect sense.
Until then, it’s hard to argue as a consumer or investor that Jobs & Co, even with personal interests such as these guiding their decisions, aren’t what’s best overall. In other words, I’d rather have had the iPad as it is today than have had and Apple / Adobe merger.
Adobe has nothing that Apple needs to buy!
The transition from flash is underway.
Other programs can do what photoshop does and more.
In a short time the iPad and iOS development will evolve to the point that image editing comparable to photoshop etc will be able to be done on iPad tablet devices of varying sizes.
It would be a waste of money to buy Adobe or any large
“competitor”!
@Applesmack,
You’re missing the point. This isn’t a game; ultimately, it’s about being a business and maximizing profits for the shareholders.
Flash is a trivial consideration. It doesn’t add much at all to Adobe’s bottom line. Apple could buy Adobe and shut down everything to do with Flash, and the math still adds up to being one where Adobe returns a far greater yield than the piss poor performance Apple has been getting on its cash. So far from being a waste of money, it’s quite the opposite, it’s about earning money that Apple isn’t now with its pile of cash.
As far as what Adobe has…
Adobe has tons of stuff Apple actually needs. They have an enormous patent portfolio and Apple licenses a bunch of it. There are all kinds of patents Apple could also use in the Mobile Patent War.
Of course there are other things like Photoshop, Audition, Illustrator, Dreamweaver, etc… that Apple could package and bundle with existing offerings all the while favoring the Mac and iOS platforms. But again, this is secondary, primarily as an object, doing nothing with Adobe once it’s acquired would earn Apple a far greater yield than it has now with the cash sitting where it is.
It’s for suing to protect their patents and defending against being sued for violating other’s patents.
It is an experience devoid of all pleasure, for me to point out the total lack of critical apprehension evinced by your post.
Take a deep breath, calm your mind and give the question some rational thought.
My folks grew up in the great depression. After they both passed we found where they both had cash hidden in their house, some we knew about, some we didn’t.
Buy Abobe and trash Flash!
trash dreamweaver as well and bring bak golive, and take advantage of apple 3d core technology and add some 3D abilities to photoshop
Apple’s reserves are simply stored value. A sigh that the company is doing very well. If we had an efficient and honest system of capitalist ownership, the stock holders, as owners of the company would be entitled to as much of reserves as the company did not need. In our stock market, companies can trade at high value without the prospect of ever paying a dividend. It is really just a strange crap game controlled by insiders. We only call ourselves a capitalist country. Really we are an oligarchy.
In America, in 2007, 11% of the people controlled 83% of the financial wealth. The bottom 80% controlled 7%. This is not income. It is financial wealth; stocks, bonds, trust funds, etc. And the difference continues to expand.
Tax the rich? Why that would hurt productivity! That is what the yell in Congress. Who controlls congress? Another rotten worm in ths system
Where was I? For Jobs and company to focus on the cash would only be a distraction. It is simply there when they need it. It is not hurting anything to simply earn and small return as stored value.
Apple has ALWAYS had more cash than the Federal Government– at least for the last 5-10 years. The Federal Government is in DEBT. They have NO cash balance.
I take it Accounting is not your forte.
About ten years ago, I recall Win-dohs fans asserting that MS “owns Apple” due to buying 50 million in non-controlling shares as a lawsuit settlement. How times have changed!
However, Apple will never attempt to buy MS in it’s current dominant position. It’s a no-win scenario other than the obtaining of critical patents. Steve wants it to die on its own, otherwise the whole PC world would collectively hate and blame Apple for its demise.
Who knows? Maybe Apple was once amassing capital hoping to undercut MS in the workplace, but MS now appears destined to blow their lead without Apple having to actually spend those reserves.
I see your point. Perhaps they could ‘use’ that cash to buy market share by dropping the price of a Mac. I’m sure if they brought back the MacBook and sold it for $700 and dropped the price of MacBook Pros and Airs by $200, market share will go through the roof.
It’s to buy a $80 billion liver.
It’s to buy an $100 billion liver.
Steve’s plan, run Microsoft into financial sandbar. Buy it for cheap and replace it with Mac OS to fix all the problems and watch the rats run in all directions.
And just maybe, if we are lucky, we can watch Mr Jobs stick the pole with the Apple symbol into the mountain of an arse Steve Balmer. Just like the Marines.
I would salute that!!
I concur with your first sentence. What would be greater and infinitely more valuable than a Nobel Peace Prize – perhaps all of the Nobel prizes wrapped up into one glorious award? That’s what such a world-wide blessing, resulting from such an achievement, would merit.
I’m not much into vulgar humour, but I love to laugh, and I have to admit I was laughing at your second thought; please make it a ten footer.
Replace it with Mac OS? And what apps do they replace Windows apps with? Hell. We can’t even get a decent version of Quicken on the Mac. Replace Windows? Not for a long, long time… if ever.
Apple thinks like a startup therefore they won’t be buying any big established companies where they have to fight long ingrained cultures.
They will continue to use the cash to make strategic decisions such as buying small companies with very key intellectual property, buying up patents that directly impact their current and future products, and making bulk purchases of parts and services at lower costs.
Apple could never buy Microsoft – the FTC would never allow it. Apple wouldn’t buy Dell either just because Dell has a different business and it would be a major distraction for Apple.
If there are going to be any big bold moves, it’s going to be about cementing their leadership in the post PC era.
Where could Apple go next? I think it’s time to end the satellite/cable stranglehold on only selling over-priced packages with channels you never want to watch. AppleTV with 1080p and some network agreements would solve this.
In dash vehicle entertainment and system monitoring functions would be better with an iPhone/iPad integrated into the car.
There needs to be a way for iPads to talk to each other to facilitate agreements and direct exchange of information. Imagine a teacher sending a test to the students’ iPads and then recovering them at the end.
What about the use of NFC (near field communication) so that when the NFC app is launched, so you can see the deals and special offerings as you walk buy each store, or the price and detailed information on a car on a dealer lot?
We have just begun to explore the possibilities with the iPad and I’m sure that’s where Apple’s imagination is captured.
See how crazy we are, we can’t imagine having money without spending it. Heaven forbid they hold on to it for a rainy day. Either way, it’s possible Apple could buy NBC or a TV network or create one itself. Although as a shareholder, I’d be for a dividend check.. LOL
When was the last time you saw a $74 Billion rainy day? Not to mention the billions more coming in each quarter?
People are thinking about this all wrong and making really poor analogies.
Keep in mind that of the $74 Billion, the majority is cash getting a very low yield. Sure, some is invested with higher yield and some is used for operations and leverage, but Apple has around $50 Billion sort of just sitting there wavering around against inflation.
So while it’s not prudent to have all kinds of debt on credit cards, a mortgage, car loans, etc…, it’s just as bad to have a ton of cash in your closet sitting there getting no return.
Suggesting to let it rot on the coffers is even worse. A healthy economy requires circulation of value.
Any kind of money will melt into no value at all, anyway, within the next few months… All that paper will just be worth for heating up small homes during winter time. There have been enough bills printed for having fire burning for few cold seasons!