“Despite the recent pickup in chatter about Apple’s growing ‘cash problem,’ it’s really not an issue at all,” Chris Ciaccia writes for TheStreet. “A balance sheet with more than $200 billion in cash on it (albeit one that now also has $60 billion in debt and climbing) is the envy of every non-financial company in the world. Every company out there dreams of having a problem like too much cash because consumers are buying so many of their products — in Apple’s case, iPhones, iPads, Macs, Apple Watches, etc.”
“While there is a growing class of shareholders and pundits who want to see Apple do something big with its cash, such as buy Tesla or Time Warner’s HBO (or all of Time Warner) or some other company are missing the forest for the trees,” Ciaccia writes. “According to sources familiar with the company’s thinking, it’s highly unlikely Apple will ever do a large-scale acquisition for fear of operational and execution risk. Apple’s culture is so much different than most every company out there, including those in Silicon Valley, that bringing in potentially thousands of workers to the company through a big acquisition would be more destructive than whatever gain Apple could receive from the company it was buying.”
“Rome wasn’t built in a day. Many on Wall Street forget that, since almost everything revolves around the almighty quarterly cycle,” Ciaccia writes. “But 90 days or a year aren’t enough to judge a company; only decades are. And a balance sheet with $200 billion worth of cash on it really isn’t a problem at all.”
Read more in the full article here.
MacDailyNews Take: Apple will buy Tesla for the same reason they bought Palm.
[Thanks to MacDailyNews Reader “David E.” for the heads up.]
Pay shareholders 80% of the profits per quarter. All public companies should pay out to their shareholders 80% of the profits.
“Should” is such a misused term.
When is $200 billion ever a problem? I would like to have that problem. Then me and Trip Chowdhry can go over to katy Huberty’s houise and play with Monopoly Money.
If Wall Street says it’s a problem then it must be a problem. Let’s think of $200 billion as a big boat anchor attached to Apple’s bow. See how all that cash is trying to pull Apple under water and why Apple stock is below $100 a share. A company like Amazon doesn’t have all that excess cash anchor weight and therefore the stock floats like a balloon and the stock rises. Wall Street says Amazon never has any problems, so Apple must be loaded down with too much excess cash. Huh!
/s
Why do wealthy people claim Apple has too much money when the wealthy are always hoarding money for themselves? Wall Street is made up of crooks and criminals who consider the economy is like some huge casino to be gambled with. It’s a wonder anyone has any jobs and why we’re in so much debt. The top money hoarders are ruining it for everyone else.
The only minor problem Apple has with its cash hoard is that in order to use it, that amount will be highly taxed and with no tax holiday in sight, it looks as though it’s untouchable. I don’t understand why Apple doesn’t at least use it for starting overseas businesses or launching satellites or laying undersea cable from Europe which can still be shared with their overall business. It’s stupid to just leave it sitting in a bank drawing little interest.
@macnifcentseven48: “Let’s think of $200 billion as a big boat anchor attached to Apple’s bow.”
Let’s not. Let’s think of it as the fuel that powers commerce. Cash is king™.
Much of Apple’s overseas money is not sitting idle. It is used to finance a number of suppliers new production facilities. It is used to secure components buys years in advance of production needs. This is a highly strategic use of its cash hoard – a fact that is virtually ignored by the Wall Street ignoramuses.
Maybe not that not much tax. On paper it is about 35%. However, they get to subtract whatever foreign taxes have been paid and they can take whatever deductions they are entitled to. They regularly state that their effective tx rate is about 25%. Nevertheless, a lower rate would be nicer.
(BOB on Wednesday, January 13, 2016 at 5:10 pm
Pay shareholders 80% of the profits per quarter. All public companies should pay out to their shareholders 80% of the profits.)
Never read such a stupid comment. BOB, you’re an ignorant twat.
Why?
Compare:
1) CEO’s, directors and executives work to maximize growth using all available levers based on complex legal, business and financial contexts.
2) CEO’s, directors and executives are asked to strictly follow nice sounding rules which are completely blind to complex legal, business and financial contexts.
Apple example #1
Apple put profits back into its own business for many years. If they had not done that, they would not have the shareholder friendly “cash problem” they have now.
Apple example #2
Apple pays foreign taxes on foreign earnings, but wisely avoids paying 2nd tier US repatriation taxes (which other modern countries do not have), through various strategies of debt and investment, thereby protecting shareholder value from turning into an IRS check.
Interesting.
Point 1: So they would not do your point one if 80% of the profits had to paid out to shareholder, interesting. I suggest they would work even harder to grow the 20% that the company could keep. And since many are shareholders themselves, I think they would work extremely efficiently; I believe it would focus their attention to producing something that someone else would purchase, instead of giving money to politicians, for a handout, tax break. See, if they paid no tax, companies, then what, so what? If apple, the example here, pays not taxes, does that cause apple to sell more iPhones, iPads, Macs, etc. ? You do realize they don’t make money by not paying taxes. The revenue comes from products and services.
Point 2: No reason to stop doing that either, paying 80% of the profits to shareholder does not keep one CEO from carrying out those duties. See, they have a greater incentive as suggested in point one’s rebuttal.
Apple example 1: You would think that’s how it works but, no. Actually these companies barrow the money, a tax thing. Who knew. Still companies would still be free to do such things as research and development, acquire other companies, hire new workers, it’s the cost of doing business. Clearly you realize no company sinks all it’s profits back into the business to grow. (If you are in business for yourself don’t do that, you could end up with nothing to show for all your hard work) And apple as you can see from its cash position does not.
Point 2: To what end game, keeping investment bankers typing on keyboards. Why do use use the term repatriate? That money has never been in the United States. Patriate may be correct.
Sticking with Apple, Tim Cook owns 1.7+million shares.
Using the 80% plan, using EPS $9.00, which is not profit per share, so yes it would be less, but $7 approximately is 80% that would be paid to shareholders. Tim would make $11,900,000 and still own the shares. Image pension plans, or other financial plans(401ks) holding tens of millions of shares. Images all public companies doing the same 80% plan. The economy would boom, boom! Share prices would stabilized. Of course, a company could follow Dells example.
American companies get the government to work for them for fractions of a penny.
Who should they pay the profit to?
Why is this so difficult?
The WallNut Street is in freak out mode. AAPL is being artificially dumped to absurd lows. Does Apple the company have to care? NO. It has a few billions to keep itself alive no matter what rubbish comes down the pipe.
IOW: A cash cache of survival, ready to thrive ever onward in spite of the external craziness. AKA insurance.