Originally Posted by Dr Millmoss
"Cash is king" is the line Steve Jobs used in an earnings conference call last year in response to a question about Apple's cash hoard. This set off even more speculation about what Apple would do with the cash.
Well, it's not a phrase he invented and is widely used in a number of contexts including that a big pot o money is not necessarily a bad thing to have.
The automated factories suggestion is interesting. That would be potentially a very large capital outlay. But it seems like a real long-shot, and I suspect even if this scenario were to play out, we'd been talking a few billions at most, not tens of billions. With over $30 billion already banked and free cash coming in at a (present) rate of about a billion month, I don't see giving a small part of that back to the stockholders as reducing the company's flexibility to any measurable degree.
A few billion here and a few billion there and all of sudden there's no $30B anymore is there?
As long as the stock value is going up, there's no need for Apple to do dividends. If you don't like that...well...sell. The fact that you are really unlikely to sell means what? That Apple is still increasing in value and doesn't need to provide dividends.
Besides, as Mel points out, you have no idea what they might be saving for.
I still feel this would not be a responsible way to spend their cash. Apple is an entertainment retailer.
Wrong. Apple is a hardware retailer. If the entertainment industry threatens to kill Apple hardware sales by constraining content then Apple can respond because it has a large warchest. Also, it hasn't hurt HBO to create its own content. Okay, it's part of Time Warner but its always been known for strong original programming.
Apple retails entertainment products at a low profit in order to facilitate high margin hardware sales. In effect they commoditize content for their benefit. That obviously doesn't make content producers jump up and down in joy.
Going into competition with their content suppliers would cause deep resentment. They'd be fighting the common enemy problem, which has hamstrung Microsoft. Does Apple really want to be the common enemy of the entertainment industry? They're already having that problem to some degree. And again, are we talking tens of billions here, or far less? Most importantly, what's the payoff?
The objective is to not go into competition with thier content suppliers unless they've already declared war by limiting content.
The large amount of cash means that Apple can go the Sony option in such a confontation and simply buy one of the major content producers. Assuming that Jobs has Disney in his corner then it is highly unlikely that content producers can restrict content to their own channels and lock Apple out of all top tier content.
Note that Blu-Ray eventually won against HD-DVD despite Sony ownership of Sony Pictures.
What's the payoff? Continued growth even in the most adverse scenario.
Really, the issue here is that Apple has more cash then they could spend responsibly IMO.
That you don't accept that anything other than dividends is responsible isn't Apple's problem. That they don't want to give you a dividend isn't irresonsible either evven if you see no downsides.
As at least one of the linked articles says, having that large a cushion against failure tends to make corporate leaders fat and lazy. Maybe you'd argue that this won't happen to Apple -- but that's exactly what people said about Microsoft.
Won't happen to Apple as long as Jobs is in charge. And when did MS get fat and lazy? They've been pushing hard into many different markets, all of which cost a ton of money. Execution has been so-so but there have been payoffs. The XBox is now the #2 console after the 2nd generation and that gives MS a large livingroom footprint.
XBox/XNA did for C# what the iPhone did for ObjC. Lots of new coders coding for their cool platform that will translate into more coders for their legacy platforms.