Apple now worth more than Google and Microsoft combined [u] - Page 4

I'd also add, this comment Millmoss made "the money might as well be on the moon, as far as investors are concerned." is far from correct. I think any investor doing due diligence would see exactly what you pointed out and that cash and how they have used it thus far it gives a massive sense of well being about Apple.

You mean something like Zunephone?

If Microsoft had listened to Steve Jobs the zune may have been the Xplayer or something and then the phone simply the X or Xphone or something. He suggested they stick to the nomenclature of their successful Xbox.

Instead we get a Zune. Wtf

I think XPlayer sounds pretty good. Despite the problems with the Xbox it doesn't have a negative aura around it like Windows.

If they can get the Retina Display on all models at the same price points they are today it'll be this kind of victory for the iPad.

Basically the iPod but at a much faster rate. By comparison this was the iPod game compared to the iPad.

I also predict the iPad arm will be more profitable than the iPhone arm in 2 years after that happens.

I stopped seriously listening to financial "experts" many years ago shortly after I was talked into selling a pile of Apple stock by one these so called "financial professionals". Within 30 days of selling, the stock had gained about 10% overall. It's now a couple of hundred dollars up since then! Yeesh!

My cost basis is under $10 a share and 'yes' I understand that holding on to something like Apple goes against every accepted financial guideline. Everyone's position is unique. For me, it works..

I stopped my financial adviser from ever bring up the subject again by telling them that when their over all portfolio starts to out perform my Apple stock, I'll consider entertaining their suggestions. You might want to ask your financial 'expert' to sign a letter stating that his services are free until he can provide you with better performance than Apple. My guess is that you will hear crickets chirping just like I did when I dropped that bomb on my 'expert'.

I wish I had a job that would allow me to be wrong most of the time.

You will be proven correct in a few weeks I hope.

I said the same, exact things ...

Plus in this town quite a few of these experts are being indicted in connection with various scams ranging from ponzi schemes to real estate fraud. Even at the high end toxic assets get AAA and the US gets a down grade by the same folks? Sheesh..

I disagree. I have the ability to see more then a single penny of Apple's cash even if they don't issue dividends or buy back shares. I'll get to see the cash when I decide to cash in on my AAPL holdings.

I don't know if an alternate example will help or hurt, but I find the standard car analogy makes it clear in my head:

Suppose you were looking at buying a used car and you found two cars to consider, both costing $10,000. However, the person selling Car A still owes $2,000 to the bank that you would also have to pick up (debt) in addition to the $10,000 sale price.
On the other hand, Car B has no debt, and in fact is being sold with $2,000 in gold in the glove compartment.

Both cars have the same selling price, but Car A would have to be about $4,000 more valuable than Car B if you back out the debt or equity situation of each vehicle.

Imagine a 2005 BMW that isn't paid off Vs. a 2005 Haundi with gold in the glove compartment. The gold doesn't make the Haundi less valuable (just the opposite) but if you exclude it to figure out how much the car itself is worth, the value of the car would go down.

Apple, then is something like a car loaded with gold. Sure, it is a nice car--one of the best. But it's market valuation isn't all about it's vehicular properties--a chunck of it's market cap could be attributed to the $100 billion in the glove compartment...

My head hurts...

I can see why so many accountants end up in jail. (just joshing ... I think). So I am crazy to prefer the car with no debt and a gold bar in it?


So you are saying Apple's market Cap is factoring in the near 100B cash. In which case Apple is even more under valued than I thought!

Finally! Someone gets it!

Mine, too. I think that was a plot point in The Heist. Just kidding, Bageljoey. Thanks for the example but I can't say I will ever really "get it." From my PoV for the example to be relevant the gold would have to be in pure bars so they are transferable without any effort whatsoever just like cash, at which point I say give me the car at the discounted "value" that is loaded down with gold stolen from The Italian Job.

Hey I think we should go into business selling cars to accountants!

I'm in!

You're welcome.
I don't think it is really a big deal anyway. It is one technical trick some investors use to try to gain an insight, but there are zillions of those and everybody thinks their trick is the best.
Personally, I think the best investing strategy was to buy AAPL several years ago and sit on it. It may not sound fancy, but the results are outstanding!

Yeah, and maybe one of these days you'll read my posts for what I'm actually saying and not interpret every disagreement as an insult.


All you're really saying here is that Apple has a cost of doing business. Well, sure. But the free cash accumulation is happening after paying for operating costs, and after their various investments. So it's net, and the sum of the net continues to grow, and at an accelerating rate.

I am all for a company investing in growth. This is the purpose of capital. I've said this many, many times in these threads. But when it becomes very, very clear that a company can't come anywhere close to spending their free cash on growth, then question of what other thing(s) they should do with the money naturally arises.

As for operating in the red, Apple hasn't done that in a long time. You don't even want to think about what would happen if Apple reported a loss.

Just a scenario for you to consider: Apple's board decides to pay stockholders a very generous annual dividend of 2%, which I will round up to $10 a share. The total cost to Apple's cash flow would be $9.3b. That's only a bit more than half the amount of cash they added to the stockpile in just the last quarter alone. It could easily amount to not more than 20% of their annual free cash flow -- which means they could still stockpile 80%, or $50b more every year, even assuming that the accumulation rate doesn't increase.

So tell me again, how does this damage Apple's ability to do anything?

It's water under the bridge. I should have ignored you, my bad.

Even if we consider the US investors and their US cash holdings that seems like it would still be doable and I have no problem with Apple doing whatever they want with their money so long as it doesn't negatively affect their business or their valuation.

My question is why must it be done for the company to be successful? Why do you require them to Dellify their cash by "giving the money back to the stockholders" instead of investing it? I certainly didn't buy AAPL because I expected quarterly dividends; I have other stocks for that.

Have you considered that Apple is saving up for something big? Maybe they want to eventually bring the production back to the US with robots that run off of iOS or buy the Cook Islands and relocate their HQ, or make their space ship campus into real spaceship.

I just want to be the guy who details the cars before they are sold

It's also possible that Apple is totally focused on their game plan, and the cash is just a byproduct. Sometimes where the horse is going is worth more than the horse, and vastly more than what the horse leaves behind.

I'm with you. If it distracts Apple from focusing on what's really important, then we shareholders need to STFU about what to do with the droppings that are mounting up behind them.

You got it. That just about captures it.

Now, don't overthink it.

Road Apples?

Now, THAT (horseshit) I understand!

BTW,, AutoMisTypeAhead in Safari tried to change the above to "horses hit"... try it!

Actually, it'd be great to see a post from you that agrees with what a - any - poster said!

Goes to show how Apple's "DNA seeds of technological excellence" that Steve Jobs laid for the company's benefit is now showing it's fruits--truly if you sow seeds of excellence, you will definitely reap excellent results--way to go, Apple!

That's a great post. Same thing happened to us. Can I use your quote next time I talk to my broker? I have to admit though, they haven't said one word about our AAPL holdings in quite some time. I managed to buy back half our position over time, but we would be a lot better off if we hadn't sold any in the first place. AAPL is a >MSFT for this era, and it hasn't ripened yet! It should be though. It should be at 1K a share at least

It's done what it has done in the worst economic environment since the thirties!

What a story! Now we have a new category killer iTV, a new iPad 3, new iPhone soon, and a stockholders meeting coming up with a lot of buzz surrounding it. Most valuable company in the world. Patents filing. Wow.

I knew they were going to make it big but this is more than I expected of them.

The poor analysts are lost on their raft in the ocean, they just crossed the bow of the queen Mary II. I think they've finally noticed how big Apple is.

Why would that be a good idea? AAPL would have to drop below that level to make it worthwhile for me to exercise a put option at that price. As I am long on Apple (and well ahead of even a $350 price) then there are only three reasonably identifiable risks. 1) Apple's value crashes and goes below whatever put option price I get. 2) Apple's value crashes and drops below a level that still gives me a reasonable return on my investment. 3) Apple goes out of business.

Notice I even included the last one in the "reasonable" list...when, of course, it's ludicrous. So you want me to pay 2% for essentially a scenario that is less likely than me winning the lottery. Hmmm. I wonder if you would like to be on the other side of the deal?

I see it a differnet way. By barging its way to the top, microsoft has encumbered themselves with a lot of historical baggage - that try as they might, they cannot drop because their customer base relies on this baggage.

Apple had to make big sweeping changes, and with Steve's return he took that step away from a computer company to what is now a mobile gadget company, with a computer arm. That game changer saved the company, but also removed them from competing with microsoft directly.

Microsoft is attempting to change, however, they are not as agressive as they appear to neither have 1) the balls, or 2) the financial impetus to change.

Without the massive change that the company was put through post-97, rationalisation of SKU's and focus, apple would be floundering around or gone.

Microsoft needs to lose some money to get a rocket up their bum

Couldn't have said it better myself. Others can crow all they want about the "risk" around AAPL, but the results are pretty much speaking for themselves.

no they aren't, don't confuse market cap and company size

These financial advisors just follow rules of thumb: diversify your holdings, rebalance regularly, etc. Which is okay if you don't have time to really look into a company, follow it religiously, and understand what makes it succeed. Or fail.

So when it comes to Apple, it's very hard for most people to resist the lure of the law of large numbers. Surely, this streak can't go on forever. Surely their luck will run out because they're due to come up with a major flop. Surely 500 billion market cap is just a fluke.

But then if you look at Apple's numbers and ask yourself "Other than 'this surely can't last that long', is there any reason why I should think that Apple is not going keep selling more and more iDevices in the next few years?" It's hard to come up with a convincing 'yes' for an answer.

When I told the missus that Apple hit 495 today she said I should go find another Apple. Well, easier said than done. Apple is an exceptional company. (Exceptional in terms of growth.) Just like Microsoft was the exceptional company in the 80's and 90's and Standard Oil was the exceptional company a hundred years ago. So exceptional companies are not impossibilities, but they come few and far between and I suspect there can only be at most one at any given era.

I'd just enjoy the ride and make sure I cash out before Apple's growth era comes to a close. Yes, easier said then done.

On one level, you are correct that Apple has more than enough ability to pay out a cash dividend without impacting its capital reserves and therefore its strategic investment options. However, many of us who own AAPL are not particularly interested in that $10 dividend because we've seen that Apple is better at managing that investment of capital over time better than we ourselves would. I have no magic insight into why Apple wants to currently hold such a large (and growing) cash reserve but I suspect they have either have a reason or simply want to ensure their options remain open.

As a left wing liberal capitalist, I believe capital will inevitably go to the most efficient place possible (without judging the social impact, of course). In the situation with Apple's large cash reserves that capital will find it's way to the most efficient place. If that's a dividend, we'll see a dividend. If that's an investment or acquisition or series of acquisitions or some combination of all of those, then that's what will happen.

As a shareholder, I'm going to benefit financially with whatever happens ... because that capital will go to the best place possible. Non shareholders will get no benefit.

Lots of good comments here.

I look at 1) the PE ratio, 2) the product momentum, 3) the market share, & 4) brand

I think apple's PE is penalized right now because of size, that is unavoidable I think, they should be a real 14x and not 10x like they are. But BAC's are often 10x so it may not change.

Their products have real momentum, each outdoing the earlier gen, a very good sign of knowing what people want better than the competition

The share in key segments is not that high (highest in tablets but it's an early market, 30% in smart phones but low in total phones so room to grow, low in computers which also have momentum)

One of the best brands going, don't have to prove their value to consumers, if it says apple it is good

I expect another year or two of real growth.....just my opinion

They don't have to do to it for the company to be successful, they can do it because they are so successful.

I realize your last paragraph was meant as a joke (the Cook Islands indeed), but it does point out the difficulty of using this kind of cash in a responsible fashion. I don't anticipate the company spending it in any sort of frivolous or very risky way, so the question is how they can use such immense amounts of money in any other.

And again, I haven't suggested anything that amounts to a "dellification." As for your expectations, perhaps they should change as the circumstances change. Apple has quadrupled their cash holdings in about three years. That's the elephant in the room. It's two elephants. Soon it will be a whole herd of elephants. Should our expectations as stockholders never change?

At this point I think Apple does have enough cash on hand to do a buyback or dividends, asssuming they don't have some big plan for the money we haven't yet conceived. When we first discussed this I didn't think they had enough because they need to be able to wait out every possible downturn that could affect there business and to its greatest degree in order to cover their ass. At $100 billion and at the current growth rate doing a yearly or quarterly dividend that would pay out to $20 billion a year seems reasonable.

They could pay it not only without impacting capital reserves, but with them still growing at a rate of $50b a year, very conservatively. At some point I think we do need to come to grips with the massive scale of Apple's free cash flow. It is staggering now, and continuing to accelerate.

So here's a kind of irony. The way the tax code is structured today, preferred dividends are taxed at a maximum 15% rate. This is how the super rich in this country became even more super rich over the last ten years, by making passive income and paying taxes on it at a much lower rate than wager earners. This is not a political point. I am simply saying that it's kind of strange to hear someone who is presumably not one of the super rich begging off the kind of tax favored income that makes rich people richer.

So here's my offer. Since I wouldn't have any trouble figuring out how to use my dividend, and you don't want one, if they declare one I'd be happy to take the check off your hands and pay the taxes. It's just one of the services I provide. This is the kind problem I like to have.

Yeah. I also don't hear anyone talking about marketshare anymore either. Microsoft still has the lions share of the O/S market, but it doesn't matter, does it?

Thank you, at least one person doesn't think what I am suggesting is unreasonable.

I want to comment on the downturn scenario though. What you are suggesting is that Apple is hanging onto huge mountains of cash because someday they might need to dip into their reserves to pay operating expenses, that cash flow would not cover it. This is called "losing money" -- and not just a little money, but one hell of a lot. I don't even want to imagine this very scary thing happening, and if Apple really is stockpiling cash against armageddon, then I really don't want to know.

Does giving x-amount back benefit Apple's bottom line?