Apple Inc's cash war chest
Does anyone have any thoughts on why Apple is building up such a huge cash surplus?
They could use this for a rapid expansion of their retail presence, but they are not. Nor are they spending it on R & D. Nor marketing or advertising (they are spending billions on these, but they are all accounted for under recurrent expenditure, not one off investments).
So what is it for?
It stands now at nearly 12bn USD, and at present reates will reach 15bn by the end of the year.
They are not buying back shares, or paying dividends. So what is left for the crock of gold? A reserve to fight off hostile takeovers (but would this cash make them more prone to takeovers)? Or a fund to make takeovers themselves? Or do they just have the cash because they can't think of anything better to do with it?
Would be interested to hear what people think!
They could use this for a rapid expansion of their retail presence, but they are not. Nor are they spending it on R & D. Nor marketing or advertising (they are spending billions on these, but they are all accounted for under recurrent expenditure, not one off investments).
So what is it for?
It stands now at nearly 12bn USD, and at present reates will reach 15bn by the end of the year.
They are not buying back shares, or paying dividends. So what is left for the crock of gold? A reserve to fight off hostile takeovers (but would this cash make them more prone to takeovers)? Or a fund to make takeovers themselves? Or do they just have the cash because they can't think of anything better to do with it?
Would be interested to hear what people think!
Comments
This includes buying smaller companies with interesting IP and buying back stocks when they think they are undervalued...
They use their cash to secure their future - a major part of the reason apple is still around is because they had a significant amount of cash on hand in 1997.
If I remember correctly, Apple just about ran out of cash back then and it was Microsoft's cash that helped keep Apple alive.
Microsoft bought non-voting shares to make it appear they were above board with regard to antitrust allegations...
Yeah, the 1 billion on hand was projected as enough to sustain another 1.5 quarters operation before creditors cut them off. Not much of as cushion.
But it was much much greater than the 150 M microsoft gave them...
But it was much much greater than the 150 M microsoft gave them...
True, and that was after they were losing up to $700 million a quarter at times. The cash kept them alive.
cutemartin:
They could use this for a rapid expansion of their retail presence, but they are not. Nor are they spending it on R & D.
They will use some to fund retail expansion, true. However, they spend quite a bit on R&D...almost three times as much as Dell, for example. That's still only about 3-4% of revenue, which some analysts take issue with, but it seems that budget covers development quite well.
But it was much much greater than the 150 M microsoft gave them...
True, and that was after they were losing up to $700 million a quarter at times. The cash kept them alive.
The cash wasn't the thing that helped, although it didn't hurt. It was the contractual commitment that MS would continue to develop and ship OfficeMac for a minimum of 5 years. That was peace of mind to buyers that MS wasn't leaving and putting the final nail in the Apple coffin.
Several billion cash in the bank makes them a lot less purchaseable. Anyone that buys Apple would have to pay for that $12b too.
Just the opposite. Many companies with large cash reserves get bought when their stock is undervalued because the cash is real while stock value is just numbers on paper. So they pay a paper discount for the stock and then get the windfall cash.
For awhile Apple was very vulnerable to that with about 5 billion of cash and a 7 billion market cap. The 2 billion the company looked worth at that time (on paper only) was ridiculously undervalued since they had about a billion a quarter in sales, the PE ratio was close to 5, 20 is considered healthy, when you considered the cash hoard. It's amazing they weren't bought out then.
This includes buying smaller companies with interesting IP
+ buying companies for talent.
I bet Michael Dell wishes he would have bought them out back then, Hiro.
Probably, but he was too busy being in a pissing contest with Steve. He was responsible for the [paraphrased quote] "If I were the CEO, the best thing to do would be shut down the company, sell the equipment and return the war chest to the shareholders"
Probably, but he was too busy being in a pissing contest with Steve. He was responsible for the [paraphrased quote] "If I were the CEO, the best thing to do would be shut down the company, sell the equipment and return the war chest to the shareholders"
Yeah, I know. I bit ironic really.