Almost $40 Billion In Cash: What Is Apple Waiting For?

Dividend? Maybe.

Stock buy-back? No Way!!!!!!!!

Buy-backs are for failing companies, as way of propping up the price of shares held b the incompetent management team.

maybe they should buy facebook. would be potentially big blow against google, who appears to already be apple's biggest competitor

Apple will NEVER give out Dividends. Dividends do not make Apple a stronger company.

Apple will NEVER buy back stock. Stock Buybacks are extremely poor choices that never make the company a stronger company.

Apple's shares will ALWAYS only grow in value with the actual value of the company.

As an Apple Shareholder for years - and thanking Steve Jobs for the profits I have made - Apple's marching orders are: 1. To make profit. 2. To make the best products they can. That is it.

Apple's enormous money stockpile is a HUGE WEAPON that Apple wields well to strengthen the company.

Apple should keep it.

Not that Microsoft has $34 Billion in Cash. It is not that far behind Apple. But Microsoft doesn't do a good job with its money. Just look at how poorly its stock has done. It is dead in the water compared to Apple's stock.

I'm completely satisfied. I say keep the cash around and be ready to do what has to be done to keep Apple free strong and independent forever. Some of the same people asking Apple to do a buyback are the same people who would have wanted Apple to be bought out by Sun or Oracle back in 1996. Let Steve be Steve.

People question how Apple will strategically leverage that much cash. Additionally, people think that the cash should be spent in one of many forms and a smaller cash reserve should be maintained.

What people are missing is the strategic potential that the cash can be used for beyond the traditional methods of spending cash. Using it for buybacks, dividends, and acquisitions are far too common and not a creative way to utilize the cash. Fueling parts pipelines and ensuring a steady supply of parts and materials is a more efficient use of the cash as pointed out in this article.

Preservation of capital shouldn't be looked on as a bad thing. I am sure that short term investors aren't happy about it, but as a long-term shareholder I feel that Apple will be able to take larger risks with product development and launches, drive innovation furthers and weather those risks without getting into serious financial jeopardy.

If Apple has the ability to accumulate wealth now when it is delivery today's hottest products, cash reserves can come in handy when it needs to revitalize the brand and potentially reinvent itself.

One other reason Apple keeps a lot of cash on hand is because they don't want to have to fire people during economic downturns. They feel like they spend a lot of effort and resources in hiring the best so they don't want to let them go because of an economic downturn. Steve Jobs himself said this in an interview with Fortune or Forbes.

They also use the cash to make sure they don't have to let people go during economic downturns.

I'd like to see Apple acquire Yahoo or establish its own search engine in order get more ad revenue. I sure wish there was a way to take that money and buy itself into the educational or health fields. Getting into either one of those fields would be a lucrative win for Apple.

Back in the 80's the Apple II was the darling of education and maybe the tablet will give Apple back that former space. Children enjoy using iPod Touches and there will be so many developers to build educational apps for the tablet. How can Apple pass up such an opportunity.

Apple is planning to buy Microsoft and it's been in the work for a while now.

Apple is planning to buy Microsoft and it's been in the work for a while now.

People forget that Apple was a dividend company during the 80s after they went public. They eliminated the dividend in the early 90s as their fortunes and cash flow faded. It could happen again as Microsoft now offers a dividend. But Apple's going to have to figure out something to do with all that cash. The "buy small, invest and reap multiples" has worked for them (iTunes anyone?) but Apple is so cash flush now that they need a new plan.

Nobody is saying they need to blow 20 big ones on Adobe, But Apple needs to ask the question of what company they want to be in 10 years and start making strategic investments. They shouldn't get stupid with their money (think Yahoo during the dotcom bubble) but there has to be a play that Apple can do that few others could accomplish that makes sense for them.

I'd like to see Apple do for the Electronic Health Record what it has been able to do for the acquisition and distribution of music. It would be great to have an efficient, lean, easy to maneuver, electronic health record!

Unlike Microsoft, Apple has zero debt with that 39B in the bank! Nice.

Intriguing question - what to do with $40 billlion. It seems that beyond a certain point, as the article says, simply amassing money has no purpose.

Apple could drop the price of its products by 1/3, and still make a small profit. In fact, more people would buy the products so there would be other side effects that are good for Apple. But that's not how companies do business (and there's no guidance for the next quarter indicating anything like that).

They talk about guaranteeing parts supplies - could Apple feasibly pay a content company in advance for a million copies of their magazines for a year?... to guarantee that the company invest in tablet versions of their mags? Is that a worthwhile investment? Of course, if not enough people subscribe to that magazine Apple loses.

In terms of traditional purchases - strategic investments might include
* a Content Delivery Network. Apple could build its own world wide backbone for data delivery, download AND upload.
* half of a company that is responsible for large enterprise IT support (I say half, as it's not really Apple's focus, but with independent management might make some good moves)
* home automation
* advanced robotic children's toys :)

Interesting stuff.

Perhaps we will learn more about Apple's strategy as it launches this much-hyped tablet computer. Certainly that might help explain its purchase of ad network Quattro Wireless.
Did you notice that Apple didn't actually announce the purchase of Quattro? It just leaked out (was it pre-vetted by the FTC?) that the acquisition had taken place.
Who knows maybe Apple may already be spending some of that money on acquisitions and we don't know about it. What will these investments be?
Well what have all the big mobile players got – Nokia, Microsoft, AOL, Google, Yahoo (note all owners of mobile ad networks) that Apple doesn't? Mobile content. To date, Apple has just provided the platform for other companies to distribute their content – Apps, music – to iPhone/iPod/tablet customers. When iPhone users surf the net they're going straight to Yahoo, Google, Microsoft, AOL, along with mobile sites of operators, broadcasters, publishers etc.
All Nokia internet-ready phones (the sales of which dwarf Apple) ship with bookmarks straight into Nokia sites, as well as having Nokia apps, such as maps, on board. And Nokia's ad network sells the space. To date Apple is still predominantly a hardware manufacturer, its nice stuff and gets a lot of hype (for a relatively small player in the phone market), but its just hardware. In the future what will the margins be on making phones? Doesn't it make sense for Apple to become a mobile destination, like Nokia, either through development or acquisition? Why is everyone convinced Apple what's to be Google? http://www.mobithinking.com/blog/apple-buys-quattro

Why not move into automotive industry.An Idrive unit to navigate, call, agenda, spoken e-mail respond, he even make it a tollbox for roadpricing if you have GPS positon and UMTS etc. Have it sponcered with a good dataplan from Telco. Goverments dn't have to invest in Black boxes. Navigate on-line through 1 central traffic control center, so goverments can steer traffic with price and use. A bonus if you drive less.
Joint venture with Betterplace to produce batteries. Become a solarpower producer.Make investments in better economicaly use of cooling processes in its serverparks.And why not a attack on the the server market of the top 500 bij giving a return plan if customers aren't happy? Buying VM Ware.Provide a Cloud route for them proving a saving with ICT costs, I doubt they evver go back to MS!

Perhaps we will learn more about Apple's strategy as it launches this much-hyped tablet computer. Certainly that might help explain its purchase of ad network Quattro Wireless.
Did you notice that Apple didn't actually announce the purchase of Quattro? It just leaked out (was it pre-vetted by the FTC?) that the acquisition had taken place.
Who knows maybe Apple may already be spending some of that money on acquisitions and we don't know about it. What will these investments be?
Well what have all the big mobile players got – Nokia, Microsoft, AOL, Google, Yahoo (note all owners of mobile ad networks) that Apple doesn't? Mobile content. To date, Apple has just provided the platform for other companies to distribute their content – Apps, music – to iPhone/iPod/tablet customers. When iPhone users surf the net they're going straight to Yahoo, Google, Microsoft, AOL, along with mobile sites of operators, broadcasters, publishers etc.
All Nokia internet-ready phones (the sales of which dwarf Apple) ship with bookmarks straight into Nokia sites, as well as having Nokia apps, such as maps, on board. And Nokia's ad network sells the space. To date Apple is still predominantly a hardware manufacturer, its nice stuff and gets a lot of hype (for a relatively small player in the phone market), but its just hardware. In the future what will the margins be on making phones? Doesn't it make sense for Apple to become a mobile destination, like Nokia, either through development or acquisition? Why is everyone convinced Apple what's to be Google? http://www.mobithinking.com/blog/apple-buys-quattro

I don't understand why no one has
mentioned that that money could be put to a beneficial purpose for mankind, even if that just means selling apple products cheap to schools in poor countries.

Come on steve, you've made a hole in the universe, now help some poor people!

Apple is a company that relies on innovation in order to maitain it's advantage. Sure, they've been pretty good at making hit after hit lately, but it won't always be so. Keep the cash reserve, it will help them keep their priority on innovating even when the economy us down or if they run into a string of mistakes.

Perhaps Apple could use that money to make an iPod with a battery that the user could change themselves.

Or maybe to pay back all those people who paid $200 extra for their iPhone that Apple dropped the price of 3 months after release.

Or they could buy an additional cel phone from another supplier for all the iPhone owners that suffer from constant dropped calls, one that actually works as a PHONE.

Or they could release the specs for their DRM so that people who bought stuff from the iTunes store could play their music on other devices.

Perhaps they could use it to fix the problems with their computers that they currently censor in their online forums.

Or maybe even give some of it to the folks they sued for posting information on Apple's products before Apple wanted them to, as an apology.

They could use some of it to pay off Nokia, whose patents they infringe with the iPhone.

Lots of stuff to do with the money.
.Tina.

How quickly people forget. Only a dozen years ago, Apple was in such a desperate situation it was forced to do a deal with its archenemy, Microsoft. Recall that Steve Jobs made a big deal at the time that the "infusion of cash" - a mere $150 million - would help return the company to profitability.
Apple reminds me of my Grandma. No matter how well off she was, she remembered the "bad old days" and was very reluctant to spend money. Tech is a fickle business, and in 5 years Apple may be very glad to have access to that cash.

At the beginning of the current economic troubles, there were a few comments suggesting Apple should use their cash hoard to setup a bank.

I am not suggesting this, but something related.

A lot of customers buy computers via a lease. This is typically done via a finance company (part of the now despised financial services industry), with them charging fees and interest to cover their costs, risk, and a profit margin. All this 'extra' revenue currently is not going to Apple but instead traditional finance companies, who probably don't have as much cash/capital as Apple now do :)

Therefore Apple could consider setting up their own finance subsidiary, 100% owned by Apple, and 100% capitalised by their cash mountain. This should be able to generate a far better return than their current "short dated, high quality investments.”

Apple do offer finance leases but as far as I am aware this is 'outsourced' to GE Capital. Meaning GE Capital is getting most of the 'extra' revenue.

It should be noted that for many auto makers, their leasing subsidiaries generate far more profit than actually making and selling the cars themselves.

What's amazing to me about the cash number is that Apple could buy Dell at its current market quote right now with cash, and still have $12 billion or so left over. Simply amazing.

Cash is your best friend in bad economic times. It allows you to continue your R$D while others, and there were several, cut there research and development. The iPod was created during a recession with cash available. The stock values should be enough to make shareholders happy. There is financial safety in cash.

Keeping cash is a way of protecting your buisness during bad economic times. It allows you to continue your R&D. The iPod was created during a recession. Cash is your best friend. Tablet also being created during this recession of the last two years.

Space exploration is expensive - just wait...

Space exploration is expensive - just wait...

"Buy-backs are for failing companies, as way of propping up the price of shares held b the incompetent management team."

Yes, case in point, Microsoft did this last year!

I think Apple is using it's cash to add stability. At this point, they could afford to pay a dividend merely with the interest it accrues. Yes, they should probably make their own bank, with an iTunes card that could be used at ATMs or you could use it online and it would negotiate with the iTunes store (no need to put in your number.) Or, they could loan to other businesses, since so many of them are having trouble getting loans.

Adobe might be a good acquisition, not for any software though, just to kill Flash for good (how about that as a service to all humanity? ;-)

Apple's cash pile drives Wall Street crazy. That probably means it is a smart thing to do, given these genius bonus babies just about destroyed the world economy- not to mention the US industrial base, the middle class and our political system.

The M&A folks would love to make a ton of money throwing away the money on crap that they do not need. If Wall Street is opposed to it- then it must be good. BTW- Main Street wants it's money back with interest, in full, yesterday.

"Almost $40 Billion In Cash"

Shhhhhhhhh!!! It's Limousine Liberal "Buy me a new Liver" Stevie Gods "retirement fund".

Maybe CrApple will now buy him a Private 747 or Airbus 330!!

But give CrApple INVESTORS (stock holders) a DIVIDEND??? HA!! Never ... As Usual!

CrApple ... the most Greedy Company in USA (except for those "Exec Stock Options, of course)

Buy AutoDesk and make AutoCAD Mac-only.

Buy AutoDesk and make AutoCAD Mac-only. ;-)

Enough with the dividends and stock buyback! All you analysts and reporters have suggestions on how to run Apple? Very nice, thank you very much! Well, they do orthogonal as you believe and preach and they seem to be doing better and better as they keep showing you every quarter. Does this tell you anything about the quality of your judgments? Your textbook finance does not help when one breaks new ground. Please stop it and watch the action!
Your attitude in the article should be to try to understand WHY Apple follows this strategy

I think that because the tablet is something that will possibly be pricy and people likely won't make it an impulse by that they will burn though part of this cash to get the tablet out there and get the prices down so that people will just start snapping them up.

I think that because the tablet is something that will possibly be pricy and people likely won't make it an impulse by that they will burn though part of this cash to get the tablet out there and get the prices down so that people will just start snapping them up.

I think that because the tablet is something that will possibly be pricy and people likely won't make it an impulse by that they will burn though part of this cash to get the tablet out there and get the prices down so that people will just start snapping them up.

Hmm, what would happen to call option prices if Apple decided to hand out dividends? That would lower the stock price and hurt all those people that have invested in call options, wouldn't it?

Tina Belmont said:
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Don't know about you, but when my iPod's battery stops holding a charge after 4 years, I bought a battery kit for $10 and changed it myself. Try it.

Tina Belmont said:
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Uhm, newsflash, Apple gave those people $100 back, and if you were smart, you could have bought your iPhone with price protection like I did. I got another $100 back from American Express.

Tina Belmont said:
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And, this is somehow Apple's fault?

Tina Belmont said:
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Uhm, all of their music is DRM-free now, and you can burn an AAC CD and re-rip any DRM'd music files that you have. That has always been the case.

Tina Belmont said:
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Eww!!! Don't be evil!

Tina Belmont said:
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Why? Is there a legal reason for them to do so?

Tina Belmont said:
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That's up to a court to decide, why don't you let them do it?

Tina Belmont said:
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Thank god, we don't have Tina Belmont as CEO of Apple.

Since, some people want Apple to be charitable, why don't we propose something truly beneficial to the widest number of people possible?

Apple and Google should pool their free cash and come up with their own global network bypassing everyone else. Whether it's dark fiber they need to buy, or all those Motorola satellites or Sprint or whatever. They should take their free cash, spin it off into a joint venture, and do what it takes to bring a mobile superhighway to the world.

Use of Cash:

Work with other companies and the government to create new entrepreneurial entities that will lead to/generate good paying tech jobs in the US and elsewhere. This is exactly what America needs. Steve and Larry and the other Larry have cash aplenty to spearhead a national technology-oriented skills and job initiative with the private and public sector to move the US (and the world) forward. A national entrepreneurial effort, especially in the area of technology can do wonders for us. There is $1 trillion in cash without long-term debt in the US, a staggering amount that can help in this effort. Apple has $40B of it.

Use of Cash:

Work with other companies and the government to create new entrepreneurial entities that will lead to/generate good paying tech jobs in the US and elsewhere. This is exactly what America needs. Steve and Larry and the other Larry have cash aplenty to spearhead a national technology-oriented skills and job initiative with the private and public sector to move the US (and the world) forward. A national entrepreneurial effort, especially in the area of technology can do wonders for us. There is $1 trillion in cash without long-term debt in the US, a staggering amount that can help in this effort. Apple has $40B of it.

Apple should create a subsidiary and sell cheaper MacOS computer for the masses without diluting its own brand, like HP has Compaq.

At no real cost ,a stock split would be a nice reward to shareholders.

They know we are in the eye of a storm not through it. The new media order isn't properly defined yet and we face a flurry of infighting, fumbled acquisitions and some big failures too. When the dust has truly settled though, Apple will walk up and shake the hand of those still standing... and a few new faces too.

All roads lead to famebook - ;-)

I believe that Apple has the right idea: sit on the cash and use it as a strategic weapon. Most especially in this economy, stockpiling cash is a great idea.

Remember, Jobs isn't doing that well physically, and when he has to step down, the new CEO will inevitably fumble around a bit and need the cash reserves to cover any missteps that might be made.