Filed under: Apple Financial
Oh, to have Apple's cash problems
Not unlike this guy, Apple is going to need avalanche insurance for the mountain of cash that it's sitting on.
According to BusinessWeek, Apple has amassed $20.8 billion in cash and short-term investments, adding nearly $1 billion each and every quarter. It's not necessarily odd for a company to have a lot of cash (Microsoft, for example, has $23 billion socked away), but it's beginning to irk the investors.
If Apple's stock price continues to rise, everyone's happy. But if it starts to dip, experts say Apple should consider investments like acquisitions (possibly in the music business) or raw materials and components.
Matt Asay of Cnet is suggesting something probably unpopular with the Cupertino crowd: tax it. Since Apple's profit margins (as a percentage of sales) are higher than Exxon's, Apple might fall prey to Congress' plan to tax windfall profits, if it becomes law.
Apple CFO Peter Oppenheimer said earlier this year that "Our preference is to maintain a strong balance sheet in order to preserve our flexibility." Charles Wolf of Needham & Co. says the company doesn't need more than $5 billion on hand, but he'd be more worried "if this was a sleepy company with no growth."
"That's not Apple," Wolf said.
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Reader Comments (Page 1 of 1)
Codey H. said 5:13PM on 8-08-2008
Apple's doing something that everyone should be doing.. building a nest egg.
What's so bad about that?
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plaid thermos said 5:26PM on 8-08-2008
PLEASE CONSIDER DIVIDENDS!
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oki said 5:49PM on 8-08-2008
agreed!
Eric said 5:28PM on 8-08-2008
Maybe they could pay their hard working engineers and other employees something a little more commensurate with their apparently high output? Sounds like it would be killing more than a couple birds with one stone.
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OC said 12:08AM on 8-09-2008
I couldn't have said it better my self.
gc_powerbook said 5:33PM on 8-08-2008
I'm no finance expert but maybe that wad of cash would be useful as a stock dividend. It might encourage more long term holders and perhaps tone down some of the volatility of aapl.
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John Kirk said 7:30PM on 8-08-2008
"Matt Asay of Cnet is suggesting something probably unpopular with the Cupertino crowd: tax it."
Well, I don't normally like calling people names, but Matt Asay is an idiot plain and simple. You can't tax money that's been accumulated. You can only tax it as it's earned or on the interest it is earning.
But if you read the original article you'll see that is the least of Mr. Asay's factual and logical errors.
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Tomahawk said 7:46PM on 8-08-2008
I miss the days when Apple was kissing the $200 mark last X-mas.
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Greg Alexander said 8:46PM on 8-08-2008
Yes, buy something.
The again... buy what? Many of the things I'd like to see Apple do (eg: TiVo... but many more ideas), they could do without buying anyone.
So then it turns around to buying human talent, like they were doing with PA Semi - buy companies with the best people. Paying more to their existing talent would also be good.
So which companies have the best people?
ps.
I think this is probably crazy - but is there any sense in Apple buying a large (but not controlling) share of Yahoo? (They'd probably want to sell MobileMe into Yahoo if that happened).
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GLacy said 8:51PM on 8-08-2008
"but it's beginning to irk the investors."
Really? I'm an investor and I'm not irked.
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GLacy said 8:58PM on 8-08-2008
"but it's beginning to irk the investors."
Really? I'm an investor and I'm not irked.
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KenC said 10:06PM on 8-08-2008
Yeah, $5B is enough for any company, that's what they said about GM too!
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Constable Odo said 2:57PM on 8-09-2008
I wish Apple could use some of that money to purchase a game company that can design some exclusive games for the iPhone and iPod Touch. Good ones, of course.
It is a pity that all that money is just sitting there for Apple and investors aren't getting any use from it. If Apple would go back up to $200 a share then I wouldn't care, but it would be nice to have some of that cash working for investors now that the stock is weak and looks to stay weak for some time.
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futurepastnow said 4:15PM on 8-09-2008
Insurance against Apple ever being purchased or taken over, perhaps? Any company that wanted to buy Apple would have to be able to buy its bank account, too.
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Vega said 6:42PM on 8-09-2008
That's wrong. Cash is part of a company's assets (just like buildings, intellectual property etc.), so anybody who owns the stock, also owns the money. Debt however makes a company more expensive to buy, because by in case of a takeover the buying company also inherits debt oblogations.
And stockholders should be worried if a company hoards too much cash, because cash only gives money market returns, which makes it more difficult for a company to beat lower risk invesmtent alternatives.
Nick said 5:15PM on 8-09-2008
Apple needs small (3-5%) investments in several media companies to give them more of a voice in how content is distributed. Apple's largest issue right now is not having access to enough content to make devices such as Apple TV worth buying.
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Andrew Harrison said 8:29PM on 8-09-2008
surely having a pile of cash the size of a small nation is a good idea when the economy is heading into a recession?
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SuperSexyErik (^_^) said 1:21AM on 8-10-2008
perhaps they will buy microsoft? that might give microsoft some hope for a future :)
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Peter Cook said 12:58PM on 8-11-2008
Or they could start paying dividends, that would keep the shareholders happy
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msr said 4:48PM on 8-11-2008
Tax it! If this were any other company than Apple, I'd be telling them to ream them, so I'm just going to have to apply that logic to my favorite company. Our country is in horrible debt and there are people living on the streets. Something has to be done about it.
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