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awcopus · Aug 25, 2006, 01:44 PM

At the close of its fiscal third quarter in early July, Apple had approximately $9.5 billion in cash and short-term investments.

This money is separate and distinct from Apple's operating budget, how it pays for costs of doing business.

I believe in saving for a rainy day, but, wouldn't, say, $8billion be enough? In which case a full 1.5 billion dollars could be used, perhaps, to more aggressively grow the company's list of products and services. Or would that just be nuts?

What would you guys suggest Apple do with this tidy sum?

davesimondotcom · Aug 25, 2006, 02:01 PM

Originally Posted by awcopus

What would you guys suggest Apple do with this tidy sum?

Duh. Give it to me.

besson3c · Aug 25, 2006, 02:05 PM

Invest in R&D to run Windows applications in an OS X window (without having to own a copy of Windows), and reduce the prices of all Macs, selling them at a breakeven point for a while if they really have to.

This would help grow Apple in a hurry

DeathMan · Aug 25, 2006, 02:10 PM

Hoarde it.

mitchell_pgh · Aug 25, 2006, 02:12 PM

I would buy Adobe... essentially sealing the creative future of Apple. [granted, they need a few more billion]

Mastrap · Aug 25, 2006, 02:15 PM

Originally Posted by besson3c

and reduce the prices of all Macs, selling them at a breakeven point for a while if they really have to.

This would help grow Apple in a hurry

It would bankrupt Apple in two to three years. Competing on price is the last refuge of people without a superior product. It is also non-sustainable.

Zeeb · Aug 25, 2006, 02:17 PM

If Apple ever hit another rut like it has before that cash could save the company. Who knows? Apple has hit so many home runs lately, they are bound to make a misstep sooner or later.

Obi Wan's Ghost · Aug 25, 2006, 02:17 PM

How awesome that they doubled their cash in three years when everyone was saying they were going to die.

Dork. · Aug 25, 2006, 02:26 PM

It's a legitimate question: investors have to ask if there's anything better that the company can do with the money then keep it in the bank. At the very least, if they're not saving it for any particular purpose, they could give it back to the shareholders: That's over $10/share they're sitting on, and the reason why Tech companies are supposedly immune from having to pay dividends is that they reinvest their profits in a fast-moving industry. Where's the reinvestment if you're just sitting on cash?

Microsoft gained some attention a while back for having a huge cash horde and started paying dividends, but their $31B cash horde is only a little more than $3/share.

(Sources: MSFL AAPL)

But, perhaps there is a use for all that cash. Apple settled some key patent issues with Creative this week, and the market barely yawned at the news. This because the $100M ransom... er... settlement was a payment of 1% of Apple's cash horde in exchange for making all Creative patent issues go away. Perhaps now Tech companies carry lots of cash as insurance against patent trolls?

Big Mac · Aug 25, 2006, 03:22 PM

Apple needs to keep a lot of that cash on hand to fund the company, as the OP said. It actually is benefiting shareholders because it helps Apple exceed its profit estimates, which props up the stock price.

Eug · Aug 25, 2006, 03:24 PM

Heh. I like the dividend idea (at least temporarily), cuz I own some Apple stock.

Big Mac · Aug 25, 2006, 03:28 PM

Apple is still a growth stock. We *do not* want to see it turn into an income stock.

Eug · Aug 25, 2006, 03:31 PM

Income stock? Nah, I just want my $10/share dividend on a one-time deal, then I'd sell the stock.

J/K of course.

greenamp · Aug 25, 2006, 03:54 PM

Give me a mill.

tutelary · Aug 25, 2006, 04:17 PM

Nintendo maintains between 10 and 12 billion as well, and has no debt, just like Apple.

hickey · Aug 25, 2006, 04:20 PM

Do you think it will diminish at all due to the battery recall? Or will that just affect Sony.

tie · Aug 25, 2006, 04:23 PM

Give it to me (as a dividend).

porieux · 05:30 AM

...

besson3c · Aug 25, 2006, 05:25 PM

Originally Posted by Mastrap

It would bankrupt Apple in two to three years. Competing on price is the last refuge of people without a superior product. It is also non-sustainable.

THey don't have to compete on price, just drop it to a threshold that will be enticing enough to prospective buyers (combined with the ability to seamlessly run all Windows apps).

justinbaby · Aug 25, 2006, 06:07 PM

Guys, Apple should NOT let Wall Street push it around. Ford Motor Co. had an extra 7 or 8 billion in cash a few years ago that Wall Street pummeled them to get rid off. Ford is in desperate need of that cash now, but that cash is gone thanks to Wall Street. There is nothing like COLD CASH to give you flexibility and peace of mind. Let Apple decide what to do with it. How on earth are they going to be cutting edge without R&D capital to work with? Huh? HUH?

turtle777 · Aug 25, 2006, 06:11 PM

Originally Posted by Big Mac

Apple needs to keep a lot of that cash on hand to fund the company, as the OP said. It actually is benefiting shareholders because it helps Apple exceed its profit estimates, which props up the stock price.

Sorry, but cash != profit.

How does cash help to exceed profits ?

Did you know that a company can be profitable and still go bankrupt ?
Or that a company may have positive cash flow, but still post negative profits year after year ?

-t

Person Man · Aug 25, 2006, 06:18 PM

Originally Posted by besson3c

THey don't have to compete on price, just drop it to a threshold that will be enticing enough to prospective buyers (combined with the ability to seamlessly run all Windows apps).

You really do want to kill the Mac, don't you?

If Apple made Windows apps run seamlessly from within OS X, THERE WOULD BE NO INCENTIVE TO DEVELOP FOR OS X. Companies would make Windows apps and say: "It runs on the Mac."

This won't happen, because Apple is not going to do that.

Mastrap · Aug 25, 2006, 06:33 PM

That's not exactly true. If all windows apps would run seamlessly on OS X, which isn't possible in any case, then Apple's market share could theoretically grow.
Remember, Apple isn't in the business of developing software, they are in the business of selling boxes.

besson3c · Aug 25, 2006, 06:42 PM

Originally Posted by Person Man

You really do want to kill the Mac, don't you?

If Apple made Windows apps run seamlessly from within OS X, THERE WOULD BE NO INCENTIVE TO DEVELOP FOR OS X. Companies would make Windows apps and say: "It runs on the Mac."

This won't happen, because Apple is not going to do that.

We've had this conversation before, and I don't buy this theory at all.

Developers who want to appease the Mac audience will probably not do so by going this route, as there are many features and things that will not be possible running apps this way (e.g. menus not attached to windows, Cocoa/Carbon features, etc.). Developers who will cop out this way would probably never have had the funding to develop for the Mac in the first place, making this solution better than nothing.

besson3c · Aug 25, 2006, 06:46 PM

Originally Posted by Mastrap

That's not exactly true. If all windows apps would run seamlessly on OS X, which isn't possible in any case, then Apple's market share could theoretically grow.
Remember, Apple isn't in the business of developing software, they are in the business of selling boxes.

Why wouldn't it be possible?

You can run Windows apps in OS X with WINE, although the problem is WINE is a moving target and probably always will be since reverse engineering something that is constantly changing seems to be a losing battle.

However, you could also just virtualize the whole OS, and develop something that would only display application windows from the virtualized OS, rather than the entire OS. This would work very much like Classic.

Now, I did add something about not owning a copy of Windows, and I don't my second option would ever be feasible without a valid Windows install pre-loaded.

What is the approx ratio between MS's sales in licensing pre-loaded copies of Windows on new machines vs. people just buying a copy of Windows? Just curious..

bradoesch · Aug 26, 2006, 04:11 PM

Originally Posted by porieux

As an Apple shareholder, I am pretty miffed that they do not ever pay out any dividends.
They wouldn't have to deplete their cash reserves to pay =something=.

As an Apple shareholder as well, I'd rather they reinvest their profits instead of pay dividends.

mitchell_pgh · Aug 26, 2006, 04:13 PM

Originally Posted by porieux

As an Apple shareholder, I am pretty miffed that they do not ever pay out any dividends.
They wouldn't have to deplete their cash reserves to pay =something=.

Why are you miffed? Have they EVER payed out dividends?

turtle777 · Aug 26, 2006, 04:16 PM

Originally Posted by bradoesch

As an Apple shareholder as well, I'd rather they reinvest their profits instead of pay dividends.

Do you consider hoarding cash "re-investing" ?

-t

Rev-O · Aug 26, 2006, 04:26 PM

Originally Posted by awcopus

At the close of its fiscal third quarter in early July, Apple had approximately $9.5 billion in cash and short-term investments.

This money is separate and distinct from Apple's operating budget, how it pays for costs of doing business.

I believe in saving for a rainy day, but, wouldn't, say, $8billion be enough? In which case a full 1.5 billion dollars could be used, perhaps, to more aggressively grow the company's list of products and services. Or would that just be nuts?

What would you guys suggest Apple do with this tidy sum?

Back to the original question:
Buy a game company and promote game development on and for the Mac. There are types of games that I think are made for computer gaming as opposed to console gaming. Before Bootcamp, how many Mac users had a 'gaming PC'? Games that do just fine with a keyboard and mouse instead of a gamepad. RPGs, RTSs, and many sims (basically anything that has an assload of onscreen menus to navigate through). Of course, FPSs are always popular. This is purely selfish, of course. I want to play Oblivion, Spore and Fable 2 (when they're released) on my Mac without bootcamp.
Maybe buy Lionhead... oh wait, MIcrosoft already snapped them up.

Chuckit · Aug 26, 2006, 04:35 PM

I really doubt they're keeping it all in cash.

turtle777 · Aug 26, 2006, 04:36 PM

Originally Posted by Chuckit

I really doubt they're keeping it all in cash.

So what if it is bonds, savings, or whatever. Still not really investing.

Apple is not in the business of investing in securities. Otherwise, Apple would be a mutual fund.

-t

Dork. · Aug 26, 2006, 04:54 PM

"Cash" is a generic term for actual money as well as low-risk, short-term investments. Basically, stuff that can be turned into something that someone else will accept as payment within a few months if the need arises.

Reinvesting profits in the business does not mean hoarding cash, it means expanding your business to generate more profit than you could get by letting some money manager invest it for income. Please don't misinterpret me: I'm not saying that Apple is not a good stock to buy because of this. In fact, I originally bought into Apple back when it's stock price was only $1 or $2 more than its cash per share because I liked its' bank account. But if you're looking at Apple's business, you might be wondering why a creative company like Apple can't find a better thing to do with that cash then let it sit in an account.

turtle777 · Aug 26, 2006, 04:59 PM

Originally Posted by Dork.

But if you're looking at Apple's business, you might be wondering why a creative company like Apple can't find a better thing to do with that cash then let it sit in an account.

I fully agree with that statement.

But don't forget one thing: any additional activity that Apple would undertake had to bring in more Sales. You can not just spend the cash w/o hitting the bottom-line (=profit). So investing it is not getting some more developers. That would have more impact on profit than on cash.

-t

smacintush · Aug 26, 2006, 05:32 PM

It's not like they have been coasting here. They continue to develop new stuff and improve the old stuff all the time. Look at what they have accomplished in the last 4 or 5 years. So what's the problem?

Salty · Aug 26, 2006, 06:08 PM

I'd say they should use it to merge with Adobe... but that's just me...

awcopus · Aug 26, 2006, 06:43 PM

Originally Posted by smacintush

It's not like they have been coasting here. They continue to develop new stuff and improve the old stuff all the time. Look at what they have accomplished in the last 4 or 5 years. So what's the problem?

No problems, per se. When I saw the number I sort of did a double take because the number is so huge. And I began to wonder about the kinds of breakout products Apple might be able to create if it used some of this amount as capital instead of basically growing it.

I love Apple's current lineup and I'd hate to see them do something reckless that might jeopardize the company's existence. But... if Apple said "9 billion dollars in cash is enough for us"... what might Apple do with 500 million dollars that they're not doing today? It's hard for me to believe that a company as creative and market savvy as Apple wouldn't be able to produce some really great, profitable products above and beyond what they're offering already with an additional 500 million dollars in capital.

What is that $500,000,000.00 doing for Apple now that's superior to using it as capital? I guess it's earning Apple $25 million a year at 5% (just a random percentage I picked). What is the likelihood that Apple could get more value out of that $500million with new product(s) that their current resources are insufficient to produce.

Cadaver · Aug 26, 2006, 10:13 PM

Originally Posted by mitchell_pgh

Why are you miffed? Have they EVER payed out dividends?

Yes, they have. I remember back when I was a teenager, I had a few shares of Apple stock and I used to get checks for between 5 - 15¢ every few months.

SSharon · Aug 26, 2006, 10:21 PM

Originally Posted by Cadaver

Yes, they have. I remember back when I was a teenager, I had a few shares of Apple stock and I used to get checks for between 5 - 15¢ every few months.

They should have just mailed you a stamp.

Cadaver · Aug 26, 2006, 10:35 PM

Originally Posted by SSharon

They should have just mailed you a stamp.

Yeah. This was back in '82-'84 ish.

Aug 26, 2006, 11:07 PM

Originally Posted by besson3c

Invest in R&D to run Windows applications in an OS X window (without having to own a copy of Windows),

This would help grow Apple in a hurry

Yeah, because that did great things for OS/2

Big Mac · Aug 26, 2006, 11:34 PM

Originally Posted by what_the_heck

Sorry, but cash != profit.

I never said it did. What I did imply was that the interest on Apple's cash pile is a major part of its earnings. If you don't understand that, then you're the one who needs a condescending lecture on corporate financing.

turtle777 · Aug 26, 2006, 11:46 PM

Originally Posted by Big Mac

I never said it did. What I did imply was that the interest on Apple's cash pile is a major part of its earnings. If you don't understand that, then you're the one who needs a condescending lecture on corporate financing.

I don't need a lecture on corporate financing, thank you very much

How do you know that Apple's cash pile is a major part of its earnings ?

At any rate, if Apple can't beat the interest they get on cash by doing what they are doing best, they should switch to be a mutual fund. I do hope they earn at least their cost of capital (EVA ring a bell ?), because with short-term invested cash, that's gonna be hard to do.

-t

Spliffdaddy · Aug 27, 2006, 01:19 AM

If I had $9.5 billion in cash, I could turn it into $19 billion within a year.

Does that make me smarter than Apple?

spacefreak · Aug 27, 2006, 01:47 AM

Apple should pay for health insurance for all of it's sweatshop workers.

Chuckit · Aug 27, 2006, 02:19 AM

Originally Posted by Spliffdaddy

If I had $9.5 billion in cash, I could turn it into $19 billion within a year.

Does that make me smarter than Apple?

Smarter or more overconfident. It's difficult to decide which since I don't have a spare $9.5 billion to spot you and see.

Big Mac · Aug 27, 2006, 03:54 AM

Originally Posted by Spliffdaddy

If I had $9.5 billion in cash, I could turn it into $19 billion within a year.

Does that make me smarter than Apple?

I assume you'd place $9.5B on black.

turtle777 · Aug 27, 2006, 10:59 AM

Originally Posted by Spliffdaddy

If I had $9.5 billion in cash, I could turn it into $19 billion within a year.
Does that make me smarter than Apple?

At what risk, though ?

And don't forget: your day has only 24 hours. How many houses can you buy, renovate and flip in a year ?
Not for 9.5 billion. And then you get into the problem of having to hire people, overseeing and managing stuff etc. It's not THAT easy !

-t

besson3c · Aug 27, 2006, 11:54 AM

Originally Posted by spacefreak

Apple should pay for health insurance for all of it's sweatshop workers.

It isn't? If so, yeah, this would be worthwhile. Apple already has gotten some negative attention for not being green too.

turtle777 · Aug 27, 2006, 12:57 PM

Originally Posted by spacefreak

Apple should pay for health insurance for all of it's sweatshop workers.

Would you demand the same from Wal-Mart ?
You know that their prices would double...

-t

turtle777 · Aug 27, 2006, 12:59 PM

Originally Posted by besson3c

It isn't? If so, yeah, this would be worthwhile. Apple already has gotten some negative attention for not being green too.

Worthwhile ?

Not really. If Apple (or any other American company at that) had to employ Chinese (or other Asian) workers at similar conditions as in the US, prices would go up.

And why put up the American standard anyways ?
From a European perspective, you could argue that many US companies offer sweat-shop like conditions in the US. So by whose standards should we play ?

-t