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  (Source: Apple Gazette)
The company's $40B USD cash stockpile allows the company to "write a check for" "big, bold things"

Apple is currently sitting on a vast pile of cash -- an estimated $40B USD -- equal to about one fifth of its market capitalization.  That's a rarity in the business world to say the least; in fact just about no company in tech industry, other than perhaps Microsoft has that much cash sitting around.

In a recent annual meeting, Apple Chief Executive Officer Steven P. Jobs discussed Apple's fiscal fatness and why he feels it's a good thing.  Sporting his traditional  trademark blue jeans and black mock turtleneck top ensemble, the Cupertino head man says that Apple is unlikely to commit to dividends or stock buybacks that would surely please the holders of Apple stock, which currently is trading at over $200/share on an average daily volume of 25M shares traded daily.

Instead, the cash allows for big moves -- like the iPad.  He states, "We're a large enough business now, that in order to really move the needle, we've got to be thinking pretty bold, pretty large. And who knows what's around the next corner.  When we think about big, bold things, we know that if we needed to acquire something, a piece of the puzzle, to make something big and bold a reality, we could write a check for it."

Some might interpret his last sentence to refer to acquisitions, but Jobs primarily is referring to internal expenditures.  Apple's current rosy financial situation came thanks to enormous risky investments in super-products like the iPod and iPhone that when they first debuted were unlike anything else seen on the market.

Apple also specializes in small acquisitions, typically to gain experience in a field it's unfamiliar with.  Describes Broadpoint Amtech analyst Brian Marshall, "Their historical use of cash has worked obviously very well.  Doing small deals, buying private companies with 100 to 150 engineers and integrating them with the Cupertino establishment and then taking their technology and making it pervasive throughout the organization."

The outlook for Apple is rather promising for the next year.  The company looks to grow and expand in the key Chinese market, opening 25 new stores there next year.  Some analysts also think that despite some public jokes and criticism about the company's new iPad tablet, that the tablet-cum-e-book reader may sell between 2 million and 5 million units.  Next month will give the first glimpse of the public's interest when the Wi-Fi version of the iPad debuts.  Some may wait until April, when the 3G version lands.

Despite its tremendous cash pile and popular products, Apple does face some key risks.  Its soaring popularity and brand image have come at the cost of increased scrutiny, and recent quality issues have soured Apple's image for some.  Apple also faces difficulties with it's tradition of intense secrecy, a tradition that reportedly leads it to maintain an army of secret agents that spy on its workforce.  The company's secretive nature recently came under fire when a worker at one of Apple's Chinese suppliers died under suspicious circumstances after losing an iPhone prototype; and a recent incident in which security guards at a parts supplier beat a foreign correspondent didn't help things much either.

Probably the biggest threat it faces, though, is maintaining the momentum on its products.  When the iPhone and unibody MacBook Pro debuted they had hardware on par with their top of the line competitors and they enjoyed sleeker packaging -- keys to justifying the devices' price premium.  Now several phones beat the iPhone's hardware in various areas (and they have Flash, something Apple feels threatened by and refuses to support).  Meanwhile, the MacBook Pro's hardware, particularly its CPU and GPU selection, is looking increasingly stale.  That said, there will probably be a MacBook refresh coming very soon and another iPhone refresh this summer that will help remedy those shortcomings.



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No reason to...
By UncleRufus on 2/26/2010 11:47:36 AM , Rating: 2
No reason to share the 40 Billion with shareholders, as the stock is up 100% over the last year.




RE: No reason to...
By Suntan on 2/26/2010 12:02:33 PM , Rating: 2
That is silly logic. If you bought the stock one and a half years ago, your investment would look as if it has done pretty much nothing.

Invest in Apple if you think that Jobs can do no wrong with his personal agenda, because it has been clear for a long time that this is the *only* thing driving him. He cares little for his investors and their wishes.

-Suntan


RE: No reason to...
By kmmatney on 2/26/2010 12:18:31 PM , Rating: 2
And he shouldn't. He should just care about making the best products for his customers.


RE: No reason to...
By Suntan on 2/26/2010 12:55:19 PM , Rating: 3
No, as he works for a "public" company, his legal obligations are to his shareholders first.

The fact that doing right by your customers is usually in line with what your shareholders want still doesn't change the fact that, legally, his shareholders come first.

-Suntan


RE: No reason to...
By cmdrdredd on 2/26/2010 6:28:01 PM , Rating: 3
quote:
And he shouldn't. He should just care about making the best products for his customers.


And the latest Macs and various other devices have had more problems than the competition and other options in the market.


RE: No reason to...
By porkpie on 2/26/2010 10:41:15 PM , Rating: 2
Really? The latest PC Magazine reliability survey shows Apple leading on desktops, mp3 players, and cell phones:

http://www.pcmag.com/category2/0,2806,1626131,00.a...

But I guess sensationalist hearsay beats out facts any day of the week.


RE: No reason to...
By dark matter on 3/1/2010 7:18:17 AM , Rating: 2
And subscribers of a PC magazine completely reflect the whole of iPhone users don't they.


RE: No reason to...
By porkpie on 2/26/2010 12:19:41 PM , Rating: 2
Jobs is doing what his shareholder's want...and he's also not doing anything unusual in the tech world. You don't stock in a tech company for dividends; you buy it in the hopes the company will grow in value.


RE: No reason to...
By MadMan007 on 2/26/2010 12:42:34 PM , Rating: 2
It's not quite so black and white. There are quite a few mature or market dominant tech companies that have dividends. Intel, MS, HPQ, IBM, but for the most part tech companies don't have dividends it's true. It doesn't mean that tech = no dividends either though.


RE: No reason to...
By Suntan on 2/26/2010 1:03:06 PM , Rating: 2
You're confusing a "growth" company with a "tech" company.

One is a market strategy, the other is a market sector. The line has just been blurred in the last decade or so because a large majority of the "Fancy Tech Companies" that everyone loved to talk about and had such a wild tear in their stock value never made any real money to distribute as dividends.

In any case, all I said was that a person should only invest in Apple if they believe that Job's personal direction is the right way to go. Do you see anything wrong with that statement?

-Suntan


RE: No reason to...
By porkpie on 2/26/2010 1:21:00 PM , Rating: 2
"You're confusing a "growth" company with a "tech" company"

No, I'm merely not adding extraneous detail. The tech sector has been the primary growth sector of the US stock market for many decades now.

" The line has just been blurred in the last decade or so because..."

The trend to replace dividend payouts with market cap growth actually began in the late 1960s.

"all I said was that a person should only invest in Apple if they believe that Job's personal direction is the right way to go...."

Jobs owns a small fraction of Apple's stock. If Apple's shareholders truly disagreed with his direction, he'd be out at the next shareholder meeting. But I think every shareholder remembers quite well what happened to Apple when Scully and Co. threw Jobs out on his ear.


RE: No reason to...
By Suntan on 2/26/2010 1:45:58 PM , Rating: 2
So what you are really saying is that, in fact, you do not see anything wrong with that statement… you just had to add a lot of words that really didn’t relate to anything you quoted before doing it, huh?

Have a good weekend brother.

-Suntan


RE: No reason to...
By porkpie on 2/26/2010 2:21:23 PM , Rating: 2
What I'm saying is that your statement that Jobs' actions run counter to the majority wishes of his shareholders is incorrect.


"The whole principle [of censorship] is wrong. It's like demanding that grown men live on skim milk because the baby can't have steak." -- Robert Heinlein














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