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
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
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
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,
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.
quote: I'll give you a better idea how much a billion is. If you spent $1B a day every day for the next 10 years, you still wouldn't equal the amount of money Obama is spending on the 2011 budget.
quote: To give you an idea how much 40 Billion is though...
quote: ...the shareholders buy into these firms not for a small cash return, but because they want the company to grow in value as much as possible.