Analysts Predict Apple Could Be Sitting on $170 Billion in Cash This Year
March 19, 2013 9:40 AM
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Some shareholders want cash returned as a dividend to investors
Apple continues to be incredibly successful in the technology market and one of the most valuable companies in the world. So far this year Apple is sitting on a cash stockpile that amounts to $137 billion. Some
Apple shareholders are upset that the company is sitting on that much cash
and isn't paying out dividends to shareholders.
Moody's Investors Services issued a report this week predicting that Apple’s cash stockpile could grow to as large as $170 billion by the end of 2013. That assumes that Apple doesn't change its philosophy towards dividends and stock buybacks. Apple has been under pressure from a hedge fund manager named David Einhorn and other major investors to return some of that cash to shareholders.
Apple has noted that it is in "active discussions" on returning some of that money to investors but no details were offered. Einhorn is currently
involved in the suit
against Apple that CEO Tim Cook has dubbed "a sideshow."
Moody's wrote, "Unless Apple changes its philosophy towards liquidity/shareholder returns by increasing its $10 billion annual common dividend, or if Apple increases it stock buyback program, we estimate Apple’s cash balances could increase by another $35 billion in 2013 and exceed $170 billion."
When it comes to cash reserves, Apple has roughly twice as much as its closest competitor. Microsoft was sitting on total cash reserves of $68.3 billion as of December 31, 2012. Google is slightly behind with $48.1 billion.
The only non-technology company in the top five biggest cash-rich companies in the United States was pharmaceutical giant Pfizer with $46.9 billion in cash taking the number four spot. Rounding out the top five is Cisco Systems with $46.4 billion in cash.
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RE: There is no "returning"!
3/19/2013 2:12:24 PM
> As stated, the money never belonged to share holders. A share holder agrees to the dividend rules when they purchased the stock. They can't cry foul now. They can also get out if they want, they'll come out in the black.
As stated incorrectly, yes. Let me put it to you this way. If the shareholders, the actual owners of Apple, don't own the assets, who does? There is no one else.
The Board sets the policies, including cash management and the decision to issue dividends, this is correct. But you must also note that they have a fiduciary responsibility to the shareholders. That doesn't mean bankrupt the company giving away 200B in cash this year. But when the company amasses more cash than it can possibly use, the best use is to return the excess to the shareholders. Their refusal to is a factor in the share price drop.
The truth is that Apple cannot make use of this much capital. They made their success by focusing on a very small set of products and doing them well. If they increased their R&D budget 10x, good things will not happen. They will instead become bloated and suffer the pains of failed products, the scourge of discount pricing and expand beyond their core competencies.
I think it's unlikely they can sustain these outsized profits. They've already lost their advantage in phones, and all the lawyers in the world won't protect the ipad forever. They will still be highly profitable, but not at the volume they enjoy today. The stock price will decrease to reflect that new reality when it happens. Meanwhile, the existing shareholders should enjoy some of the happy days.
RE: There is no "returning"!
3/19/2013 8:57:32 PM
You are not wrong, I agree in fact, I'm just pointing out that if the powers that be, in their fiduciary responsibility, feel the share holders are best served by the existence of this pile of cash, than they have every right to proceed this was.
Should a hedge fund manager sue Walmart if he doesn't like their decision to invest in time travel R&D?
"People Don't Respect Confidentiality in This Industry" -- Sony Computer Entertainment of America President and CEO Jack Tretton
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