Apple's $15 Billion Cash Reserve

[aaarrrgggh]

Oblig.

One word: m-o-n-o-r-a-i-l !

Maybe connect their two campuses...

 

[IJ Reilly]

IMHO, the delays show a management error and it looks like Apple is being somewhat caught by surprise with their growth. What's even more interesting is that many companies don't make it over this growth period. Or they get so big so fast and quit doing the things that made them successful when they were small, a la Innovators Dilemma.

This is my main concern about Apple going forward. Rapid growth can be even more difficult to manage than contraction. They seem to be doing okay so far, but signs aren't 100% positive.

And is money that makes Apple itself a juicy takeover target.

Possibly, but usually only when the stock price is depressed. You really need to add the cash to the market cap and other assets to get a valuation in a takeover. I can't think of many companies who could afford Apple, with all of this summed. Cash can also be used defensively in a hostile takeover situation.

But this just got me thinking of ten years ago, when Apple was a takeover candidate. The top suitor was Sun. Yes, we can certainly laugh about that now!

 

[aaarrrgggh]

Same issue as MSFT

Steve Jobs doesn't want to pay taxes on all the dividends that disposing of the cash that route would generate. Same problem as Bill Gates with MSFT before investor revolt.

Likewise, Sticking it to the Man (NBC/Universal, et al) would similarly impact Jobs interests in Disney.

needs to develop a real vision for video, given the constraints they have thus far. Lobbying fair use on the video front might actually get them considerable good-will, while helping them to release products that consumers really want and that change the way people interact with their TVs. They need to balance this with other vested interests.

I just pray to Buddha that they don't try and get into advertising... we need someone to balance out the other forces in the market. Can you imagine what it would be like if you had to listen to a commercial after every five songs on your iPod?!!

 

[ajhill]

New Idea: Apple Studios

After all the crap Apple has had to put up with from the Music, TV and Movie industries, why not start your own Studio?

Produce and distribute Music, TV and Movies. Bribe big names to jump ship and join Apple, and the rest will follow. When Beyonce, Sting, Justin Timberlake, JJ Abrams, Peter Jackson, Michael Bay and Kevin Smith are all making and distributing their goods through Apple Studios and iTunes, you can bet others will follow.

Cash will start flowing like water, and though you'll piss a few companies off initially, they won't have any choice but to stick with iTunes because that's where the stars are.

Wow, this idea makes so much sense its scary. They could create a successful Studio by simply paying artists a bigger share of the profit. Apple is already use to just getting pennies on the dollar for selling content on iTunes. Think what they could do if they kept 50% and gave the artists the other 50% ???

You need only look at Madonna's recent deal with a Concert promotions company to know that the music industry is on the verge of a MAJOR change. TV and Movies too. The only way to combat piracy is to make legally purchasing the content too convenient and too cheap for people want to spend the time to pirate the content. In ten years the Madonna contract will be looked back on as the turning point.

Congrats, chameleon on a truely great idea in a thread with several good ideas.

Al

 

[ajhill]

The idea of Apple buying Netflix brings up a number of questions. Since Apple's relationship with Hollywood is somewhat strained, I can't imagine it would get any better by buying Netflix.

Netflix has lately been promoting a lot of Indie films but in a very poor way. There's also Jaman but they don't seem to be getting very far.

The idea of Apple becoming a major film/music promoter is appealing but filled with major pitfalls.

I'm sure Steve has some sort of plan lined up, sitting on that much money isn't healthy but I also don't see him paying out dividends anytime soon.

Whatever he does with his stash of moolah, it'll be interesting, that's for sure.

Steve Jobs has experience running a studio. Didn't he run Pixar for a few years before he sold it to Disney?

Clearly a studio that paid artists a bigger share of the money and relied exclusively on the digital world for distribution would be interesting. But why would Steve go out and start a studio from scratch? He's on the board of Disney already. Now, if he could only talk an old school studio like Disney into cutting a bigger check to the artist in exchange for exclusivity to top talent.

It's kinda like the system that Hollywood abandoned in the late 1950s. You remember it better as the "Studio System". It was a Monopolistic Giant until Congress broke it up and killed it. With the internet being so new, and poorly understood by you typical congressman, "The internet is just a series of tubes..." It would be decades before Congress discovered that Apple/Disney had brought back the Omni powerful Studio system. And by then I'd be retired on my AAPL shares...

Al

 

[aLoC]

Windows

They should use the money to buy Windows from Microsoft and discontinue it.

 

[jouster]

Steve Jobs has experience running a studio. Didn't he run Pixar for a few years before he sold it to Disney?
Al

Yes, but he was pretty hands-off....or at least the Pixar guys managed to dodge him when they had to.

They should use the money to buy Windows from Microsoft and discontinue it.

Yeah, someone already did that one.

 

[yoyon8]

Apple isn't a financial investment company, they are a technology and consumer products company. Any money that isn't working towards growing their business is money that isn't working as hard as it should. I'm not arguing that Apple should be buying companies left and right, or at all -- only that cash flow investments are not doing much if anything to help them ship new products.

Here's an example. This year Apple was forced to announce the delay of Leopard for several months because the iPhone launch got in the way. A company with $15 billion in cash reserves can't finish a product on time? Need I remind you, this is the kind of excuse that Microsoft uses constantly.

No, sitting no huge piles of cash and still being unable to meet product deadlines is not a sign of good management practices. It's a sign that financial resources could probably be better allocated.

Ahh accusing Apple of being a bad administrator in this tread? Go figure.

 

[Iroganai]

Wow, this idea makes so much sense its scary. They could create a successful Studio by simply paying artists a bigger share of the profit. Apple is already use to just getting pennies on the dollar for selling content on iTunes. Think what they could do if they kept 50% and gave the artists the other 50% ???

I can't disagree more. Look at Sony, which was so cool years ago before they acquired some of the media companies.
After they got the music and movie companies in their group, the Walkman slowly died because of its excessive DRM, which they put on it because they wanted to protect their own music from piracy. In a sense the music business killed the Walkman business. I don't like to see it happen to Apple.

 

[glowingstar]

please! apple!! acquire MEEEEEE!!!!

 

[yoyon8]

Apple (Steve & co), don't listen.

Continue as you are doing, you are doing great. I love what you are doing to my stock, Love my iPhone, My MacBook Pro, my iMac and my Apple TV (even if it does not have much use yet). I love all your applications, they are so intuitive and so well designed. I love your style ad how you are so unique and successful.

Please do not distract yourself and just continue to create marvelous products that add meaning to my life. Continue to use the revenues as wise as you have so far.

All I can say is. Thank you apple. Love you since the first mac in 1984. (Still have it, and works).

 

[megfilmworks]

I can't disagree more. Look at Sony, which was so cool years ago before they acquired some of the media companies.
After they got the music and movie companies in their group, the Walkman slowly died because of its excessive DRM, which they put on it because they wanted to protect their own music from piracy. In a sense the music business killed the Walkman business. I don't like to see it happen to Apple.

The Walkman was not killed by the music business. It just became obsolete.
Sony bought CBS Records in 1988.
The walkman had no DRM. It was a cassette player.
You could play your own mix tapes or cassettes from the labels.
And if you are talking about the mp3 Walkman, that's not a Walkman, it's a dead man rolling over in its grave.

 

[CaptainHaddock]

Am I the only one who thinks Apple should keep doing what they're doing, and start paying juicy dividends to their stockholders?

Sharing a company's profits is, after all, the main reason an investor wants to own a portion of a company in the first place.

 

[rtdunham]

just improve current operations

It strikes me as a rare thing for a company to be that far in the black. I'd personally love some serious reinvestment in R&D, especially after the Leopard/iPhone debacle this year. It's a mixed blessing for a company to have that much cash on hand, although it does, as others have pointed out, mean that Apple can literally throw money at certain problems and make them go away or leverage its cash on hand to corner parts of the processor market.[QUOTE/]

The surplus makes it harder to accept shortcomings in the company's products: Consider dot mac (outages, limited storage and features for the price, add your own complaints); a new iMovie that seems to some people to be a step backwards; problems with Leopard that have various parts of the Mac community waiting for an upgrade; an iMail app that could be significantly improved with just some small fixes, and an iCal app that needs major work to be be more than an embarrassment. And those are only some of the software problems: Other posters can itemize hardware products that could be made much better with focused efforts, which, yes, would require some investment. Knowing of the company's surplus of resources makes it even harder to tolerate those shortfalls. imho.

 

[flir67]

Sweet! A Steve Jobs clothing label!

good idea but it most likely be mixed up with SJ on the market. (sean john) which is already raking in billions.

 

[queshy]

They should spend $14 B improving their at times pathetic quality control.

The remaining $1 B should be donated to me for giving them this great idea

 

[Jim Campbell]

Yes, Adobe is more than 15B, but they could cover the remainder with stock or loans. Having Photoshop under their control gives them enormous leverage in the computer business. Imagine if the PC version of Photoshop was always 1 year behind the Mac version? There's a pretty big incentive to leave windows for anyone in the creative industry.

Two things ...

1) I said a controlling share in Adobe, which wouldn't require them to buy the company outright.

2) The reason I suggested it was because, back in the day, it always used to feel like Apple had a preferential relationship with Adobe - their software used to feel like it belonged on the Mac, and the Windows versions were slightly grudging ports after the fact.

These days, not so much.

So ... it would seem to me that a controlling interest in Adobe would shore up Apple's relationship with creative professionals to a point where it was rock solid. To me, that would be a fantastic foundation as a business for Apple to pursue its newly emerging markets and to consolidate the inroads it's made into the home market.

Obviously, if I knew what I was talking about, I'd be running a FTSE-100 tech company and not posting to a discussion forum ... but as a strategy, this makes sense to me.

Cheers!

Jim

 

[JonasLondon]

I would like to see Apple continue pumping their $ into R + D. This is what keeps them innovative and profitable, IMHO. If they start paying dividends, I would worry that they have run out of ideas.

Fully agree. Pump 250 million each into Aperture "3.0", Final Cut Studio (it's already awesome, keep it way ahead of competition!) and upgrade the specs on the Mac Pro's to make them the ultimate in desktop computers.

2008 is going to be very exciting, product wise methinks!

 

[Padraig]

I agree! A company sitting on lots of cash (and not investing in new products or whatever the company does) is a huge red flag.

As far as debt is concerned, some debt is good - especially with rates as low as they are at the moment. Why use you're own money on projects when you can leverage someone else's at a low cost.

Yes, this is true. Microsoft only started paying dividends to get money of the balance sheet for tax implications. There was nothing else they could really do, or purchase with it. Likewise, financing through debt can sometimes be argued to be more attractive than equity.

 

[IJ Reilly]

Yes, this is true. Microsoft only started paying dividends to get money of the balance sheet for tax implications. There was nothing else they could really do, or purchase with it. Likewise, financing through debt can sometimes be argued to be more attractive than equity.

Microsoft was under pressure from their stockholders to part with some of their cash hoard, since the stock price had gone nowhere for years. Many of these stockholders were also employees. Bill Gates alone netted nearly $100 million when the dividend was instated. The move was also abetted by Congress, which lowered the tax rate on dividends.

 

[JobsRules]

I think they should really go out there with a product that would not only land them billiosn but get the Apple brand as more than just cool tech stuff to lust over.

I say they make a mainstream 400mile range electric car and start buying Tesla Motors http://www.teslamotors.com/ who've already proved you can make a high-performance 245mile range car.

The Tesla is based on a Lotus Petrol car. If apple funded a ground-up electric car that re-wrote the rule book they could really define the next stage of their history.

 

[SiliconAddict]

And yet we are paying a premium on the iPod. And please guys don't suggest otherwise. I understand that a company needs to make a profit but I would love for once to see Apple bring that profit down to a level that isn't insane. At 15 Billion the whole R&D crap goes right out the window.

Bolded for relevance and less rant...
PS- Apple should go after that 700Mhz spectrum chunk. Imagine if they owned that nation wide. Welcome to the .Mac wireless network. At $99 a year....heck jack that up to $200 and I'd pay for that if I could link my MBP back to my desktop from across the city. Yes you would need infrastructure, but I can bet you a years salary that there would be plenty of hardware vendors chomping at the bit to be the exclusive manufacturer for whoever wins that spectrum. Cisco and Apple anyone? Even 7 billion could win that chunk. Leaving them a sizable nest egg.

 

[applejilted]

Stop emitting all those stock options !!!!!

One thing Apple should definitely do is stop emitting stock options to its executives .... these are truly obscene .... Apple execs are becoming extravagantly rich with these options,,,, pay them a fair wage and that's it ... that would also preclude the need to buy back shares and would hence enhance shareholder value ..... THE TRULY OBSCENE STOCK OPTIONS MUST END !!!! Apple execs are like pigs at the trough !!!!

 

[roocka]

RE: Apple buying out TIVO

So I have been thinking about this a lot. Would this sync to your iPod so that any shows that you have recorded on your new Apple-tv would be available on your i-Pod? This would make your i-Pod a mobile TIVO player and jukebox. I think that would be awesome. It would also ensure that people would always want to upgrade their i-Pod to the latest and greatest hard drive size available so as to fix more shows.

When you own a TIVO or DVR, you don't own the shows that are on the DVR. You just own the harddrive allocation. At some point you will want to delete the show in order to accommodate new shows. If you had a 500 GB DVR, you could have so many shows it literally wouldn't matter.. If you had a 300GB iPOD, it also wouldn't matter.

I think this would kick ass...

I want to know what you think..

the Rook.

 

[SiliconAddict]

It's obvious. Apple Inc. is saving up billions of dollars to one day (in the not too distant future) purchase Microsoft and rid the world of a terrible disease that has plagued us for nearly 3 decades.

Another 5-6 years ought to just about do it...

actually MS could buy Apple outright and still have enough to buy a major studio or 2. 40 billion in cash assets gets you a lot these days.