It is not like they have it all sitting around in low yield checking account. Their last balance sheet showed $19B in Short Term Investments, and $89B in Long Term Investments. From their financial statements it is a little hard to tell how big of a return they are getting on those investments. From 2010 to 2011 they went from $25B to $55B in long term investments, after depositing $24B into investments that year. Back of the envelope shows a 24% return on long term investments over that year.
Having a hord of cash is a strategic advantage for Apple that allows them to enter into supplier agreements that others are not able to. This allows Apple to get high quality Flash, and displays at a good price that other companies can not. They can write multi-billion dollar checks to their suppliers to buy up their supply at a low cost.
Agree 100%. Apples liquidity allows them to do things nobody else can do. As things continue to sour with Samsung it is likely apple will have to finance the development, build out and ramp up of other suppliers with a fairly significant outlay of cash.
Apples huge cash pile is essentially a nuclear arsenal that can be aimed at Samsung and gives apple leverage. So while Samsung might know in some supplier areas they have the best product for apple, they can't threaten apple with it because apple has the resources to break away from Samsung as a supplier if they had to do it. It would be short term messy and very expensive but apple could pull it off. Which on the other hand would be a big issue for Samsung losing their largest customer.
Also as apple potential moves into new markets being able to quickly finance suppliers growth is a massive asset, especially in an already competitive market or more importantly an emerging one.
I see Microsoft and google making some huge investments that I think were not financially sound and I would much rather apple keep their flexibility for growth and smart opportunities (the 400-500 million dollar companies with cutting edge technology vs 12 billion dollar dinosaurs with lots of baggage) , keep the gun at samsungs head and invest in new opportunities.
The last few days I have really kept going back to the idea of apple having a video hosting service. At first thought I balk and believe it a mistake and outside their scope but then I think like google and amazon they have now built and continue to add a ton of data capability. As you grow that it simply becomes much easier to offer expanded data based services. Thinking about that and integration with their product lines and video recording as well as a disconnect from google and I could see apple going that route.
That being said to successfully do that , say buy an existing video hosting technology or companies and then expand it, would only take a tiny fraction of resources. Apple continues to expand iAds, they already sell massive amounts of music, which could tie in nicely with a video hosting service.
Anyways I feel diversification is one of the hardest obstacles for the largest company in the world or the smallest. Pursuing multiple routes with smart financial management means even if your batting average is lower you will end up growing the company effectively.
