To address an earlier point about Apple's cash hoard... Let's say I were to include them in a fair market valuation of Apple. I'd have to look at the different slices differently, because none of that cash is counted as working capital. So, if I were to, how would I go about it?
As a business analyst, I have to look at the different buckets differently. It's not $100 billion in liquid cash. Instead, we have:
1. $67.5b in long term investments.
2. $19.8b in short term investments.
3. $10.3b in cash and equivalents.
None of these buckets are likely to get spent on any operating activities. They're the result of retained earnings, i.e. after operating expenditures, R&D, property/plant/equip, etc. So they cannot be counted along with working capital in an operating performance analysis.
You're free, as a speculator, to apply whatever logic you want to finding what you think is fair market value, of course. But for anyone who wants to make a conservative M&A-style estimate of fair value, you have to look at the three buckets like this, at least on a very cursory glance:
Both Apple's long and short term investments are about 50% in corporate securities. It would be unlikely for their fund managers to consistently beat the S&P but assuming they matched the S&P's long term performance, the rate here would be around 9% on $40 billion. So add about $3.6b, or about $3.90 per share to the first year of a multi-year Discounted Cash Flow analysis, and discount subsequent years by the weighted average cost of capital (WACC).
The other 50% is mostly in fixed yields, commercial paper, etc. that might net them around 3%-ish after management expenses... or about a buck twenty ($1.20) a share in first year, and again discounted year over year using WACC from there.
Then you've got the $10b in cash and equivalents... this is going to yield next to nothing. So you might as well exclude this.
Any other items listed in Cash from Financing Activities in the Cash Flow Statement are purely irrelevant as they don't tell you as much about Apple's operating ability as they do how much Apple might offset shortfalls on the operating side with disposition of some liquid assets from time to time. Every company can do this to manipulate results, so it doesn't really tell us anything about Apple's value as a unique company with a strategic competitive advantage in the marketplace.
So what does this give us? It certainly doesn't put Apple within the ballpark of current market price. But like I said, if someone wants to take the riskier route of purchasing Apple at a premium rather than waiting to acquire them at a discount, that's their decision and their risk to take.
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The stock could be volatile tomorrow. Apple is announcing their decision on their cash balance half an hour before the market opens:
http://allthingsd.com/20120318/appl...ce-tomorrow-morning/?reflink=ATD_yahoo_ticker
Link points nowhere.
