Ironically, I'm both. I owned a business, and now I work on the Street. Not that that really matters. You believe in the Kool-Aid. I believe in reality that any business can fail at any point, no matter how great the vision is. Which is what Apple believes as well, which is why they have a nest egg of 11 billion in cash sitting in the bank.
I'm going to have to interject in this exchange to ask exactly what you would expect Apple to do aside from keeping the cash they've earned? Obviously they could invest the cash to diversify their operations into other market segments, which is really the only other thing a company generally does with their cash, aside from R&D, advertising, etc.
So since you are stating that Apple is holding 11 billion in cash due to concerns about market saturation (this is what you are implying, and you did just paint yourself into this corner), let's see if we can come up with some more logical reasons why a company would keep money on hand, shall we?
1) Apple expects an upside in iPhone sales, and needs extensive cash on hand to buy bulk (and therefore more affordable) purchases of flash memory. While that wouldn't account for 11 billion obviously, that would be a *reason* for having cash on hand--for future purchases.
2) Apple doesn't *need* to spend 11 billion to diversify their market because they have enough in-house R&D, creativity, and marketing talent to go into new segments as they are identified, without the need to purchase companies and add the talent to the company. What you are really stating is that any company that has no fear of market saturation spends all of their money to build a bigger company, make purchases to diversify their company and the markets it is involved in.
What's a company that spent tons of money to buy into new market segments by buying other companies? Ford Motor Company, that's who. Now here's the thing about buying companies to get into new market segments. That's expensive, and the company you purchase had better be successful in their market segment, and it had better mesh well with your own market. It had also better be a *neccessary* purchase, which I'll go back to in a bit.
The point is, a lot of those covering Ford state Ford put all of it's eggs into the SUV market, and gas prices, and blah blah blah. There's partial truth. Fact:
Ford spent way too much money on the companies they purchased, and they built a mamoth company with so many markets in the car industry, they could not build a successful central management team that could run all of this. And those companies that were run by *individual* management teams could not success on their own. So Ford could not be run as one cohesive company, nor as seperate companies run unilaterally, where the parts make up the sum.
3) It is *very* possible, and in fact my dream, that Apple will become successful enough to use their stockpile of money to directly challenge Microsoft in the corporate segment, which competing business software, a better OS, better hardware, better or non-existant licensing agreements (where Microsoft is really vulnerable, and will be their downfall), but it is important to not *why* that should not be the path they should take now, and may *never* be the path they should take, and merely a dream on my part.
You see, Apple is really pretty self-sufficient. They have the talent, and the ability to build new market segments within the consumer and corporate technology market. If there is a need for an iPod that also plays movies, they can make it. If they need a phone that also works as an iPod and has a bigger screen for movies, they can make it (and do much more, clearly). If there is a need for easier, more simplified business software, they can make it. If there is a need for a laptop that is thin, and has a great battery life, just watch, they will be able to make it.
Apple has the ability to steer their own ship, and this is proving to be a *very* dangerous competitor. They don't need to spend 11 billion. That doesn't mean they are *afraid* to spend it. Life is like a game of chess, you only make neccessary moves, and you only make moves that have a *point* and a *plan*. Any decisions you make need to be forward-thinking and long-term. Why spend money when you don't need to?
By the way, for the individual who stated Microsoft makes 50 billion per year in profits, it's very fascinating when people overstate how many this company makes. They made an amazing $14 billion last year, and that's just incredible. With that said, one of the big reasons people do this is because they percieve Microsoft to be invincible, and really the ultimate in profitability.
There is no doubt Microsoft is a behemoth, but they have potential to be one of the great lessons of business. Their business model has been to build kind of a large platform with suppliers cooperating to make a whole product. As with any business model, it has its advantages and its *disadvantages*.
I think it needs to be understood that while this platform business model was a success, that doesn't make it the *best* business model, and ultimately, it could only be the *best* business model for the time it was implemented, during the rise of PCs. As computers become a commodity, the consumer's viewpoint of computers is going to change. They will be willing to spend less, and there will be a need to bring down costs. The advantage Apple has is that while the *general* public may view things that way, there will always be a demand for better quality, and there is a willingness to pay for that. Believe it or not, Apple can also cut the cost of its product to compete, by the way. The problem is, Microsoft depends on their licenses. They need that money to have revenue. They don't make money off their consumer electronics, they LOSE money. No licensing, no Microsoft.
As computers become a commodity, what is going to happen to the general consumer's willingness to have tied-in costs to an operating system such as Microsoft's. Couple that with Microsoft's inability to innovate, and the fact that the supply method they use to ship their software will be challenged, and Microsoft is extremely vulnerable, and the end of $14 billion/year profits could be in the forseeable future. Sure it can take awhile for an elephant to fall, but fall it may.
When it happens, it's going to be because Microsoft is their own worst enemy, and the business model of dependance on licensing fees is no longer tolerated. Businesses are already challenging this arrangement, and so will others. Companies like Apple will be able to leverage this vulnerability and offer an alternative to those who will listen.
I've said this 4 years ago, and I'll say this again, there are forces that will challenge Microsoft, and it is possible in the end that Steve Jobs has the best business model, and not Bill Gates. It is quite possible that Microsoft's biggest assest was that they were in the right place at the right time, and that asset will only get you so far in the end. It's time for us to "Think Different", and throw old assumptions we were taught during the times of a bubble out the door.