Gartner: Apple At 6.1% U.S. Market Share, Up 1.5% From Last Year

[dontmatter]

Of course the point is, they aren't doing these or any or things with the money. It's been accumulating steadily for nearly ten years, and is really building up quickly now. I don't think any of us "grumpy" stockholders would be complaining if Apple was doing something worthwhile with it. Dividends, BTW, are a message from a company to stockholders that they don't have to sell to realize a benefit from owning shares. They are good for improving the long term stability of the stock.

I would love for apple to use 10 billion to innovate fantastically, enter new markets, go green, and more. I don't think it's going to happen- the purpose of 10 billion in the bank for apple is having 10 billion in the bank. Apple's expertise is in taking big risks (at least large for a compnay of their size), a good number of which pay off very, very well. But people- investors, CEOs, are risk adverse, and a huge pile of cash to operate on, so big they can operate and continue to invest in risky and exciting products, mitigates their risks. For apple, a pile of money might actually be worth more than investing that money at a high rate of return.

 

[Edge100]

Success in not necessarily about accumulating cash. Far from it, in fact. A company that sits on huge piles of cash and does nothing with it, is not seen as managing their capital resources well. Many if not most financial analysts would argue that if the company is not investing their cash in future growth (and Apple decidedly is not), then they should give at least some of it back to the stockholders.

In addition to what I said above, dividends are a signal from the company that they're feeling secure about the future. Dividends, even token dividends, are a sign of maturity and stability. Hoarding cash is not.

I agree, the huge stockpile of cash is an issue. That's money that should be working for Apple, and IMHO that should be in the form of purchasing other companies that will strengthen Apple in key areas, like music distribution and/or audio/video/graphics production.

And I also agree with you on the dividend issue. A small investment of that money into dividends may have the exact effect as you describe. On the other hand, putting that money into new products/enhancing existing products, may do more for Apple's long-term health vs. providing a dividend to improve the 'optics' of the company in shareholders' eyes.

 

[IJ Reilly]

I would love for apple to use 10 billion to innovate fantastically, enter new markets, go green, and more. I don't think it's going to happen- the purpose of 10 billion in the bank for apple is having 10 billion in the bank. Apple's expertise is in taking big risks (at least large for a compnay of their size), a good number of which pay off very, very well. But people- investors, CEOs, are risk adverse, and a huge pile of cash to operate on, so big they can operate and continue to invest in risky and exciting products, mitigates their risks. For apple, a pile of money might actually be worth more than investing that money at a high rate of return.

Huge cash hordes are only good for three things, in order of desirability: reinvesting in future growth (which is why it's called capitalism); returning to the stockholders in the form of dividends; or holding for a rainy day. The last reason, which you seem to think is the best one, should be seen by investors as a signal that the company lacks confidence in the future.

Actually, there's a fourth use of excess cash: a stock buy-back. Apple isn't doing this with the money currently, either.

I agree, the huge stockpile of cash is an issue. That's money that should be working for Apple, and IMHO that should be in the form of purchasing other companies that will strengthen Apple in key areas, like music distribution and/or audio/video/graphics production.

And I also agree with you on the dividend issue. A small investment of that money into dividends may have the exact effect as you describe. On the other hand, putting that money into new products/enhancing existing products, may do more for Apple's long-term health vs. providing a dividend to improve the 'optics' of the company in shareholders' eyes.

New investments in technologies and products would be by far the best use of the money. With Apple's cash, they could set up a research arm similar to Xerox PARC or the old Bell Labs and place themselves in the forefront of new technology for a long time. Instead, they seem to be notably stingy with their R&D dollars. Purchasing technologies by buying out smaller companies could also be advantageous, and Apple does do some of this, but not much -- not enough to make even a dent in their cash hoard.

 

[Edge100]

New investments in technologies and products would be by far the best use of the money. With Apple's cash, they could set up a research arm similar to Xerox PARC or the old Bell Labs and place themselves in the forefront of new technology for a long time. Instead, they seem to be notably stingy with their R&D dollars. Purchasing technologies by buying out smaller companies could also be advantageous, and Apple does do some of this, but not much -- not enough to make even a dent in their cash hoard.

I'm not so sure that Apple needs to re-invent the wheel all the time. It seems to me that Apple is (historically) pretty good at introducing new features, long before other PC manufacturers.

While I agree that a dedicated research arm could, in the long term, create a lot of great, innovative products and technologies, I think they have the possibility, if not properly run, to become cash cows that produce little or nothing of any profit-making value. Researchers have a way of remaining focused on research, not profits.

I still think that buying up other small, but influential companies such as Digidesign would be a great thing for Apple. Think of all the products that Apple currently sells that were bought, rather than developed in-house:

iTunes
Final Cut Pro
Shake
Logic (and, by extension, Garageband)
LiveType

Heck, even MacOS X was, in many ways, 'bought' rather than developed by Apple.