How Apple Uses Its Cash to Keep Latest Technology for Themselves

[Lesser Evets]

As outsiders, we have no idea what is going on in the mind of the company's bosses, or in Steve Jobs' head, but there is a possibility this money is being saved and built to make a crushing move toward some form or independence in terms of production of materials. Or it can be used to conquer adjacent industries that play into Apple's future moves. Apple has created and filled a new computing market in the last few years; they have eyes on television/video steaming; they know there are expanding markets other companies aren't taking seriously at this point--I'm certain Apple is going for a big move within the next years, and it will have the possibility to expand the company and the company's impact of more than just the computing market.

For evidence, I point to the new building they are going to put in Cupertino.

 

[Optheduim]

hooray for capitalism

hooray for capitalism! they earned it! they should keep it, and they know what's best for the company to use as an investement to keep building us better & aweomse crap that i love so much.

imagine if americans actually build the products. the money'd be spent on us!!

oh well... oversized government & unions.
$ $ $ $

 

[KillerTree]

Apple should pay Blizzard to make an iOS exclusive multiplayer game.

 

[DaREdBaRoN]

hooray for capitalism! they earned it! they should keep it, and they know what's best for the company to use as an investement to keep building us better & aweomse crap that i love so much.

imagine if americans actually build the products. the money'd be spent on us!!

oh well... oversized government & unions.
$ $ $ $

Yeah! Americans should live at their jobs and work 16 hour days for $1 an hour. That will make America competitive in the global economy. Those darn unions, always making ridiculous demands like a minimum wage and 40 hour work weeks. You sir are on to something

 

[Rocketman]

Those darn unions, always making ridiculous demands like a minimum wage and 40 hour work weeks.

Unions are OPPOSED to "a low" minimum wage. Unions are all about outsized wages and benefits and work conditions as opposed to traditional/private/free market workplaces.

Now I for one am opposed to the other extreme as exemplified by Wal-Mart, where wages are low, hours long, and benefits and transportation for workers are provided by public governments.

Somewhere in the middle of those extreme options are the majority of jobs, among which are the most productive, successful, and long lasting on the planet. If not for globalization and unionization.

Kill those and solve the problem. Long term. Revive the journeyman apprentice system, please!

We need common sense to reenter our society.

Rocketman

 

[lordreye]

Terrible Article Title

"... uses its cash to keep latest technology to itself"? What a sensationalist, misleading choice of words. How about "wisely leverages large cash reserves to develop new technology and give itself a competitive edge"?

 

[cms2]

However, not everyone is impressed with this line of reasoning. One fund manager, Christopher Bonavico at Delaware investments, said Apple is "destroying value" by sitting on so much cash, and complained that the cash is "earning near zero". Bernstein Research analyst Toni Sacconaghi said the cash pile has "been beyond the point of being rational for a while now."

the same line of thinking that brought us subprime mortgages, toxic assets, and the near collapse of the world's economy... Let's keep doing what we've always done and see if, this time, we get a different result.

 

[Tilpots]

As outsiders, we have no idea what is going on in the mind of the company's bosses, or in Steve Jobs' head, but there is a possibility this money is being saved and built to make a crushing move toward some form or independence in terms of production of materials. Or it can be used to conquer adjacent industries that play into Apple's future moves. Apple has created and filled a new computing market in the last few years; they have eyes on television/video steaming; they know there are expanding markets other companies aren't taking seriously at this point--I'm certain Apple is going for a big move within the next years, and it will have the possibility to expand the company and the company's impact of more than just the computing market.

For evidence, I point to the new building they are going to put in Cupertino.

I agree with your line of thinking, but I am a firm, longtime believer that Apple will get into the carrier/provider game. It's the one part of the equation that they don't control. An end-to-end Apple experience is coming... Soon.

 

[winston1236]

well investors could alway go put their money into microsoft i think at todays price (26 dollars to apples 349 dollars) they could get more , too bad it would be all crap hahahaha

 

[Rocketman]

However, not everyone is impressed with this line of reasoning. One fund manager, Christopher Bonavico at Delaware investments, said Apple is "destroying value" by sitting on so much cash, and complained that the cash is "earning near zero". Bernstein Research analyst Toni Sacconaghi said the cash pile has "been beyond the point of being rational for a while now."

The cost to rent space in Cupertino is over $3 per square foot per month. Apple is building a HQ with over 1m sqft, reducing their "opportunity cost" by that figure every month for every year for every decade the building is in service.

I hope they use the savings for tax dodges, labor, memory, processors, and display pre-purchases and acquisitions. If not I would sue them for malpractice as most stockholders of most companies should do so right now because Apple has set a course that provides evidence they are fully SQUANDERING stockholders assets.

"Everyone" knows stockholders have superior rights ( ) and government regulators are overzealous ( ) in enforcing any claim which will give them additional jurisdiction and publicity.

Poli - tics. Many blood sucking insects.

Rocketman

 

[oneofthesedaves]

As a stockholder, I don't think it's out of line to ask Apple to give back some of that money through dividends. A large strategic reserve is definitely beneficial. But continuing to stockpile cash past any reasonable limit is just a waste.

I'm a stockholder as well, and I think it's a good thing for them to keep stockpiling money. They are only a couple of years away from being able to buy Microsoft if they want to. I'm not saying that they will buy Microsoft, but they have/will have enough cash to make acquisitions that will push Apple to $500 per share. It can also help them buy a competitor if they start getting too competitive.

 

[Laird Knox]

The slope of the chart is not merely steep and upward, it is geometric. The ROI is on average higher than CD's, money markets, or 10 year bonds pay. This is not merely strategic capital which has proven so awesome the stock price represents top 2 in the USA for market cap, but also is surviving as a standalone investment far better than other mostly liquid investments in the entire financial market. They not only have money, but they are making money at outsized rates. I wonder if we will ever see anybody stop complaining about unbridled success?

Nope!

I wonder what would happen if they started buying "junk bonds" which pay 12%+ and started buying every nature of high leverage start-up resulting in more revenue from treasury activities than operations?

Rocketman

cite for a theme:
pnc bank commercial cnbc

The only problem with your reasoning is that the slope of the graph is not representative of their investments alone. I wouldn't be surprised if the investments are near-zero with the bulk of the growth coming from profits.

 

[Renverse]

I'm a stockholder as well, and I think it's a good thing for them to keep stockpiling money. They are only a couple of years away from being able to buy Microsoft if they want to. I'm not saying that they will buy Microsoft, but they have/will have enough cash to make acquisitions that will push Apple to $500 per share. It can also help them buy a competitor if they start getting too competitive.

They wouldn't even be able to. If they even tried to buy a company like Intel, Microsoft or Google, they would be hit with Anti-Trust investigations all over the world. That deal has a snowball's chance in hell of succeeding.

Also, you are presuming that the MSFT stock will stay static for the next few years. You may be absolutely right, but then again, the tech industry is unpredictable, Microsoft might be worth much more than Apple can afford in a few years, and that is also assuming that Apple will actually keep saving money.

 

[Rocketman]

I agree with your line of thinking, but I am a firm, longtime believer that Apple will get into the carrier/provider game. It's the one part of the equation that they don't control. An end-to-end Apple experience is coming... Soon.

Once we have a data only device (no voice network) we will have VoIP via 3G, 4G, wifi, cable. No voice protocol needed and no more than $30-$40/mo for everything all the time.

The problem with that is the network business models assume $80 per user per month. They have to amortize/depreciate their installed networks to make that work. Hey, bad government, should provide TAX CREDITS for wireless internet on the basis it is the most recent and leveraged infrastructure on the planet.

Just Rocketman

 

[dorky24]

I'm a stockholder as well, and I think it's a good thing for them to keep stockpiling money. They are only a couple of years away from being able to buy Microsoft if they want to. I'm not saying that they will buy Microsoft, but they have/will have enough cash to make acquisitions that will push Apple to $500 per share. It can also help them buy a competitor if they start getting too competitive.

Lol Microsoft has a market cap of about 220 billion dollars. AAPL has a market cap about 320 billion. It cost AAPL a freaking lot if they want to buyout Msft in a couple of years.

 

[oneofthesedaves]

They wouldn't even be able to. If they even tried to buy a company like Intel, Microsoft or Google, they would be hit with Anti-Trust investigations all over the world. That deal has a snowball's chance in hell of succeeding.

Also, you are presuming that the MSFT stock will stay static for the next few years. You may be absolutely right, but then again, the tech industry is unpredictable, Microsoft might be worth much more than Apple can afford in a few years, and that is also assuming that Apple will actually keep saving money.

Good point. Do you think they would really have a problem fending off an antitrust suit given that there are alternative OS available such as Linux and Chrome OS?

 

[icrew]

This is not monopolism.

No, it's more Monopsonism than Monopolism, really.

(BTW, I can't take credit for this observation--I saw it in the title of another article about this same quora post earlier today. I can't find that article again to link to it, unfortunately.)

 

[Tilpots]

Once we have a data only device (no voice network) we will have VoIP via 3G, 4G, wifi, cable. No voice protocol needed and no more than $30-$40/mo for everything all the time.

The problem with that is the network business models assume $80 per user per month. They have to amortize/depreciate their installed networks to make that work. Hey, bad government, should provide TAX CREDITS for wireless internet on the basis it is the most recent and leveraged infrastructure on the planet.

Just Rocketman

I don't think they'd use a business model like Verizon or ATT. I believe it'd be more like the iTMS to perpetuate the walled garden. Hardware is the money maker, everything else is a funnel towards it.

 

[Renverse]

Good point. Do you think they would really have a problem fending off an antitrust suit given that there are alternative OS available such as Linux and Chrome OS?

While that seems like a good argument, it's just a moot point when Windows still has 90% of the market in their hands, and Apple has 8%. That's almost a 100% monopoly. And, ofcourse, they'll have 30% of the Server market with Windows Server, and the Enterprise market by it's balls with Exchange, Office, and iWork.

 

[kdarling]

Yep, I think we let Apple take a stab at the US government's debt issue.

They could start by bringing much of that money back to the US and paying full taxes on it.

.

 

[oneofthesedaves]

That's almost a 100% monopoly. And, ofcourse, they'll have 30% of the Server market with Windows Server, and the Enterprise market by it's balls with Exchange, Office, and iWork.

Ehhhxcelent

 

[Digitalclips]

The point is other companies don't know what they 'want' till they see Apple's latest products then they try to buy it so they can try to replicate it. If they actually innovated instead of copying they wouldn't be in this situation.

 

[Digitalclips]

They could start by bringing much of that money back to the US and paying full taxes on it.

.

Sounds like you don't think Apple is an asset to the US economy.

 

[Rocketman]

I don't think they'd use a business model like Verizon or ATT. I believe it'd be more like the iTMS to perpetuate the walled garden. Hardware is the money maker, everything else is a funnel towards it.

They are using "external capital" to feed customers to the platform. Disneyland relies on a complex network of low margin hotels, buses, planes, and families surrounding the park to sustain the high margin business model.

Off-budget funding works!

Rocketman

 

[jameskatt]

Why do pundits want to spend Apple's money???

Why oh why do pundits want to burn through Apple's money???

Apple is the greatest company in the world. It makes money hand over fist. It rakes it more money per square foot of retail space than Tiffany's.

And it does the most prudent thing anyone can ask: It saves its money and spends it wisely.

And now it is doing the most awesome thing with its money: using it as a competitive weapon in buying components in mass quantity. In doing so, it can get technology years ahead of the competition.

Whenever Apple's money pile grows to equal its market cap, that means Apple is a no brainer as an investment. One can't lose money on such an investment. This is the greatest reason Apple continues to save money. The money pile helps insure that its stock price has a floor it cannot past through.

The last time this happened was when Apple's stock price was $6 and Apple's market cap was $4 Billion. And look at where we are now.