How Apple Uses Its Cash to Keep Latest Technology for Themselves

[paul4339]

while the fund managers may have a point that apple probably is heavy on the cash side, i find it funny how these 'certified financial analysts' who has probably never worked a day running the tech or consumer electronics company is trying to tell one of the most successful companies what to do.

too much cash ... coming from the same folks that (arguably) brought the global financial sector to the brink of disaster - giving commentary on the team of people who brought a company from the brink of disaster.


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[kdarling]

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

How in the world does suggesting they bring in billions of dollars and pay taxes on it on like some other companies do, "sound" like they don't otherwise contribute? We all contribute to the economy, but most of us also spend our money here in the US after paying taxes on it.

Now that you bring it up, Apple certainly seems to be more of an asset to the Chinese and Korean economies. Ten times as many people work in factories overseas, and billions of dollars are spent on Samsung, LG and other suppliers. What do they buy here? Land for their stores and data centers seems the major buying contribution.

Heck, even Starbucks employs five times as many people in the USA as Apple does. Apple is also infamous for being far less philanthropic than other companies, even making it difficult for non-profits to benefit from the App Store. They also spend relatively little on R&D or hiring engineers.

So, while I think they're an asset to the US, they're certainly nowhere near the level of what they could be. That's not being mean. It's just the way they are.

 

[ToroidalZeus]

Unions were initially formed and justified to improve workplace conditions and safety. Health and Safety code revisions since have eliminated the need for that. Unions morphed into collective bargaining arrangements. About 15% or less of the workforce is unionized. The remainder of folks both hourly and salaried are operating under some loose variant of a free market and with protections offered by civil laws and courts, health and safety code, and insurance and government rules.

Who said workplace conditions were all about safety?

Interestingly the majority of union workers are in fact also PUBLIC workers, the one class of worker that does not need unions at all. These collective bargaining arrangements exploit the lack of price sensitivity public entities have as compared to private businesses to negotiate outsized pay, benefits, pension, and other perks like paid and saved vacation time. The most extreme examples include prison and fire employees in CA, MA, and NY, large politically liberal/D overtaxed states.

If you understood how money was printed out of thin air you'd also realize how moot this point is or possibly even necessary.

 

[moore2772]

Dividend

As an Apple stockholder, I think it's high time that Apple start paying dividends. The rise in stock prices is great; but you only get any benefit out of it if you cash out.

 

[Powerbooky]

A company that knows how to manage and leverage money and has a pile of it on hand knows a thing or three on what to do. Those Wall Street people who are deriding Apple on this obviously don't have the know-how to follow suit for themselves or their clients. Maybe the US Congress could learn from Apple... or not.

Wall St. has just one goal: making money by using money/capital of others. In fact, they need others to keep on selling/spending and have (huge) debts. Pilling up money and not having any debt just doesn't generate enough interest to those greedy bankers.

Actually, the whole financial system depends on interest that is generated by the huge debt the government has. This is why Wall St. lobbyists will do whatever they can to keep the government from reducing the debt and making sensible changes in spending.

 

[hynke]

From the simple graph presented it would appear that the return from Apple's investment strategy is solid and significant.

I just wonder if they are abusing a near monopoly position? I'm no expert, but I wonder if they'd be referred to the Competition Commission if they were a UK company?

Apple is not in a position of monopoly (that means many buyers face only one big seller). The position they are in however is called monopsony (one big buyer faces many sellers). But that position is of cause as devastating to the free market as monopoly is.

 

[ebolamonkey3]

Apple is not in a position of monopoly (that means many buyers face only one big seller). The position they are in however is called monopsony (one big buyer faces many sellers). But that position is of cause as devastating to the free market as monopoly is.

Well, Apple is a monopoly if you want to use OS X

For Windows you can buy literally any laptop on the market, including a Mac. But for OS X you can only use a Mac, unless you want to get creative (and illegal) w/ hackintoshes.

 

[cg0def]

Sounds like a good business plan to me. It's got to be frustrating for Apple's competitors, but there's never been anyone telling them they can't do the same thing. RIM was the market leader for quite some time but they never thought to use their money wisely like this.

The author mentioned an analyst that states Apple's cash is earning near zero and therefore must be dumped. That guy is an idiot. Apple's cash is what allows the company to buy in massive quantities and lock up segments of the market before anyone else can touch them. It may not be earning returns in conventional ways, but to say the cash isn't working for them is just plain stupid.

Besides all that, a company with no debt is a company with few worries. Very smart business.

No offence but the analyst actually does know what he is talking about. There is no mention of dumping the cash and I think you have misunderstood the position. You are also thinking in consumer rather than business terms. A huge pile of cash for a balanced financial sheet actually means a huge debt because the only way you accumulate cash in a business is by borrowing it. What they are talking about is converting the cash into assets or paying back some of the debt that they have. Since Apple is really big as it is, they are probably not suggesting that Apple should expand even further but rather pay back the investors and take some of it's stock off the market. Provided that Apple does not have a grand plan of taking over the world, that would actually be the wise thing to do. However, the plans of Apple's execs are very much a mystery to every one who is not them.

All that said, noone is suggesting that keeping a healthy cash reserve is a bad thing. The issue is merely with the size of the cash reserve that Apple has accumulated. But then again when you get as big as Apple no simple problem is that simple anymore!

 

[toddybody]

How in the world does suggesting they bring in billions of dollars and pay taxes on it on like some other companies do, "sound" like they don't otherwise contribute? We all contribute to the economy, but most of us also spend our money here in the US after paying taxes on it.

Now that you bring it up, Apple certainly seems to be more of an asset to the Chinese and Korean economies. Ten times as many people work in factories overseas, and billions of dollars are spent on Samsung, LG and other suppliers. What do they buy here? Land for their stores and data centers seems the major buying contribution.

Heck, even Starbucks employs five times as many people in the USA as Apple does. Apple is also infamous for being far less philanthropic than other companies, even making it difficult for non-profits to benefit from the App Store. They also spend relatively little on R&D or hiring engineers.

So, while I think they're an asset to the US, they're certainly nowhere near the level of what they could be. That's not being mean. It's just the way they are.

Hear Hear. Given their exorbitant profit margins and cool image, one would think Apple was at the forefront of corporate philanthropy. Unfortunately they're not. Im tired of folks elevating Apple for their holistic innovation (technical, social, etc), while they're still such a blase supporter of social programs.

Just imagine what Apple could do by donating a small percentage of their profits

 

[JHankwitz]

Yep, I think we let Apple take a stab at the US government's debt issue. It won't happen, and I doubt anyone at Apple would want to touch it with a ten foot pole, but they must know something about money that escapes our wonderful elected officials in DC.

Apple knows that you can't spend money you don't have, you can't take money from customers without giving something in return, and when you spend money, you need to get something of value for all stakeholderes in return for it.
-Economics 101

 

[JHankwitz]

Im tired of folks elevating Apple for their holistic innovation (technical, social, etc), while they're still such a blase supporter of social programs. Just imagine what Apple could do by donating a small percentage of their profits

Spoken like a true socialist.
-John Gault

 

[FreeRange1]

Sounds like a good business plan to me. It's got to be frustrating for Apple's competitors, but there's never been anyone telling them they can't do the same thing. RIM was the market leader for quite some time but they never thought to use their money wisely like this.

The author mentioned an analyst that states Apple's cash is earning near zero and therefore must be dumped. That guy is an idiot. Apple's cash is what allows the company to buy in massive quantities and lock up segments of the market before anyone else can touch them. It may not be earning returns in conventional ways, but to say the cash isn't working for them is just plain stupid.

Besides all that, a company with no debt is a company with few worries. Very smart business.

These are institutional investors with large holdings that are whining about paying a dividend. Somehow they think that because they bought some shares they have a right to raid the bank to give themselves a big payday. If only all publicly traded companies were as smart as Apple! Hold the money boys! We love what you are doing.

 

[Tiggs]

Wonder how much Apple cash got used on the recent 'Rockstar' alliance purchase of the Nortel patents. Was a wise use of Apple cash and would rather see moves like that than wasting it on dividends.

 

[vvswarup]

How in the world does suggesting they bring in billions of dollars and pay taxes on it on like some other companies do, "sound" like they don't otherwise contribute? We all contribute to the economy, but most of us also spend our money here in the US after paying taxes on it.

I don't doubt your reasoning. I take exception to Apple being singled out as the only company to engage in the business practices that you are criticizing. Dozens of companies keep their cash offshore to avoid paying taxes on it.

Now that you bring it up, Apple certainly seems to be more of an asset to the Chinese and Korean economies. Ten times as many people work in factories overseas, and billions of dollars are spent on Samsung, LG and other suppliers. What do they buy here? Land for their stores and data centers seems the major buying contribution.

Heck, even Starbucks employs five times as many people in the USA as Apple does. Apple is also infamous for being far less philanthropic than other companies, even making it difficult for non-profits to benefit from the App Store. They also spend relatively little on R&D or hiring engineers.

Look at the BOM for Apple's products, especially the iPad. Quite a few of its components are designed by American companies. You say that Apple buys all of its components from Korea or China instead of buying them from the US. What if the reason Apple doesn't buy them from the US is that they're not available in the US?

Now that you bring up Starbucks, let me first mention that I'm not sure where you got the information that says that Starbucks employs five times as many people in the USA as Apple does. You also mention that Apple's only "major buying contributions" are land for its stores and data centers. What exactly is Starbucks' "major buying contribution" to the USA? The lion's share of Starbucks' employees are people who work in the Starbucks shops.

While we're on this subject, where do you think Starbucks gets its coffees from? The answer is not USA. Starbucks buys its coffee from South America and other places. Unlike you, I'm not going to criticize Starbucks for this. Until I see evidence to the contrary, I'm going to believe that the reason Starbucks doesn't get its coffee in the USA is that either there's no coffee grown in the USA or it's not of good enough quality.

So, while I think they're an asset to the US, they're certainly nowhere near the level of what they could be. That's not being mean. It's just the way they are.

Completely baseless. On the contrary, Apple has been a huge asset to the US. You have talked at length about how Apple doesn't employ enough people in the USA.

Apple has paid out over $2.5 billion to app developers. The vibrancy of the iOS developer community has created thousands of jobs. Developers have barely scratched the surface of what mobile apps can do. Apple had a big hand in creating this market. There's still a lot of room to grow in the mobile app market.

 

[kdarling]

I don't doubt your reasoning. I take exception to Apple being singled out as the only company to engage in the business practices that you are criticizing. Dozens of companies keep their cash offshore to avoid paying taxes on it.

Sure they do.

However, the thread topic is Apple, not those other companies.

Cheers!

 

[slieu92]

how bout spending that money on teaching underpaid chinese workers how to properly put on some thermal paste. (2011 mbp)

 

[marksman]

Wirelessly posted (Mozilla/5.0 (iPhone; U; CPU iPhone OS 4_3_1 like Mac OS X; en-us) AppleWebKit/533.17.9 (KHTML, like Gecko) Version/5.0.2 Mobile/8G4 Safari/6533.18.5)

Apple should have bought myspace for 580 million. Much better than sitting on cash.

 

[DiamondMac]

The most extreme examples include prison and fire employees in CA, MA, and NY, large politically liberal/D overtaxed states.

What makes them extreme examples? I am honestly asking....I have no idea.

 

[philipma1957]

Unions were initially formed and justified to improve workplace conditions and safety. Health and Safety code revisions since have eliminated the need for that. Unions morphed into collective bargaining arrangements. About 15% or less of the workforce is unionized. The remainder of folks both hourly and salaried are operating under some loose variant of a free market and with protections offered by civil laws and courts, health and safety code, and insurance and government rules.

Interestingly the majority of union workers are in fact also PUBLIC workers, the one class of worker that does not need unions at all. These collective bargaining arrangements exploit the lack of price sensitivity public entities have as compared to private businesses to negotiate outsized pay, benefits, pension, and other perks like paid and saved vacation time. The most extreme examples include prison and fire employees in CA, MA, and NY, large politically liberal/D overtaxed states.

The fact is undeniable. What to do about it? I suppose ban unions for ANY public worker, but the chance of that happening is near zero IMHO.

Rocketman

So when 300 NYC fireman went into the world trade center time and time again during 911 and saved 10's of thousands of lives finally making the ultimate sacrifice of their own lives they were overpaid right. 200 died in the second building after the first collapsed. But they are the extreme example of overpaid unions. Please get a clue.

 

[res1233]

[rant] There are far too many communists (or people who don't realize they're communists) on the internet for my taste. Let Apple keep their cash. If they dodge taxes, that's probably because THE TAXES ARE TOO HIGH!??!!? Maybe? How 'bout we lower taxes! That's a thought. While we're doing that, how about we stop voting for retards who destroy our economy by introducing these hundred page bills packed with useless and sometimes damaging legislation with so much pork in it you could start a pig farm![/rant]

This is Apple's cash, not yours, don't even give it a second glance. None of us have the right to it, so don't ask. If you disagree, then hand over your cash. Don't want to? My point exactly.

Sorry for the rant, but I'm getting tired of the high level of ignorance I see in our country today. Earn your place in society. Is that so much to ask?

 

[vvswarup]

Apple is not in a position of monopoly (that means many buyers face only one big seller). The position they are in however is called monopsony (one big buyer faces many sellers). But that position is of cause as devastating to the free market as monopoly is.

Apple is ALMOST in a monopsony situation when it comes to buying components. However, I have yet to see any evidence which shows that Apple is "cornering the market." It's just as likely that Apple doesn't want to face supply constraints. Squeezing competitors' margins is a welcome side effect, but stop making it sound like Apple is basically buying up components just to block out competitors.

 

[kisbys]

Massively out performing the competition can make investors happy. What they are doing is working. Any investor that comes in and starts telling them to change their game plan is a moron.



Dividends are for non growth companies. If Apple ever starts handing out dividends, it is time to run.



If fund managers dump Apple while it performs at it's current level, fund managers will get burned.

I'm guessing you don't understand the concept of the stock Market if you think the time to run is when a company starts handing out dividends.

More importantly I don't think many people have understood what Tony is saying. He is saying not that he thinks the company should give up all of it's cash but instead once you get beyond a certain level it is pointless having cash. Most fund managers want a roi and they are investing in the performance of the company not it's cash holdings. Cash especially right now makes literally nothing and there is an opportunity cost of holding cash.

Of course having a strategic reserve is great and clearly works for apple as can be seen in it's ability to invest but a strategic reserve of $65bn is only useful if you want to go on a huge buying spree of other companies in fact it's approx 20% of the Market cap and as such is just silly.

Surely you can see the pointlessness of holding so much cash by the fact that their reserves are higher than the combined Market caps of rim,nokia, htc et al.

Surely you can see if the company has enough cash to wake up tomorrow and buy them all up on a whim it's a little too much?

 

[vvswarup]

Hear Hear. Given their exorbitant profit margins and cool image, one would think Apple was at the forefront of corporate philanthropy. Unfortunately they're not. Im tired of folks elevating Apple for their holistic innovation (technical, social, etc), while they're still such a blase supporter of social programs.

Just imagine what Apple could do by donating a small percentage of their profits

Apple is not a charity. It's a business. Apple's job is to make money and tons of it. Also, Apple has a fiduciary duty to its shareholders. Every decision Apple makes should be done with the goal of "maximizing shareholder wealth" in mind.

How does being innovative and bringing innovative products to the market have anything to do with social programs?

 

[ESPN]

haha 65 Billion, that is greater than the wealth of #1 Carlos Slim.

 

[Fraaaa]

Hear Hear. Given their exorbitant profit margins and cool image, one would think Apple was at the forefront of corporate philanthropy. Unfortunately they're not. Im tired of folks elevating Apple for their holistic innovation (technical, social, etc), while they're still such a blase supporter of social programs.

Just imagine what Apple could do by donating a small percentage of their profits

And imagine NASA stop looking for aliens and planets will never reach and fix poverty in the world.