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Oh, to have Apple's cash problems

by Robert Palmer Aug 8th 2008 at 4:00PM

Not unlike this guy, Apple is going to need avalanche insurance for the mountain of cash that it's sitting on.

According to BusinessWeek, Apple has amassed $20.8 billion in cash and short-term investments, adding nearly $1 billion each and every quarter. It's not necessarily odd for a company to have a lot of cash (Microsoft, for example, has $23 billion socked away), but it's beginning to irk the investors.

If Apple's stock price continues to rise, everyone's happy. But if it starts to dip, experts say Apple should consider investments like acquisitions (possibly in the music business) or raw materials and components.

Matt Asay of Cnet is suggesting something probably unpopular with the Cupertino crowd: tax it. Since Apple's profit margins (as a percentage of sales) are higher than Exxon's, Apple might fall prey to Congress' plan to tax windfall profits, if it becomes law.

Apple CFO Peter Oppenheimer said earlier this year that "Our preference is to maintain a strong balance sheet in order to preserve our flexibility." Charles Wolf of Needham & Co. says the company doesn't need more than $5 billion on hand, but he'd be more worried "if this was a sleepy company with no growth."

"That's not Apple," Wolf said.



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Not unlike this guy, Apple is going to need avalanche insurance for the mountain of cash that it's sitting on. According to BusinessWeek,...
 

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msr

Tax it! If this were any other company than Apple, I'd be telling them to ream them, so I'm just going to have to apply that logic to my favorite company. Our country is in horrible debt and there are people living on the streets. Something has to be done about it.

August 11 2008 at 4:44 PM Report abuse rate up rate down Reply
Peter Cook

Or they could start paying dividends, that would keep the shareholders happy

August 11 2008 at 12:58 PM Report abuse rate up rate down Reply
SuperSexyErik (^_^)

perhaps they will buy microsoft? that might give microsoft some hope for a future :)

August 10 2008 at 1:21 AM Report abuse rate up rate down Reply
andrew harrison

surely having a pile of cash the size of a small nation is a good idea when the economy is heading into a recession?

August 09 2008 at 8:29 PM Report abuse rate up rate down Reply
Nick

Apple needs small (3-5%) investments in several media companies to give them more of a voice in how content is distributed. Apple's largest issue right now is not having access to enough content to make devices such as Apple TV worth buying.

August 09 2008 at 5:00 PM Report abuse rate up rate down Reply
futurepastnow

Insurance against Apple ever being purchased or taken over, perhaps? Any company that wanted to buy Apple would have to be able to buy its bank account, too.

August 09 2008 at 4:15 PM Report abuse rate up rate down Reply
1 reply to futurepastnow's comment
Vega

That's wrong. Cash is part of a company's assets (just like buildings, intellectual property etc.), so anybody who owns the stock, also owns the money. Debt however makes a company more expensive to buy, because by in case of a takeover the buying company also inherits debt oblogations.

And stockholders should be worried if a company hoards too much cash, because cash only gives money market returns, which makes it more difficult for a company to beat lower risk invesmtent alternatives.

August 09 2008 at 6:41 PM Report abuse rate up rate down Reply
Constable Odo

I wish Apple could use some of that money to purchase a game company that can design some exclusive games for the iPhone and iPod Touch. Good ones, of course.

It is a pity that all that money is just sitting there for Apple and investors aren't getting any use from it. If Apple would go back up to $200 a share then I wouldn't care, but it would be nice to have some of that cash working for investors now that the stock is weak and looks to stay weak for some time.

August 09 2008 at 2:57 PM Report abuse rate up rate down Reply
KenC

Yeah, $5B is enough for any company, that's what they said about GM too!

August 08 2008 at 9:52 PM Report abuse rate up rate down Reply
GLacy

"but it's beginning to irk the investors."

Really? I'm an investor and I'm not irked.

August 08 2008 at 8:53 PM Report abuse rate up rate down Reply
GLacy

"but it's beginning to irk the investors."

Really? I'm an investor and I'm not irked.

August 08 2008 at 8:23 PM Report abuse rate up rate down Reply
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