What to do with Apple's $15 billion in cash: Try nothing

What to do with Apple's $15 billion in cash: Try nothing

Summary: Apple has $15.4 billion in cash lying around and folks are wondering what it should do with it.

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TOPICS: Apple, Banking
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Apple has $15.4 billion in cash lying around and folks are wondering what it should do with it. Technology companies--at least the good ones--traditionally hoard cash and eventually shareholders want something (dividend, mergers and the like).

Fortune tosses out the idea that Apple should go on a spending spree. Buy Tivo! Peter Kafka at Silicon Alley Insider notes that perhaps Apple (see Apple Core blog) should buy a music label or movie studio.

Here's a thought: Do nothing.

Cash stockpiles only become an issue when the growth slows down. And at last check growth is the least of Apple's worries. Why distract yourself with acquisitions? And why would Apple want to enter the music business? The way things are going a big band could sign a deal with Apple anyway. Ask Madonna and LiveNation. Ask the Eagles and Wal-Mart. It makes no sense for Apple to buy a business that's irrelevant in the first place.

Sometimes the best moves are the ones you don't make. And there's no reason for Apple to do much with its $15.4 billion. I suppose it could do something crazy and try and develop an alternative to coal-generated power, but it's out of character.

The demands on Apple to give up some of its dough will rise again. But these questions won't be a big deal until Apple's growth slows--and I don't see much on the horizon to make that happen. Investors will gladly let Apple keep its $15.4 billion as long as it keeps up the growth--in the fourth quarter the company's revenue was up 29 percent from a year ago.

Thoughts or suggestions on what Apple should do with its money are appreciated.

Topics: Apple, Banking

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23 comments
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  • Directors & Officers Insurance

    These cash hoards are valuable to directors and officers at US corporations because they allow the purchase of D&O insurance at a more reasonable rates. With Sarb Ox, not every qualified person is willing to sit on boards of directors. They demand a high level of insurance and the insurance companies are requiring cash hoards before they are willing to deal. So we in the IT industry should be aware.
    mighetto
  • Actually, buying Tivo would be a good idea...

    Nothing would put Apple in the Living Room more than Tivo!

    I would be happy to see a $10/month subscription system for iTunes though...
    BitTwiddler
    • TiVo is a has been co

      Their craizy subscription fees just to DVR something does not bring anything fancy.
      Linux Geek
  • RE: What to do with Apple's $15 billion in cash: Try nothing

    Cash is an Asset and there always is a view that returns on assets should be appropriate in the context of comparable companies' returns in the industry.

    To the extent acquisitions may be accretive to earnings and the businesses are complementary to Apple's strengths, they might make sense -- but that is not something Apple needs to consider more now than at any other time.

    Clever use of its assets in possibly new or extensions of old business lines is generally a good idea, given Apples unique talents in product conceptualization, design & execution.

    I would expect Apple to manage just fine.
    swhiser
  • One area to invest in

    is automotive systems. If you look at the latest crop of automotive systems they are ummm, primitive at best. Apple has a real knack of user interfaces snad this is an area that is wide open for improvement.
    No_Ax_to_Grind
    • I couldn't agree more

      Look at the group of people that are going as far as to install Mac Mini systems in
      their cars. Apple could really do well with an automotive system. With all the interfaces required for navigation systems, cell phone, terrestrial radio, satellite radio, hd radio,
      CD audio, digital audio players...the best I've seen so far from what Apple could do.
      <? gorno(); ?>
      • Go one better...

        All the current players are focused on New Cars only. I think there is a real market for a package that can be installed as an after market if it's done in a manner that makes it reasonabbly easy (a day or two) to do. Perhaps something that replaces the car's stereo by slipping into the space. I mean car stero shops do it all the time right? (The real hardware can be in the trunk, etc.)

        And I want MORE than I can get today:

        1. Should have WiFi built in so when I hit a hot spot (free WiFi hot spots are all over.) I can check email, IM, etc.

        2. WiFi should automatically sync with my home system when I pull in the garage at night. (MP3s, Video, etc.)

        3. WiFi should communicate any errors the cars computer comes up with. (save me the cost of paying a mechanic to tell me what the error is.)

        4. Allow me to record any radio station I happen to be listening to. (XM, terrestial, etc.)

        5. Allow me via WiFi to "talk" to other cars equiped with WiFi. (Say two or three cars are traveling together sharing a map, or even sharing music while traveling.)

        6. GPS and turn by turn directions WITHOUT paying someone $50 a month. (Put On Star out of business!) All it takes is an app like Map Point and a GPS reciever.


        Honestly, the possibilities are endless and could be a serious market for Apple, especially if they open it up to third party developers.
        No_Ax_to_Grind
        • Hmm

          I agree with 2, 3, 4 and 6, definitely. 1 with some caveats (like not if car is moving), and 5 with some caveats as well(think about the security issues of someone hacking your car's wifi?)

          But 2,3,4 and 6? Hell yes. Especially 3.
          SniperCT
  • I think they should develop for the automotive industry..

    .. but not just for one car/model.. but for something that you can take from one car to
    the next/other car integrating with the car's electronic management, but without
    replacing it.
    sos10
  • I think they learned their lesson

    Before Steve Jobs returned Apple was in the dumps and
    financially strained.

    Now that they have re-emerged as a powerful player and
    have established a nice cash cushion I don't see Steve J
    letting that go. First, it's not sitting in a checking
    account - they are generating interest off of the money
    and the larger it gets the greater impact this interest will
    have on the bottom line.

    Then there is the simple fact that business is cyclic and
    Apple's cushion will hold them through rough times.
    Just as important, it allows them to continue R&D efforts
    during rough times without a reduction - not only
    minimizing their downturn, but also preparing for when
    things get better.

    Finally, Steve Jobs isn't the only creative person at
    Apple. (Jonathan Ive is a good example.) There is a
    large pool of creative guys & gals that can bring new
    products to market. The cushion provides the means for
    Apple to look a new ideas in depth and there is no telling
    what will come in the future.

    I'm in the camp that hopes they hold onto the cash and
    uses it as an intelligent leverage over the next 10 years.
    Ken_z
  • Put it back into the company

    Me, I'm a firm believer that a company with extra cash should put the money back into the company, such as investing more in R&D, lowering prices, creating new products and product lines, etc.

    Maybe that just makes too much sense, though . . .
    CobraA1
  • Touch screen MAC for auto / portable

    There are already high-end, custom Linux/unix based PC's which mount into cars and/or are removable. Apple could adapt the Mini to sit behind an LCD within the dash. The LCD would be touch screen and the unit would have a USB + Firewire port so that a keyboard could be attached if desired. Bluetooth should also be built in. Like most stereos, the device would need to be removable. Alternatively, the Mini could be mounted in the trunk with cables connecting to the dash in the cab.

    As others have said, the Mac would need to be able to interface with the car's own computer. With bluetooth and GPS and other capabilities, Apple could easily dominate this market. It's a great niche for them, and they can work with luxury brands first, where their normally-overpriced hardware will not even be questioned. Apple does extremely well in niche markets.

    There will be the standard security issues with any wireless device, and perhaps the car's info may become available to hackers. This is possibly one negative aspect, but overall, I think Apple could make this a slam dunk.
    srobtjones9
    • in case you missed it...

      ...this equates to R + D. Putting the money back into the company.
      srobtjones9
      • Which is something Apple has always done

        from the beginning. The standard joke is that Apple is Microsoft's R&D department.
        Apple does the R&D, takes the risks, and the rest of the industries copies its
        successes.
        MarcB_z
  • Do you mean besides the money they are pouring

    into misleading advertising and building on top of their already existing anti Vista campaign because they have no product to advertise? Although they still state it "just works" on their site about Leopard, so i guess they are willing to say anything, real or imagined. Like the many links to sites with half-truths about vista, or the inaccurate description of the makeup of Leopard, stating inclusions that don't exist, which is a flat out lie. <br>
    Apple is very good at marketing and playing dirty minor league games, but Job's stubborness and sheer megalomania are going to be the fall of Apple over time. Just as his ideas in the beginning over "woz's" creations and ideas, that won out, made Apple into a second rate company, now that he's at the helm again, it's inevitable. Chapter 2 is not yet fully written.
    xuniL_z
    • Right...

      Apple is ALWAYS just about to die. That is soooo last century dude.

      The Apple story is on Book 5 now and no end is in sight. Haven't you seen their
      market share and stock prices rising? Catch up.
      MarcB_z
    • As the kid said in Blazing Saddles when told if he continues

      to drink like that he would die...."WHEN?" I mean Apple has been around as long
      or longer than most, and is doing shall I say pretty well for itself. So when is this
      collapse going to occur anyway?

      As for Apple's adds well from sights like this one I gather that some people are
      going back to XP. Apple sales are doing well. I've read some reviews that state
      Leopard is better than Vista at least to the reviewer and I've read others that
      disagree. So which of the two should Apple point to in it's adds? Hmmmmm?

      Pagan jim
      Laff
  • Buy Garmin.

    Seriously. Don't they need GPS in the iPhone? Also, for maps on the iPhone, they could dump Google and do it themselves.
    Userama
  • Put an amethyst mine under someone's Xmas tree?

    ...or perhaps you have a spare $15 million, for a good exploration program on my gold claim?
    Feldwebel Wolfenstool
  • RE: What to do with Apple's $15 billion in cash: Try nothing

    How about giving employee's making less than 50k a year a raise? Oh, sorry, silly me, how will Apple retain top notch upper management unless tjey pad the pockets of stupid execs.
    raymarc001