What will Apple do with its $100 billion cash?

What will Apple do with its $100 billion cash?

Summary: Industry reaction and analysis: Apple has scheduled a media call for March 19, where the company is expected to announce it has reached a cash stockpile of $100 billion.

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The world's richest company, Apple, is expected to announce tomorrow morning 6:00 am PDT (9:00 am EDT; 2:00 pm GMT) that the company has reached the milestone of $100 billion in its cash reserves.

Apple chief executive Tim Cook, and chief financial officer Peter Oppenheimer will host a conference call to announce the decision over its cash balance, which stood at $97.6 billion at the last quarter's count.

The company can do only four things: invest, acquire, philanthropy, or dividend. It could also do nothing, but Apple doesn't often go for bragging rights in its media events.

Let's start off with what we know:

Tim Cook, speaking in February at the Goldman Sachs conference in his own words, points initially towards a dividend, at least it seems:

"I’d be the first to admit we have more cash than we need to run the daily business. So we’re actively discussing it. I only ask for a bit of patience, so we can do it in a way that’s best for the shareholders."

The late Steve Jobs said in 2010 he preferred to retain its cash for investments, rather than shelling out a dividend to its more than faithful investors. But now that Cook is in the driving seat, he could pull out an entirely different strategy and promote future investment.

Here's what the industry experts are saying:

The New York Times immediately focuses on Apple's tax problem. ZDNet's David Gewirtz covered this in great detail. It will be a troubling time for the company if it decides to rake in its cash from abroad, knowing full well the financial tax penalties it will incur:

"While Apple ended last year with a cash balance of $97.6 billion, it cannot easily gain access to most of that for a dividend because roughly 66 percent of the money is held by its foreign subsidiaries. To bring that cash back to the United States, Apple would have to pay hefty repatriation taxes, very likely more than 30 percent."

Forbes follows on with a different, yet similar take. If the company brought back stock to bolster its position, it would cost Apple greatly:

"Keep in mind that only about a third of the company’s cash is actually held in the U.S. The rest is offshore – and bringing it back to the U.S. in order to pay it out as dividends or to use it to buy back stock would incur a substantial tax penalty. They could buyback a pile of stock. Not something they have done in the past, but in the past they didn’t have $100 billion in the bank."

MG Siegler considers a Google--Motorola deal, in which Apple could solve its Samsung patent battle difficulties. But more interestingly, if Apple is about to dip its toes into the icy water of the television business, it would make sense:

"To that end, maybe crazy, but what about buying Samsung? It would both harm Google (Samsung is by far the most successful Android partner) and help Apple (which still heavily relies on Samsung chips and screens, etc). They don’t have quite enough cash to do that (but almost!), but the cash they do have could surely sweeten a deal."

Matthew Panzarino with The Next Web sees the future of Twitter in Apple's hands. It would not be a ridiculous move, considering how far Apple has invested in the microblogging service since its iOS 5 integration:

"Apple doesn’t make moves like this lightly and obviously considers Twitter a safe bet. If that bet turns out to be wrong however, Apple will do whatever it takes to ensure that Twitter remains a part of its service. Ensuring that Twitter’s lifespan will be a long one."

Jacqui Cheng with ArsTechnica highlights the "invest, acquire, philanthropy, or dividend". One consideration Cheng makes not seen elsewhere is the company "investing money in improving conditions for factory workers". It's far out there, but knowing Cheng's 'human' perspective of the company holds out with credible thinking:

"It's unlike Apple to announce a call for the sole purpose of discussing its cash situation, so there might be some news on its way come Monday morning."

The Register has more, with its usual satirical spin:

"We'll see. Other possibilities include acquisitions, and maybe even – don't hold your breath – the establishment of an Apple Foundation philanthropic arm. After all, eleemosynary-minded Cook is known to believe in public philanthropy more than did Jobs."

Om Malik goes with the "do nothing" approach, and forget about what Wall Street analysts and investors are thinking. The company could simply hold onto what it has in its reserves:

"I, for one, believe the company should just sit on the cash and not worry too much about Wall Street just yet. It is important that they use the cash to lock up supplies of components for its products. The cash cushion gives the company room to actively compete for talent as well as any future startups it might need to acquire to enhance its overall ambitions."

Gizmodo --- as always --- thinks outside the box of sanity and reality:

"My money is on a $90,000 million project to clone Steve Jobs and develop growth acceleration and brain information download technologies."

Opinion remains divided on what Apple will do with its stockpile. $100 billion in cash is enough stacked up to be the world's most expensive (and grotesquely sized) living room coffee table.

Apple shares closed at just over $585 a share on Friday, up by 45 percent since the year's start. It briefly skirted the $600 mark last week.

Image credit: Stephen Shankland/CNET.

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Topics: iPad, Apple, Government, Government US, iPhone, Mobility

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  • Let's waste it for them!

    Instead of leaving it invested in various things like it is now, they should withdraw it from the banks, bring it back to the US, and let the government take 30% of it to piss away on bridges to nowhere, failed solar energy projects, and nation-building exercises in places where the people hate our guts. That's a much better use of the money than having banks lend it out to people who buy houses or cars or expand businesses.
    Robert Hahn