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NewAlchemist (59.01)

Apple's cash stash

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February 14, 2013 – Comments (3) | RELATED TICKERS: AAPL

Why does Apple keep so much cash on hand?  If someone knows, please tell me.  Some speculate it is due to a “depression era mind set”.  Others say for acquisitions or because much of the cash is overseas.  I don’t know what the true answer is. 

Apple released earnings last month.  After analysts peppered Apple CEO Tim Cook with all sorts of questions, this answer in particular stood out to me. 

Tim Cook - CEO: Toni, the most important thing to Apple is to make the best products in the world that enrich customers' lives. That's our high order bid. That means that we aren't interested in revenue for revenue's sake. We could put the Apple brand in a lot of things and sell a lot more stuff, but that's not what we're here for. We want to make only the best products. And so what does that mean for market share? We've been able to do that, and I think we've had a great track record here on iPod of doing different products at different price points and getting a reasonable share for doing that. And so, one doesn't – I wouldn't view these things as mutually exclusive as some might. But the high-order bid is making a great product that enriches customers' lives. And so, that's what we're focused on.

If Apple wanted to increase revenue they could.  If they wanted to better utilize cash they could.  Apple is NOT focused on optimizing the value of the company at this snapshot in time.  They are NOT focused on optimizing the balance sheet to make the stock price go as high as possible.  THAT’S OK!  It’s called having a long term vision. 

So why does Apple keep so much cash on hand?  It is not really business PC to say but I don’t think they care.  They can absolutely do things to temporarily increase value but then what?  The cash pile gives them options and it is not a great priority.  The priority is to be a luxury tech brand and they are doing a great job at it.

Author is long AAPL

3 Comments – Post Your Own

#1) On February 15, 2013 at 12:09 AM, awallejr (80.13) wrote:

It was a fetish of Steve Jobs.  Remember there was a time when AAPL was near death. 

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#2) On February 15, 2013 at 10:58 AM, chk999 (99.98) wrote:

A lot of the cash in lodged in foreign countries and due to the strange US tax laws, it would be double taxed if repatriated here.

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#3) On February 15, 2013 at 3:49 PM, MrOneHundred (34.15) wrote:

I'm speculating:

If you consider it from a long term strategy game perspective, hoarding cash reserves allows the company to minimize expenses  and save up for the next big thing they decide to sell while allowing competitors to struggle.  Microsoft, Intel, AMD, and others are fighting to get their feet into various growing markets that Apple is already a part of.

Microsoft released Xbox Music, Windows 8, and the Surface rather quickly and all at once.

Intel (yes, the chip maker) is trying to get involved in the streaming television services with Intel Media.  (It feels like the service is being thrown together quickly.)

It sounds like Apple is trying maintain its brand name's synonymous with high quality products by only placing money only where it really feels the company (and consumers) will benefit most.  They can play the waiting game because they have the money to do so.

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