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Apple's cash quintupled in last four years and doubled in last two years.

During the last quarter the company added $5.2 billion to its cash, long- and short-term marketable securities accounts for a total of $51 billion. This amounts to about $53 per share vs. $49.43 per share in July (making the share price about $250 ex-cash).

I would caution again that when reading commentary about Apple’s cash that many observers exclude long-term securities from the “cash” total.

To see the difference in the total, this chart breaks out the three different accounts over time.

Note that without long-term securities, the cash wold appear to have stayed roughly constant since Q4 2008.

Also note that in the third quarter of 2006 the company had just crossed $10 billion. The cash equivalents are now over five times bigger. The amount also doubled since Q3 2008. It is the largest cash hoard of any technology company.

The question of what this cash will be used for remains open with management repeating that opportunities might arise to do something big.

  • Alexkhan2000

    I guess the interesting topic here becomes what Apple will do with this cash hoard. Jobs hinted at some "big strategic opportunity" that may arise. It's hard to imagine Apple making a major acquisition although I guess there's a first for everything and something unprecedented. Some names I've seen being thrown about include Facebook, Hulu, Zygan, Netflix, Adobe, etc. None of these names really seems like the "big strategic opportunity" that Jobs mentions when looking at the Apple business model.

    Apple has a very unique culture. It would seem that a big company being acquired by Apple would not integrate well into the way Apple does things. Small acquisitions of chip designers with IP and web ad companies make sense, but I really can't think of a large company really fitting in or creating a synergy where the whole exceeds the sum of the two parts.

    Interested in your thoughts, Horace.

    • asymco

      This is a very popular topic of speculation. Personally, I think Apple should spend money on manufacturing. I just tweeted: Forget the cloud. Buy Foxconn. Pour on the coal in production and shut down competitor lines.

      • Alexkhan2000

        Bingo! The *only* thing that does makes sense. LOL Now that would be total vertical integration because Apple is, at its core, a products company. The hardware is the most discernible difference because consumers still like to touch and feel stuff as well as look at 'em. The hardware really is the most obvious differentiating factor – the industrial design and hardware engineering with the high quality manufacturing. Now that they've got the exclusivity on the Liquid Metal material, they could really differentiate their products even further. Good call, Horace!

      • iBob

        I have a hard time with the idea of buying Foxconn. They just screw the components together, and do an excellent job at that. At the present time there are production limitations caused by scarce components. Foxconn doesn't make these things; they come from vendors.

        The real weak link in delivering a good experience to the customer is the network providers. Sick, sick, sick all of them. Now if Apple wants to spend enough money maybe there's an endgame that can be played.

      • dms

        Agree that AT&T is a weak link in the US.

        But another weak link is content. Apple surprised everyone in how they disrupted the music industry. But seems like other industries are taking a more cautious and confrontational stance towards Apple.

      • Alexkhan2000

        I gave this idea more thought and I think there'd be one major political implication or stumbling block for Apple doing something like this. In an economic climate in the US with 10% unemployment rate and the country's still negative view and growing weariness of China, a major acquisition of a Chinese company (albeit owned by a Taiwanese company) that employs 1 million Chinese by the most visible and "glamorous" American company would cause a political firestorm. It will *not* go over well at all with the American public when so many are crying about jobs lost to China.

      • EricE

        With as much as Intel is jerking Apple around with their grab to try to squeeze out nvidia and AMD GPUs, I wouldn't be surprised if Apple doesn't go for AMD, Micron, Samsung, TI or some other foundry to indeed get control of their own CPUs or Memory chips. Or perhaps a display manufacturer – or all of the above!

        I agree with iBob – they don't need Foxconn – they do their job, and do it very well. Apple wouldn't be served by trying to take them over.

    • Dsquared

      Rimm? Buy the Rimm corporate customer base and make a version of ios that will use the blackberry service. Ok I guess you still need to make some chicklet phones for the dinosaurs.

  • asymco

    There is a long discussion on the difference in the last quarter's update: http://www.asymco.com/2010/07/31/apples-cash-upda

  • Iphoned

    I think everyone understand that “cash” includes long term securities.

    The more interesting question is what they will do with $50b soon to be $70b. It seems Jobs clearly signaled a massive acquisition.

    It is just hard to imagine who might that be that would make sense to spend such massive $$

    – arm?, a cable co? A major network? A wireless operator? Facebook? Netflix?

    • http://twitter.com/yoshipark @yoshipark

      Disney? :)

    • Alexkhan2000

      A site called Two Cents speculated that Apple would acquire Facebook and groom MZ as the heir apparent at the combined companies but that sounded like tabloid trash. ARM is interesting but Apple would then compete head-to-head with Intel and other chip suppliers… Not sure Apple being its own ISP and competing with other cable, carrier, and ISP companies really makes sense… Don't think Apple wants to compete with AT&T and Verizon by snatching up someone like Sprint… Facebook would be ridiculously expensive and I really don't think it's a good fit for Apple. Netflix? Makes more sense but it's just more content to add to iTunes. Major network? Then Apple would have to compete with all the other networks that they're trying to convince to join in for Apple TV. Like we both said, it's really hard to imagine a large acquisition that can be viewed as a big strategic opportunity. But, of course, Jobs and his lieutenants must see things that we can't.

    • kevin

      Maybe everyone here understands that "cash" includes long-term securities, but most financial blogs and websites (including Forbes and Fortune) don't always remember to do so.

      Jobs carefully used the words "strategic opportunities" twice, so it need not be spent on an acquisition. It could be used on capital investments as well.

      • Marc in Chicago

        It's not that Forbes and Fortune forget about long-term securities. It's just that in the financial realm, cash is only that which is completely liquid. By that definition, short- and long-term securities are not cash.

        Really, this chart should be labelled, "Cash and Securities."

      • kevin

        I think Apple includes those short and long-term securities because they're US treasury bills and bonds, which have been very liquid.

      • asymco

        That's exactly right. I did not check the latest filing (not even sure if it's out yet) but historically the instruments Apple has purchased for long- and short-term are equally liquid. Accounting convention separates them but it's deceptive to keep long-term out of the "cash" value and Apple's CFO states the full figure every conference call.

      • JonathanU

        Actually the technical accounting practice for a long-term security or a short-term security depends entirely on the maturity date of the security in question, so long as the debt investment is classified as being held-to-maturity. So AAPL's long-term securities are essentially debt investments which have a significant maturity date and which have been classified as being held-to-maturity by AAPL.

        When calculating a firm's net cash position, one should always include long-term securities, as these are effectively the equivalent of cash. Forbes, Fortune et al are wrong when they are calculating a business’s net cash position for precisely this point. Hence why any analyst worth their weight will never use any of these sites for financial analysis and will always go straight to the annual reports…

      • Marcos El Malo

        Well, that sort of makes sense, and of course one should use GAP to calculate cash reserves.

        I guess where I get confused is that (it seems to me) money tied up in long term investments are not liquid by definition (at least by the definition that I understand).

      • JonathanU

        Agreed it can be confusing. You essentially need to look at it like this:

        I own a bond that has a maturity for the next 10 years. I am going to keep it until it matures in ten years. This therefore makes it a long-term security as it isn't going to be sole in the next 10 years. However, say the bond is a treasury bill; the market for US government debt is so highly liquid that holding one vs. cash is virtually the same thing. Therefore even though the debt has been classified as a long-term security, AAPL could at a push (say in the event of default) liquidate their long-term securities very very easily.

  • sweeps

    Money and Energy

    Admittedly, I'm not knowledgeable about all the rules and regulations, but I think Apple somehow will buy into the financial industry, and begin to disrupt the financial industry. Maybe it buys a bank. It could feasibly become like a PayPal, or the transaction services of MasterCard or Visa, couldn't it? "Visa Inc. and DeviceFidelity, Inc. are working to allow Apple iPhone users to make payments by simply waving their iPhone in front of a contactless payment terminal." (source: http://macdailynews.com/index.php/weblog/comments

    I'm just brainstorming, here, but think of all the inefficiencies in the financial industry. Apple always engineers things with the consumer in mind. Something as simple as when you travel to another country and have to use an ATM to get cash costs money. I'm sure Apple could simplify that. How about the bankers raising their fees after we bailed them out? I suspect there are millions of customers that would love to jump to a new trusted institution. Think of all the transactions happening with the 160+ million iTunes users! This is just the tip of the iceberg, and Apple could keep it simple.

    Another totally different idea I have is Apple creating a solar powered battery recharging device that will allow the hundreds of millions, maybe billions, of smaller electronics devices (including ALL mobile phones and laptops) get off the grid. This device is solar powered and charges up a bigger battery during the day, and then recharges our mobile devices and other electronics at night. Again, I really don't know the feasibility of such things; I'm just brainstorming.

    • Marcos El Malo

      I want to praise your creative thinking before I dis it. So please keep doing it! :-)

      My experience with getting cash from ATMs when visiting a foreign country is that it's already pretty efficient. I get charged a percentage point or so over the exchange rate, and if I use a bank that is a member of my bank's network, I'm not charged a fee or not much of one, if I'm withdrawing the max cash. One dollar is 0.20% of $500.

      As you point out, if Apple were to do anything in this area, I think it would be with "mobile cash", i.e. using your mobile as a "point-of-payment". (Maybe we can call it POP in distinction to POS, point-of-sale.)

      The solar is a good idea, but I'd rather have Apple leave that to third parties. It's getting too far afield from their areas of expertise. Instead, Apple should (and apparently is) focusing on battery technology itself, with the benefit being product differentiation. The main reason I would see for Apple pushing solar R&D is to get Green Peace off their backs.

      • sweeps

        Marcos, thanks for your response. I want your bank. I'm in California. I've traveled overseas quite a bit, and have talked to many other travelers. My banks include WellsFargo, USBank, Chase, BofA, and HBSC. I get charged $5 per ATM transaction (WellsFargo). Using various credit cards outside of the US is a 3% transaction fee (all my banks). Wire transfer? $30. And why do I even need to go to an ATM in the first place? Travel is just one example – there are many ways Apple can disrupt the financial industry, like it did with music, movies, etc.

        I don't see Apple doing many more electronics devices other than what they're doing presently. What more could they do? GPS or RFID devices? Razors? Toasters? In my opinion, Apple could do any of the above well, but I think Apple is really about bringing change to stodgy business models, and winning big. Imagine, it's payday. You get your paycheck, you activate your iBank app, take a picture of it with your iPhone and it deposits directly to your account. You stop at the grocery store, buy some beer and brats for you, arugula and pretty flowers for the girl, wave your iPhone at the self serve checkout lane and you're on your way. This sort of thing is already happening, and Apple is probably the best positioned to facilitate this.

        iPhone cash and quick, easy transactions. Europeans will love it. They have SO MANY coins cluttering up the pockets! I have a theory – that's why there are so many lines to wait in! For illustrative purposes, imagine if it takes each individual an additional 5 seconds to count out the change, that's 10 seconds between the customer and merchant/teller. Maybe that happens on average 2 times a day per 325+ million eurozone people. That's over 100 million minutes lost every day! Or 1-2 million (productivity) hours lost in lines each day. Perhaps I exaggerate (not), but there's opportunity out there and Apple is probably the best positioned to facilitate this.

        Sorry Horace. My math may be off… And I'm off my soap box.

      • Marcos El Malo

        I'm with BofA. Last time I traveled extensively and was using foreign bank ATMs was in 2004, so things might have changed since then (and it's possible that my memory is failing me, too). I made sure to use banks that were members of Interlink, same as BofA. As I said, I was charged a few points over the exchange rate + around $1 per transaction.

        I think your idea is good and I'd like to see it in some form. However, Apple has been showing a lot of discipline in not getting too far afield from their focus. iPods, iPads, iPhones, even Apple TV are not too different from their original business of selling computers and peripherals. While they've made bold moves, they're judiciously bold, if you can forgive the oxymoron.

        However, I could see Apple partnering with another company, say a Visa or Ebay, perhaps buying a large non-controlling stake in the company.

        Horace, you don't mind me and sweeps rambling like this? I figure we're OK as long as we don't get too far off topic and keep it civil.

  • John

    It is hard to grasp what Apple could do with this much cash.

    Two guesses.

    1) As suggested earlier Apple somehow becomes their own credit agency or transaction service such as Paypal or Visa. It makes sense that if the iPhone is initiating the transaction they might as well complete it. As hardware costs trend towards zero this gives them a solid revenue stream.

    2) Some sort if investments like Liquid Metal. In the next ten years we’ll see a raft of exciting new technologies and materials coming online in batteries, displays, storage, displays, and materials such as graphene.

  • KRIS

    ‎"We'd like to continue to keep our gun powder dry" – Steve Jobs
    Got to love that :D

  • Billy

    Buy Verizon and HTC, and totally screw Android in the US?

    • JonathanU

      Would never get past anti-trust regulators.

      • fivetonsflax

        Nor should it.

  • http://www.pixaria.com/ Jamie

    Perhaps they're looking to invest in securing raw materials or avoiding materials shortages in the future? Many of the natural reserves of key chemical elements used in electronics (such as germanium, niobium, hafnium, rare earth metals etc.) are running out and once they're gone, that's it. Recycling and innovations in materials sciences to provide substitutes are the only ways to avoid supply problems in the future.

    I can definitely see Apple investing to circumvent these types of issues either by buying materials engineering firms or by securing stocks of key materials through recycling schemes or stockpiling.

    • Marcos El Malo

      ". . . or stockpiling"

      Interesting. Apple is already hedging at the component level, so this isn't that big a stretch.

  • JonathanU

    This isn't really an acquisition idea, but I think AAPL needs to increase the number of software developers they currently employ. The amount of innovation that the company has been pumping out has meant a number of probably pretty interesting projects which could lead to the next blockbuster product have most likely been sidelined. I think Google has this right to a certain extent. Hire the best and brightest, let them loose and see what happens. Yes, it could be the most mammoth waste of money in corporate history (not likely, look at the AOL Time Warner merger etc.), but sometimes you have to plant the seeds without knowing what plant/tree might grow from it. Not to mention the software development focus has been primarily centered on iOS to the neglect of OSX to a certain extent. No need for this, just hire more developers…

    Apple should also seriously consider throwing their cash around to ramp up/secure their manufacturing supply going forward as already alluded to by Horace. This could only be a good thing…

    • Marcos El Malo

      If Apple would be recruiting programming talent for specific projects, this might be a good idea. Perhaps they already are! Jobs has made a point about Apple not being tied to and dependent on other companies' tech in his open letter concerning Flash.

      It would make sense for Apple to be developing an in-house alternative to Adobe's suite of applications (I'm mostly thinking about Photoshop and Illustrator) in case their relationship with Adobe becomes insurmountably rocky. If they've already done so in secret, they might already be using this as a stick with Adobe (without revealing how far along they are). Of course, Apple is already competing directly against Adobe and others with Final Cut, Aperture, and other products. Software might not account for a large chunk of Apple's profit, but it certainly offers strategic advantages.

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  • http://www.notesark.com iphoned

    $71b in cash by next October.

    Maybe they can buy a couple of small countries?

  • gerard

    I hope and expect Apple to stick to what it does best . buy into new technologies to add to its know-how .
    Still , if I had to make a guess I would love e to see a Television made by Apple . can you imagine how different it would be from today's copycats ??