Having added $20 billion last year, Apple's cash growth suggests total could top $100 billion next year

The following chart shows the value of Apple’s cash and cash equivalents for end of 2010:

This represents $64/share (current price per share is about $340, making the enterprise value about $276).

The company was trading at $64 per share in July 2006.

Here is a list of iconic companies whose market cap is less than Apple’s cash.

  • Visa Inc. $59.63b
  • American Express Company $55.8b
  • The Boeing Company $53.16b
  • Morgan Stanley $43.5b
  • The Dow Chemical Company $41.8b
  • NIKE, Inc. 40.22b
  • Eli Lilly & Co. $40.12b
  • Texas Instruments Inc. $40.92b
  • Nokia $39.92b
  • News Corporation 37.72b

I would also make note of the trajectory of the cash. Growth is accelerating. The last quarter Apple added $8.7 billion in cash. A year earlier it added 5.8 billion and the year before that $3.6 billion.

The amount of cash added is more than the amount of cash the company had five years ago.

In 2010 the company added $20 billion to its cash reserves. In 2009 the company added about half that amount.

If the trend continues, Apple could see $100 billion in cash by this time next year. That’s about what HP is worth now.

  • dchu220


  • And Apple is just warming up …

  • Pieter

    Apple added $8.7 billion to the cash this quarter, while according to… the net result was $6 billion?
    What did I miss?

    Could this cash hoard become problematic for Apple?
    If next year Apple has $100 billion, the enterprise value would be 'only' $250 share.
    In a couple of years, the enterprise value would drop to zero?

    Will Apple have $100 billion in revenue next year? Wow…

    • gctwnl

      I think the cash itself is also generating a 'profit' (that is valuation growth) by itself. So, 8.7 added, of which 6 from profits, means a 2.7 from the 51 that was already there. That translates to a 5% investment result from its cash.

    • NotSoFriendly

      Basic accounting…

    • asymco

      Earnings are not cash flow. Earnings is an accounting interpretation of what is (among other things) taxable.

      You need to look at cash flow: $9.8 billion

    • JonathanU

      Cash and profit are two different things in accounting.

      The reason cash increased by $8.7bn is most likely due to a negative working capital position. Apple pays their suppliers a lot slower than they get paid for their products. They therefore probably (I haven't actually checked the numbers recently) have negative working capital in which every dollar increase in sales leads to a positive increase in cash generated through working capital.

      This is just a hunch given I haven't checked the numbers reported last night yet, but it's usually the most likely culprit for a greater increase in cash than the increase in EBIT would suggest.

    • "Could this cash hoard become problematic for Apple?
      If next year Apple has $100 billion, the enterprise value would be 'only' $250 share.
      In a couple of years, the enterprise value would drop to zero? "

      Well, you are assuming that the shareprice stays the same. Most likely it will not.

  • gctwnl

    In addition: You can see that partly because the long term marketable securities have grown most. The market has recovered over the past two years and it is reflected in their portfolio.

  • hahnchen

    This is getting ridiculous. How much of a war chest do you need? Given the growth of the stock price, I'm not too bothered about a dividend, but there are better ways to make money with $60B other than having it sit in a bank.

    • gctwnl

      Standard investment economics says this is so. But there are more effects than just direct economic effects. For one, the 'war chest' is something that buys Apple stability en reliability (also in the eyes of investors) and that again minimizes the risk of doing business with Apple which in turn should lower the prices they pay. There are many such effects and the default investor 101 classes do not cover these effects. (But then again, the default 101 economic is often ridiculously simplified with respect to the real world as the credit crisis illustrated rather forcefully)

      Maybe they can grow their war chest enough to take the company private :-). That would be the mother of all 'give the money back to the investors'…

      • hahnchen

        You don't need $60B for stability and reliability.

        I'd quite like to see some bold strategic buys.

        OmniVision? NXP? They're still small fry.

      • dchu220

        Well… Not to be an ass, but it really doesn't matter. Apple isn't going to succumb to pressure to give dividends or to buy up companies.

        In their eyes, if you have issues with how they manage, you can sell your stock.

      • EricE

        "in their eyes, if you have issues with how they manage, you can sell your stock."

        Which is a view I wish more successful companies would take. Why would I want to buy into a company and then have them listen to other idiot stockholders on how the company should be run?

        I bought into the company based on the merits of it's management, not the other idiot stockholders!

      • arjun_

        Why would those, in particular, be acquisition targets?

    • FalKirk

      Premise: Apple is one of the best run companies, if not the best run company, in the world.

      Premise: Apple is hoarding cash for a reason. Apple didn't "accidentally" accumulate 60 Billion in cash. They didn't put the cash in the bank and forget they had it. They have targeted this money for something.

      Conclusion: If you're a long term Apple share holder you should be thrilled with this move. Apple, the best run company in the world, is hoarding cash for a secretive purpose known only to them. This portends good things. Very good things. And if you're a short term Apple share holder only interested in the near term value of Apple stock then let me give you a little advice: Get Out. Apple is in it for the long run. You should be too.

      • Joe_Winfield_IL

        Well constructed argument. It's hard to disagree with either premise, and the conclusion is logical. Still, I would prefer that they at least use a bit of the cash to buy back enough shares to prevent dilution. Apple is very generous with options (which is a good thing), but they could easily apply enough of their cash to offset this.

    • Martin

      Apple is effectively their own investment bank at this point. They announced that they're using $4B to secure production, which is a stupendous use of money. Tech companies routinely become constrained as global demand for everything from memory to displays to assembly lines at Foxconn goes up. Apple has both the margins and the cash position to beat anyone, including big hitters like HP back, guaranteeing that their products go out. I know back when they did their strategic flash purchases that there were more than a couple of competing products that never made it to market because they simply couldn't get components – Apple had bought up everything in advance.

      Apple could use this money to fund app development if that ever seemed at risk and they're putting big money into their retail push, and during all of the credit crisis, Apple just coasted right through it.

      I can also think of 3 huge market pushes Apple could choose to take, each of which would require a huge chunk of that warchest. Big, big bets, but they'd be redefining moves for each market if they did.

  • iAppleTennisU:-)

    Apple management is doing just fine for 12 years now! As a stock holder the growth of the stock is amazingly great and more to come. "Don't fix it if it's not broken" I believe!
    Dividend or splits are just bonus and not necessary. I do think Apple should continue to accumulate the extra cash each quarter for that : "one or two" strategic buy that Steve Jobs talked about.
    We all should be saving more as Apple is doing no matter how small or large!

    AAPL = $422 in 2011 and add $100/year because by 2015 = $828!!!!
    …. What do you all think? Remember back in 2006 Q4 the revenue total was $20 Billion and last FY2010 Apple's total revenue was $65.22 Billion!!! This 2011 it will be about $86B!!! BUY! Buy!

  • giromide

    If I’m not mistaken, Apple has pushed some cash next door to Nevada under the name Braeburn Investments. They chose Nevada due to its lower tax rates.

  • tvaltone

    what apple sells is ipod and this xmas might have been the last good one… so badtimes ahead….

    • CndnRschr

      Ummm…. yes, that's why iPod Touch sales increased 27% – bad times indeed. There is more profit in the iPod Touch and its an iOS device which adds to the critical mass of that ecosystem. I doubt Apple cares two hoots that overall iPod numbers are decreasing when it has gangbuster sales increases in the iPhone, iPad and even Macintosh lines. Apple doesn't rest on its laurels and expect a product line to grow indefinitely. Moreover, there is no evidence that iPod sales are being lost to competitors (such as, ahem, Zune). Instead, people are migrating to the iPhone as their music device which has a much larger profit per device. Indeed, with the strength of iTunes, its likely they could revamp the iPod line lightly each year and still maintain mp3 player dominance.

    • Mozz

      Quite the contrary. While iPod sales may have gone down, keep in mind that more than half of those iPods are iOS devices.
      Just as Tim Cook talked about dumb phone owners becoming smart phone owners, dumb iPod owners are trading up to become smart iPod owners.
      Apple found the golden goose with iPod but it hasn't stopped them from innovating and seeing that MP3 players are a dead end road.

    • Don't forget that there's an iPod in each iPad and iPhone

  • Charel

    Apple gets 62% of its revenue from overseas, so a lot of its cash and cash equivalent must be overseas as well. Then, it pays 25% in tax which will be due in the US and overseas as well. It cannot repatriate it's cash without paying a huge amount in US taxes. There must be more to it then pure totals in my opinion.

    • Horace the Grump

      Oh no… their tax accounting will be way smarter than that!!

    • JonathanU

      Very good point. I wander what discount rate should be applied to the cash that is held outside the US if the company wanted to repatriate it?

      Similarly I was under the impression that there was quite intense lobbying by the tech sector (amongst others) to try to get an amnesty for foreign earnings to be repatriated to the US? This is getting more and more critical an issue as Apple's cash hoard keeps mounting.

  • davel

    great post

  • ROFLOL!!!
    we take note when heroic achievements -yes, heroic, as in a hero- occur before us, even those so well stated, but so quietly, as done in the above entry…

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  • Horace the Grump

    As the cash piles up even higher the question will increasingly be asked what Apple will do with it all… The table of companies with mkt caps less than Apple's cash hoard is interesting, but does not indicate that Apple would actually consider any of these companies as a takeover target.

    What Apple should be doing IMO is considering a share buyback… It would be the best use of their cash and a strong signal to investors everywhere that Apple is focused on financial management as much as it is on the business…

    As a shareholder you have to be worried that all that cash is burning a hole is someone's pocket, somewhere inside Apple and it is a dangerous thing indeed… it risks cash being thrown as stupid and pointless projects that end up burning shareholders.

    So having some financial discipline and giving it back to shareholders not only sends the right signals to shareholders that the cash won't be squandered foolishly…

    IMO this is the single biggest issue worrying professional investors about the stock…

    • gctwnl

      The professional investor community is not that much of a good guide when looking at Apple, it seems. And squandering cash foolishly is not what Apple is famous for (the opposite, more like it). Personally, I am not that worried about that cash (but then again, I am not a professional investor).

      Still, there is not that much I can see Apple do with all that cash that is useful. A large takeover with enormously differing cultures is not good for Apple and there is only so much money you can spend on good innovation (especially when you're already so bizarrely effective). So, a large risk is indeed something that could be worrisome. OTOH, Apple could buy content (movies, TV, music, book rights) to make sure the content stays available. But probably it would not be allowed by the US or the EU.

    • FalKirk

      I apologize for repeating much of my earlier post. 1) Apple is a premiere company. 2) Apple is accumulating cash for a reason. 3) The opportunity Apple sees must be much, much larger than the 60 Billion in cash that they've accumulated. Think about THAT for minute. What kind of an investment is worth MORE than 60 Billion (and counting) dollars? 4) Apple's management should be given the benefit of the doubt. They've more than earned it.

    • r00tabega

      <quote>As a shareholder you have to be worried that all that cash is burning a hole is someone's pocket, somewhere inside Apple and it is a dangerous thing indeed… it risks cash being thrown as stupid and pointless projects that end up burning shareholders. </quote>I love it. Investor community "worried" that Apple, the most successful stock in the past 5 years, is not successful enough.Cash is power and freedom. Why waste it on pumping up a stock valuation that's already the 2nd largest in the world? Apple just announced a $4.6B deal on critical component supply for the next several years. Perhaps they have more of this that we don't know about.It's hard to argue with success

    • dubTX

      Look, this is not MSFT, it's AAPL. They aren't going to use their "war chest" to produce innumerable failures. Once AAPL starts diverting that cash to make things like Kin, Zune, Vista, et cetera, then you can worry. Worrying too much already? Sell your stock. If current shareholders "want money back", they can sell a few of their present shares. I don't get all the problem with Apple having a lot of money.

  • Andreas

    So who are takeover targets?

    – ARM
    – SanDisk
    – Adobe
    – Microsoft
    – Imagination Technologies
    – Sony
    – Disney

    Did I forget any?
    What’s your bet?
    Who will do an analysis? *wink*

    • asymco

      If there is a big acquisition (which I doubt) I think the most common reaction will be: "Whoa, I did not see that coming."

    • dubTX

      Apple will not acquire any company that would corrupt Apple's corporate culture. Even if AAPL could buy MSFT or Sony, what would be the point?

  • Mater

    ARM? It would actually do more harm than good. Mobile competitors (Google) would reflexively run toward Intel and Intel would love to get a second crack at the mobile market.

    SanDisk? Maybe if it ensured a stable supply of memory but SanDisk's margins are probably lousy.

    Adobe? It would be just desserts but still not a great ROI on the $20b it would cost. Too much money just to put Flash down (though it would deprive Google of a partner).

    Microsoft? Too expensive even at $100b but Microsoft's shareholders would like the management change with a cash/stock deal. The US Justice Dept. and the EU would nix the deal though (monopoly). And Steve kinda hates Windows. In MSFT's favor, they still pretty much print high margin money from their existing businesses.

    Imagination Technologies: Maybe.

    Sony: Too much of a basket case of a bunch of business silos that do little well right now. Apple Management could clean it up but it would distract them from what they do best. And not enough ROI. Cultural problems too.

    Disney: It's not like Steve really needs to get Pixar back. πŸ™‚ And they just aren't in the same core businesses. Steve's happy enough to influence things from the board of directors.

    And I'll throw in:

    HP: A lot of money to dominate the corporate market but it would put Steve squarely in competition with Larry Ellison who is a friend. Of course, everyone would forget about canceling XServe. And too much money just to get Palm patents. πŸ™‚

    IBM: Ditto.

    Intel: A game changer on many levels. Might actually get by the anti-trust guys (but it would be close). And you get to make your own chips (CPUs, mobile, chipsets, SSDs). But you also gain their Atom business which is in direct competition with your ARM-based product lineup. If Atom was ready to blow past ARM in terms of speed and power consumption, it might make sense (Apple's changed CPU platforms a number of times in 20 years)

    AMD: Much cheaper than Intel and you get ATI. But their CPU chip tech is inferior and they have no mobile strategy outside of graphics. Not enough ROI.

  • kkk


  • Why not buy Dropbox already? It would be like a rounding error in their cash.

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