If Cash is King, Apple's is an Emperor [Updated]

Apr 26, ’11 12:48 PM

Author Horace Dediu Categories Uncategorized

Apple’s cash for short-term and long-term marketable securities totaled $65.8 billion at the end of the March quarter. Cash increased by $6.1 billion.

The increase in cash is net of approximately $900 million for prepayments and capital expenditures related to the strategic supply agreements that Apple announced last quarter.

The following chart shows the historic cash, short-term and long-term liquid assets Apple holds.

As in previous quarters, the securities Apple holds are:

Cash
Money market funds
U.S. Treasury securities
U.S. agency securities
Non-U.S. government securities
Certificates of deposit and time deposits
Commercial paper
Corporate securitiesMunicipal securities

Although the asset classes are all liquid, those with longer maturity dates are classified as “long-term” securities (orange area in chart above) and are often not counted as “cash” in many financial databases.

The enormity of the overall size of this cash can be put into several perspectives:

The funds are big enough to place Apple’s CFO office in the top 100 largest fund managers in the world and larger than any hedge fund manager.
Cash growth in one quarter was higher than the market cap of many companies. For example, if pre-payments were added back, the cash increased by about the market cap of Motorola Mobility.
Current cash is worth more than Nokia, RIM and Motorola Mobility’s market caps, put together.
Apple’s cash is worth half of Google’s enterprise value.
About two years ago, in January 2009 the stock traded at a price of $78 with at least one analyst placing a target of $70 on the stock. Today Apple’s cash is worth $67 70/share.
If you owned $100,000 of Apple stock, $19,000 of that would be cash and only about $80,000 would be “at risk” capital.
If Apple had no revenues, the current cash would sustain operations (SG&A and R&D) for over 7 years or until the middle of 2018.

When analysts cite limits to the rate of Apple’s growth on the basis of the “law of large numbers” I wonder if there is an implied limit to how big this cash pile can grow. By looking at the chart its size seems to be growing faster all the time.

[Updated] The cash per share figure was wrong. It is $70/share.

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http://twitter.com/Accent_Sweden @Accent_Sweden

I wonder if the cash alone is enough to deter some companies from competing with Apple since they may fear Apple could do a hostile takeover? Or is it a non-factor in their competitor's eyes, particularly when Apple does not have a history of big acquisitions?
- Walt French
  
  I'd say the non-factor. Apple doesn't exactly rest on tradition, but it's very costly to buy a huge outfit and then junk the 3/4 of it that's redundant to your current organization.
  
  If it were to be a large buy — more than say, a tenth of that monstrous fund — it would have to be some firm with technology or infrastructure that'd take Apple years to build, and where Apple would not have the risk that Horace highlighted for Google, of competing with heretofore partners.
  
  I'd think that'd rule out a wireless carrier, for example, because Apple can't afford the deadweight of the 90% of Sprint that they'd have to drag along. There'd maybe be a bit more likelihood for a cableTV or ISP type network, but again, there'd be huge deadweight. With all that “legacy” business to support, it's awfully hard to focus on disruptive technology, which I actually take to be Apple's expertise: identify an under-served market, hit it with a blitzkrieg of new product development that keeps your margins fat due to both high volumes and competitors' slow entry, then repeat with some variations.
  
  So I presume smaller deals more on the order of P.A. Semi or Lala, some of which could disappear entirely into the infrastructure.
- chandra
  
  It would be against every business instinct of Apple's to buy a competitor. How would it help? Competing products are of little interest to Apple. If a competitor cost less to buy than its IP portfolio, then maybe, if the patents had mileage in them for Apple.
  Far better to invest in ideas being developed by companies (large and small) which Apple can apply to its future advantage…..as in chip design, targeted search, in battery tach and separately in negotiating unmatchable supply chain procurement deals that no competitor can match.
  Nothing like de-levelling the playing field to wrong-foot all competitors and starve them of the oxygen of healthy margins.
- George Slusher
  
  A hostile takeover attempt of a real competitor would bring instant attention from the antitrust divisions of the US Dept of Justice, the SEC, and more. Heck, even an attempt at a FRIENDLY merger has to go through those agencies.
MattF

One thing that's clear is that 'accumulate cash' is a fundamental element of Apple's long-term plan. Analysts tend to think of the cash in terms of what Apple could buy with it, but I suspect that Apple is more concerned with independence and enabling disruptive strategies without having to find a financial partner– the Bank of Apple is big enough for just about any venture.
- Brian
  
  Jobs has been in business for a very long time. He knows not to be hamstrung by a lack of cash. They routinely use this cash to buy out supplies so that they cannot be constrained and cause product back logs. Don't assume they are afraid to make a major purchase, because that would be a mistake. I look for them to do this at some point, just taking their time and not gambling but going for it all when they have a full house and are impossible to beat, that's more Apple's style.
  
  They are going to take the computer market from MSFT. They have nearly already done so, despite what the irrelevant 'marketshare' statistics show.
- Hamranhansenhansen
  
  With 1-click purchases combined with near field payments, maybe "Bank of Apple" could end up being literal.
Childermass

I agree with Walt that it is a non-factor. I'm less sanguine about their wisdom of seeing it would not be in Apple's interests (which it wouldn't, of course), I suspect they are simply dazzled by the upside of even a tiny slice of what Apple is getting. Moths to a flame.

I say 'of course' it isn't in Apple's interest to make large acquisitions. Wall Street obviously disagrees. They are hungry for big M&As because it makes money for *them*. History shows that nearly all big M&As destroy shareholder value. They are vanity plays by the managers, egged on by the fee-raking bankers and margin-making traders.

Apple, so far, have shown they are immune from these temptations. Maybe they have their eye on some big chunk of IP, or a fully fledged activity they know they can integrate seamlessly, but we won't know until after the event. Until then there will be cries for dividends, ludicrous suggestions about acquisition targets and silly ideas for 'new' technologies.

Keep the cash, Apple. It is your moat and ramparts.
- newtonrj
  
  " Maybe they have their eye on some big chunk of IP" – Childermass
  
  It would be a great acquisition to get the Nortel's 6,000 patent portfolio under Apple control. If ever there was an open risk of sacking that pile-o-cash, court litigation is the most likely cuplrit.
  
  Of course, Microsoft could leverage in and use those same patents with their pre-existing cross-platform license agreement from Nortel 's 2006 agreement.
  
  -RJ
- davel
  
  Yes.
  
  Apple is immune to the big multinational financial institutions.
  
  I think that is part of why they are always ragging on Apple.
Steko

I think they're saving the cash to finance a major acquisition of one of the most creative, dynamic and innovative companies in the world… Apple. They're going to take the company private.
- Nate
  
  How would this benefit Apple? (Not a rhetorical question.)
  - Alan
    
    I agree with Steko. The benefits would be huge for Apple – they really like to be in control of decisions and information. Going private would greatly increase their control over both of those. A lot of the media coverage of Steve Jobs' health centers around the company's duty to report material issues to shareholders, for example. And it's clear they want to disclose sales numbers on their terms and not be bound to release those quarterly. If the market values AAPL at a forward P/E of under 10 ex cash how could they resist?
  - Steko
    
    You make a good point about their privacy paranoia and Jobs' health. But it almost seems like they love the free advertising and a chance to bash the competition they get every quarter.
  - Hamranhansenhansen
    
    All Steve Jobs has to do to get free advertising is call a press conference.
  - Steko
    
    Going private (as opposed to just buying back a bunch of stock) is fairly extreme and unlikely because of the large amount of outside financing they'd need. Other then the reduced regulatory burden I'm not sure what huge advantages that would offer.
    
    I do think a large stock repurchase seems like a good move just as a straightforward investment.
  - chandra
    
    Buying AAPL for 12 months would move the stock and return more than the rather low rewards their cash is earning now.
    I don't know if it's legal to trade in your own shares, but AAPL is overdue for (at least) a 40% rise rise over the next year imo.
- Walt French
  
  Because Apple has to cravenly crawl to shareholders and say, “mother may I?” about every tiny little jet it gives to Jobs, or new product introduction. This is SUCH a hindrance to making money.
- Alex
  
  …except that cash doesn't belong to Apple — it belongs to the shareholders and would be returned to them should Apple ever go private. I don't see that as being in line with good financial management or with Apple's apparent strategy to date.
  
  Wall Street types like to see low cash balances because it means the company is leveraging their capital into generating profits. The flip side is that leveraging increases the risk to the company — any interruption in cash flow can cause a cascading effect that could force a company into bankruptcy (see Northwest Airlines for a good case study in a debt-free company with positive cash assets that gets leveraged into bankruptcy). Also, a large cash balance allows Apple get materials at better prices than their competition.
  
  Think about it — using the cash to obtain pricing discounts is likely to earn Apple a better ROI than the interest they'd get off an investment. The typical analyst views that money as sitting idle when the reality is it's critical to their product(ion) strategy.
  - George Slusher
    
    "…except that cash doesn't belong to Apple — it belongs to the shareholders and would be returned to them should Apple ever go private."
    
    Oh, so the shareholders would also get the desks, pens, chairs, etc, that Apple owns? The cash and securities are no different. Maybe you don't understand how a company would "go private." They'd have to buy all the outstanding stock. The shareholders would get whatever was paid for the stock.
CndnRschr

Nah, but it does prevent Apple from itself being subject to a hostile take-over and its deep pockets provide significant insulation for litigations. I'd think Apple has learnt from its years in the shadow of Microsoft that it pays to have weaker competitors to distract monopolistic accusations. It's also clearly confident that it can and does design, build and market devices and services that are better than others (and so will not follow Microsofts slow-motion implosion).

Apple has talked about having the capacity for a big investment which likely makes some nervous but there are few examples of major acquisitions (in the $billions) that have turned out that well.
- KenC
  
  I'm not sure how cash protects you. Isn't it an attraction? It makes any takeover far cheaper as the EV is much lower. Not that anyone would have enough cash and debt to buy Apple.
Chip

Apple's cash looks like it would be big enough to start its own bank … or credit card service … or electronic payment service.

Could Apple be thinking of entering Visa and Mastercard's turf?
- Brian
  
  That is much more than a mere possibility. They already have more credit cards on file than almost any other company. They are already paying much money in micropayment fees, etc… The iPhone is the perfect credit card replacement, particularly in the US. where the lame, corupt, ABUSIVE credit card companies are still using DUMB credit cards which are EASY to cheat. Most of the rest of the world has gone to smart cards already.
- Laughing_Boy48
  
  Akamai seems like it could be a useful company for Apple to own if Apple is going to compete against Netflix. Akamai's share price is relatively low compared to six months ago. With a market cap of just under $8 billion it's surely something Apple could easily handle.
  - chandra
    
    I can see that. At least Akamai's internetworking expertise and rolled-out infrastructure would be an asset and knowhow plus for Apple. It would probably add more value to AAPL than its cost – esp at current low prices.
- Walt French
  
  @Chip, go ahead & make the case for why Apple could enjoy the growth rates and profitability it otherwise does, because of some unique expertise they have. Don't forget the issues of competing with the very firms through which nearly 100% of your revenues flow.
  
  Apple's home runs are from disruptive technology finding new ways to enchant consumers. Somehow, I don't see the ability to wave a phone at the Starbucks counter as “enchanting” versus what we have today, and there are huge volumes of non-stop operations to support, that impose a huge liability to Apple's hugely valuable image as an innovator.
  
  Wait until there's a chance that Apple could take a 70% share, or work within a “standards-based” framework where an Apple-vs-Google standoff wouldn't consign Apple to unprofitability and egg on their faces.
  - Steko
    
    The disruptive potential Apple (or Google or whoever) could offer here is that they could create a frictionless near-global pseudo-currency.
    
    Unique expertise (why Apple?):
    (1) widely distributed mobile devices;
    (2) large online store operating in many countries with integrated payments;
    (3) widely rumored e-wallet for paying at vendors.
    
    Potential for growth, profits:
    Kenyan mobile company Safaricom came out with tradeable minutes and mobile payments and in a year became the biggest bank in east Africa.
- Hamranhansenhansen
  
  They could just buy VISA. That seems to me to be as likely a large candidate as any.
Steve Weller

How much of that cash is pre-tax and how much is post-tax? Much of that cash has not been repatriated, and so has not been (US) taxed.

Pre-paying the supply chain is a very good use of cash for Apple. It's devastating to the competition, requires no repatriation of the money, and lowers risk significantly. As more and more business for Apple occurs overseas, this effect will be greater and greater.
- Brian
  
  Not sure what you mean about repatriation, Apple sells everything in dollars, and pays about 25% taxes (far more than most companies). You are dead on right in the 2nd paragraph. China sales were up 250% this quarter, and this figure has been accelerating rapidly. I look for about 400% growth y/y next quarter.
  - Jocca
    
    Apple sells more to the international market than to the US during the past few quarters. A lot of the money it makes is not denominated in USD.
  - chandra
    
    But they don't bring overseas earnings back to the US which brings tax advantages, i believe.
http://www.blumenthals.com/blog Mike

@asymco
You do not speculate nor opine on the value of this strategy to Apple… I would value your opinion.
- asymco
  
  It's not a "strategy" to take money from customers and put it in the bank. A strategy would be to decide to do something with it. In that sense there is no strategy.
  
  I've suggested that a good use for the cash would be to use it to gain more control over manufacturing. Apple is already doing something along these lines by prepaying for components and financing plant construction.
David H.

Why not buy Time Warner?
They own thousands of movies, books and magazines.
Lots of desirable content to feed hungry iOS devices!
- Walt French
  
  Because it'd make for strained relations when negotiating with Disney, Viacom, etc. Make it harder for TW to work with Google.
  
  These negatives aren't show-stoppers, but this whole issue of a huge cash pile being a problem seems artificial. Apple's key problems are (1) making enough product fast enough, while not locking in costs that could be out-dated by somebody else's innovations or market shifts, and (2) finding high-growth areas where an Apple service could out-race competitors — like the 5-year lead Jobs thought iPhone had in 2007 — giving Apple the chance to define a whole market in their favor.
  
  So, I'm MUCH more interested in “what service will Apple innovate” rather than, “how will they finance an acquisition, and why would that be the right direction to do it?”
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http://www.toplocalrankings.com Mark

For all the talk and IMO pipe dreams of big acquisitions, Apple probably cannot venture into any territory represented by Facebook, TimeWarner, Disney, etc, without pretty severe anti-trust implications… especially looking forward a couple years when they are the worldwide dominant computer manufacturer, smart phone manufacturer; at least by measure of profits if not units sold.

I think the same challenges occur in the more interesting area of being their own credit facility; however this is an area they have no expertise and I wager no interest in becoming. More likely to partner with an established player to take advantage of NFC payments.

Apple's discipline is when to say no. That has been SJ and team's strength since he came back.

So in the realm of acquisitions, small smart IP that they can swallow and easily digest, that moves them forward to the areas they have already invested in is the established pattern.

Forward looking areas to conquer revolve around TV/video, smart social media – talking rather than typing (Siri), the cloud for media delivery, mobile advertising… all areas they have invested in and learned about.

These are all huge areas, with high current interest and revenue, massive forward growth rates and tied to/supporting the platforms that Apple has in place.

Horace thanks for the perspective as always! The metric of 7 years operating capital in the bank is mind blowing cartoonish. Scrooge McDuck territory… do they have a swimming pool full of money on the campus??
- Hamranhansenhansen
  
  Apple is already the dominant computer and smartphone manufacturer by profits.
Xavier Itzmann

My concern about having 20¢ in cash per each $1 I own of Apple is that the USD is quickly devaluing.

True, AAPL's inherent enterprise value grows and masks the devaluation effect, but this value evaporation should not be overlooked.
- HTG
  
  Well you're assuming that all this cash is sitting in US$, however, its highly likely that AAPL is holding cash in numerous currencies to balance the very risk you highlight… would have to delve into the 10-Q to see the impact, but it should be disclosed…
- Hamranhansenhansen
  
  It will all even out when Apple buys America at a cut rate price.
JayNelson

In 95/96, Apple was nearly lost. Nearly disappeared under the waves. One hunch is that I think there is a motivation on the part of at least one key person, of "never again". Never again to be that close. Part of helping to assure this is to have a fat lot of cushion, a ridiculous amount. Another is to develop and so instill a culture that will sustain the company for at least another generation. A job is not done until it can be done without you. The place shouldn't flail and fall because you're not there.
xtophr

How about a nationwide WiMax network? Sprint is building one for about $3 billion.
- KenC
  
  Sprint is worth about $14B right now. Buying them would probably take $20B. They also have about $20B in debt. Running a cellphone carrier would depress margins. However, if you bought Sprint and spun it off, then it wouldn't depress Apple shares. Then you could turn Sprint into an unlimited data pipe for iOS users and run all voice over VOIP. I'm sure it doesn't make any sense, but interesting.
  - Hamranhansenhansen
    
    Well, you could also say that running a retail operation would depress margins. But it hasn't, because they didn't run it the typical way. If Apple bought a carrier they would only sell Apple devices, and they would likely offer very simple pricing, like $30 per month per device for unlimited usage, including FaceTime and texts. And a lot of people would run from AT&T/Verizon to Apple Wireless like they ran from CompUSA to Apple Store.
    
    The reason I think they might do this is simply because the #1 bug in iPhone is the carrier. The carrier is the most expensive part of the iPhone, they charge artificial voice and texts plans on top of data, which keeps users from buying iPhones; the carrier is overly complicated; the carrier has holes in their network; the carrier is a huge privacy loss for the user; the carrier doesn't let FaceTime run over 3G/4G; the carrier has outrageously bad customer service.
    
    When you look at Apple doing wireless, it feels so much like Apple doing retail in 2001. There is an opportunity for them to just do a much better job than the people who are doing it now.
  - KenC
    
    I did send this idea in an email to Steve over a year ago, for exactly the reasons you cite. Obviously, Apple would run it their way and make it extremely attractive to users, driving people to opt for iPhones due to the simplicity of the plans, etc.
  - Iosweeky
    
    Wouldnt verizon & at&t immediately stop selling the iPhone under this proposition? Why would they sell a device made by their direct competitor? And it would apple time for them to complete the purchase, so it's likely you couldn't buy an iPhone subsidized in america for a good 12 months or so. I'm sure that would kill iOS marketshare considerably.
  - Pants and Plants
    
    Why doesn't someone else do this? What is stopping someone?
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delmiller

During the Q4 conference call, Steve said, “We strongly believe one or more strategic opportunities may come along, that we’re in a unique position to take advantage of because of our strong cash position."

Immediately the webwaves were inundated with reports of Apple's 'hints' that a major merger or acquisition was due in the not too distant future. But he never said 'acquisitions' he said 'opportunities' and I think the difference is important and that stating it thusly was quite intentional.

While Apple might buy a big company (something it has never done) it is more likely that they will invest in something internal–but I can't imagine what that would be either.

Can you?
pk de cville

My 2 cents:

I think Apple aims to be Earth's biggest digital content store: millions of movies, shows, traditional print publishers.

All showing in iPhone, iPad, Macs, and PCs (everywhere internet)…

The build out could cost billions.

.
russell

@Horace Good perspective on the accumulation of cash. Since Apple's p/e multiple for the time being seems to not be expanding ( for many dif possibilities), can its ever dramatic earnings increases have a meaningful impact on driving up the stock price even without any help from the p/e multiple?

The equation for a stock price (correct me if i'm wrong here) with no dividend is:
(Price/Earnings) x (Earnings) = Stock price.

It's a strange way of looking at a company that is literally printing money. In tech particuarly, P/E s always run out ahead of the companies that show this any kind of dramatic, sustained increases in revenue and earnings in the early part of a cycle and then contract at a later stage of the cycle. I'm almost starting to see their current p/e as something with limited downside but some future bonus feature built in once enough people get a clue.
- asymco
  
  The P/E is contracting, not just not expanding. Cash is expanding polynomially while the stock price is increasing linearly. If the trend continues then Apple will be worth less than book value.
  
  It's not clear to me why shareholders are eager to give the stock away.
  - Iosweeky
    
    Having 10s of billions of dollars handy for a stock buyback might be a nice thing to have around when Steve jobs announces his retirement as CEO, don't you think?
russell

PS: the cash does give them the almost exclusive ability to purchase another tech company that is worth in the hundreds of billions of dollars. The ability to pick a SURE winner very late in the game without any chance that a competitior in their industry or the company being aquired industry would ever emerge. Your Google theory holds some weight here, Horace.
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Charles

I am really impressed with the Netflix CEO. He has the look of deep insight and is aa master of media negostions. In the path of Mr Jobs, perhaps he could sell his company to Apple and become a major player in Apple's future. Perhaps even replace the man.
- Hamranhansenhansen
  
  I would be very surprised if Apple bought Netflix. They already have 98% of what they need to compete with Netflix. And Netflix has only 12 million subscribers versus iTunes Store's over 200 million.
leberumen

Horace, why did they have so much cash on Q308? According to the chart Apple just surpassed that mark.
- asymco
  
  In Q3 08 equities were very dangerous things to hold as the market was in free-fall. It probably made sense to be in cash at the time from a portfolio point of view.
  - Shashwat Nanda
    
    yes but aren't lt and st marketable securities mainly fixed income "bond" type securities. i don't think aapl would ever hold equities, that would make it a hedge fund.
  - gslusher
    
    How? They wouldn't come even close to the definition of a hedge fund. Companies can own equities, just as individuals can. Do you have corroboration of your position?
HTG

One interesting exercise, if anyone has the time (Horace?) is to look at the real option value of holding so much cash… there are well known strategic benefits related to its supply chain, and the 'comfort' that comes from having so much in the bank… I'd need to build a model and I don't have the time, but it would be a good exercise to value the cash from an option perspective to assess its economic value (as opposed to its accounting value) to shareholders…
- asymco
  
  There is a huge option value which is never measured by any financial model of the balance sheet. I'm sure that's what management looks at however.
  - chandra2
    
    What do you two mean by "option value" vs "accounting value"? Is that quantifiable?
  - asymco
    
    Option value is quantifiable. A Nobel prize was awarded for the formulation. http://en.wikipedia.org/wiki/Black-Scholes_formul…
handleym

I look at this as two orthogonal issues.

One issue is defensive — where is Apple dependent on companies that, through malice or stupidity, could harm Apple? The obvious contenders here are cell carriers, ISPs, and content companies. The problem for Apple is that by becoming an explicit player (a carrier, an ISP, a content company) they basically provide strong incentives for everyone else in that space to REALLY compete against them. So Apple might be able to get, say, every Time Warner item that exists into iTMS — but might face Sony, EMI, etc defecting. Likewise if they become a cell carrier, VZW and ATT both might well make iPhone work a lot less better on their networks. So to me it seems that Apple is in a better position constantly maintaining the ability to threaten them — and a large stash of cash helps — but without ever going so far as to actually buy one of these companies.
(Which is sad, because god knows, I think we'd all be better off with Apple getting into these spaces and shaking things up.)

So what's the alternative? Saying defense will take care of itself, and betting big to really change the world. Here are three wild hypotheses:

* Apple wants to save the world (like all Silicon Valley companies) and somehow gets into energy. We all know the story, and have seen Google's take on it — home automation to allow users to know where their electricity and water and gas are going, and allow them to improve efficiency; car computers (both for entertainment and to make vehicles more efficient); working with the power companies to get to a smart grid; etc etc.

I could see Apple being willing to be the consumer part of these sorts of exercises, but their expertise is not really in the backend. (On the other hand, Google's expertise is hardly in electric cars…)

* Steve Jobs has seen the light given his medical situation, and wants to do what plenty before him have failed to do — reform US healthcare. Again one could imagine a variety of ways of doing this. Maybe interchange SW for doctors, plus a way to get all your medical records on your iPhone; so no more of this crap of having lousy medical records because they're scattered across thirty cities. Maybe Apple providing seed money for a database to track doctors/hospitals/medical treatments for efficacy — with Apple customers getting free access to it and everyone else paying, or something— and Apple SW tracks all the insane crap related to payment of medical bills?
Maybe Apple starting a side business in genomics or something bio-informatics related? Maybe constantly adding new HW to iPhones to track health — that Nike thing, only constantly improving, so we start off with a wearable ring or whatever that tracks heart rate and temperature, then we move to devices like fancy breathalyzers that you breath into and they measure whatever can be measured that way — not just your lung capacity but if you are producing too much ammonia or too few ketones, have too much glucose or too low insulin, or whatever?

Intel have been involved in using computing to improve medicine at the individual level for years (with eg projects that put sensors in the houses of old people). They might feel Apple are the best partner to move this stuff from research to commercialization?

* Tricorder light. People have discussed for years, in abstract terms, what could be done with modern optics and MEMs to create miniature scientific machines — tiny atomic clocks, etc. We've already seen that with gyroscopes. Could you create a miniature spectrometer or mass spectrometer, that would allow you to wave your iPhone at some material and have it give you a chemical breakdown (either as atoms, or, if you prefer, as "850 calories, 68g carbohydrates, 10 g sugar")?
vsp

Apple is not like a python that swallows its victim whole. Apple is like a lion that shares its meals with other lions. Google is like a python that is greedy and after swallowing its victim whole would find that it cannot move.
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unhinged

Not to mention the decline in the US dollar over recent months.
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unhinged

"Although the asset classes are all liquid, those with longer maturity dates are classified as “long-term” securities (orange area in chart above) and are often not counted as “cash” in many financial databases."

This may be part of the reason why the P/E ex cash is such a matter of debate and the P/E ratio is so low.
Ted Kluaf

Cash is clearly not king. Some great comments. I hope to see follow up in the future. It does seem like here is a key nut in how "amateurs" and "pros" value AAPL.
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maddoguk69

I know it's not going to happen, but I just wish Apple would buy Adobe and then, frankly, gut them. They still have some good technologies, but as Jobs once said to Nike, they need to "get rid of the crappy stuff".
http://twitter.com/anicehassim @anicehassim

I think Applehave a very, very under-rated executive bench.
Besides the historic anomaly in P/E Horace references in an earlier article as being a discussion for "business historians", Tim Cook and his performance as effective day to day leader of Apple for the last few years is THE business story of all time. As evidence " there are no material disruptions from Japan".
I dont know that Reed is in the same league.
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gctwnl

As most of this is other investments, it is not exactly 'risk free'. So, except maybe for cash and cash equivalents (which do carry an inflation risk), you can't divide AAPL stock value in 'at risk' and 'not at risk'. Basically, your AAPL stock is $280 in a company and $67 in an investment fund.

However, as this investment fund is under control of the company, it has the side effect of being a stabilizer for the company (for financing innovations and disruptions).
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nick

Since no one here has said it…
Apple should buy Nintendo and combine the Wii and AppleTV and then release Nintendo's back catalog on iTunes. Nintendo has been getting hammered since the iPhone and iPod Touch was released and will only get cheaper for Apple.
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David Leppik

Homework assignment: China has $1.16 trillion in US Treasuries. At Apple's current rate, how long before it owns more of the national debt than China?
Andrew

Having a boat load of cash is not an "enormity".
- asymco
  
  I used the word in a less precise but still correct neutral sense.
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Sigma902

"f Apple had no revenues, the current cash would sustain operations (SG&A and R&D) for over 7 years or until the middle of 2018."

Did I calculate this correctly? Microsoft could last 52 weeks.
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poke

Question: What kind of resources does Apple need if it someday plans to be selling 100s of millions of iPhones and iPads per year? Answer: $70 billion is a good start.
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gslusher

How would buying back stock help the company? I understand that it would be a slight benefit to stockholders, but what about the company? They would end up with less money and fewer shares outstanding, but how is that a benefit to Apple?
- SilverOz
  
  Buying your own shares back is equivalent to “investing” in your own company, you’re effectively saying that it is good value and you expect to see a return on your investment (i.e. when the stock goes higher or when dividends are paid). It also allows a company to accumulate shares for use in profit-sharing strategies with itsemployees (like stock options or grants).
  - http://www.asymco.com Horace Dediu
    
    So does selling shares (issuing new ones) mean you are “divesting” of your company and that you’re effectively saying that it is bad value and you don’t expect to see a return on your investment? If so, isn’t management in any IPO culpable of misleading its investors?
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Chuckbarry

Steve Jobs has always referred to Apple TV as 'just a hobby' after years of money loses and failure. Yet he keeps it. Because it is the next focus area for Apple, like you wouldn't believe.
Apple changed the way music is sold. Apple changed the computers are sold. Apple changed the way telephone are sold. Apple created the the smart phone market. Apple has the BEST OSX in use. Apple changed the notebook, netbooks and iPads are sold. And Apple will changed the way TV's are sold.
With Pixar and Disney and ESPN, Apple will change the way content is delivered, the hardware used, internet protocols services, and cloud computing are used.
Every item of ipod, ipad, iphone, imac, macbook Pro, every bit of content, every use of media delivery and cloud computing is going to be built into Apple TV.
All developed within, financed within, retailed within its own stores.
Apple didn't buy Sony Walkman for iPod, Apple didn't buy some cell phone company for iPhone, etc, and it's not going to spend money on some useless, outdated company acquisition.

It's going to be new and improved development with Apple's "old money".

Just a thought.
- asymco
  
  I would not conclude that Apple TV has lost money.
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