So what are they saving up 40B$ for?

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    Posted: 28 September 2010 09:35 PM #31

    NatasRevol - 28 September 2010 10:48 PM
    deagol - 28 September 2010 10:44 PM
    NatasRevol - 28 September 2010 07:18 PM

    http://www.apple.com/pr/library/2010/07/20results.html

    Interestingly, that also shows that if Apple would just put their cash in a money market fund, they’d do a lot better.  They lost $9B in ‘investing activities’ over the latest reported 9 months.

    I think you’re misinterpreting the cash flow. They’ve definitely NOT lost $9B on anything. It says “cash used in investing activities” was $9.5b. Net Income over the same 9 months was $9.7b. They’re just putting the money in the bank.

    I did struggle with it, but I can only interpret it as the net cash position in investments went down $9.5B over the trailing 9 months.

    Perhaps it just means they’re buying more long term investments and so don’t have the cash.  But I guess that’s what you mean by putting it in the bank?

    You can see from the detail, purchased $41.3b in marketable securities, and proceeds of $19.8b from maturity and $14b from sales of marketable securities, for a net investment of $7.5b. And a couple billion more for acquisitions, property, plant and equipment.

    Not sure what you mean by “net cash position in investments.” Surely an increase in investment would imply a reduction in cash, all other things being equal. Given that there’s a $12.9b increase in cash from operations and another billion from financing activities, there’s still a net increase of $4.4b to the cash and equivalents account.

    As to any possible losses on these investments, you’ll find that in the 10Q (big PDF file), Note 2 ? Financial Instruments: Cash, Cash Equivalents and Marketable Securities (page 10-12), you can see they’ve lost nothing on these investments:

    The Company had net unrealized gains on its investment portfolio of $79 million and $57 million as of June 26, 2010 and September 26, 2009, respectively. The net unrealized gains as of June 26, 2010 and September 26, 2009 are related primarily to long- term marketable securities. The Company may sell certain of its marketable securities prior to their stated maturities for strategic purposes, in anticipation of credit deterioration, or for duration management. The Company recognized no significant net gains or losses during the three- and nine-month periods ended June 26, 2010 and June 27, 2009 related to such sales.

    Then there’s a table describing the unrealized losses of $34m and $16m on total corresponding investments fairly valued at $9b and $2.4b as of Jun10 and Sep09 respectively (thus improved from 0.7% to 0.4% unrealized losses), aggregated by investment category and length of time continuously showing an unrealized loss.

    The unrealized losses on the Company?s marketable securities were caused primarily by changes in market interest rates or widening credit spreads. The Company considers the declines in market value of its marketable securities investment portfolio to be temporary in nature.

    Again, although both are inconsequential to the principal amount, notice the unrealized gains significantly exceed the unrealized losses.

         
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    Posted: 28 September 2010 10:41 PM #32

    Thank you for setting me straight.  I obviously needed it!

         
  • Posted: 28 September 2010 11:13 PM #33

    I agree with all the benefits of a huge pile of cash, but given the size of the stash, and the increasing rate it’s growing, it really is time find a way to make better use for at least the quarterly excess.

    1. Whatever can be done to increase production rates

    2. More Apple stores in more countries. The best retail square footage in the world. But, I put this behind #1 because Apple doesn’t need more stores with empty shelves. Also, I wonder how much faster they can really go as prime locations and the refurb work can’t be done very quickly.

    3. Okay, I’m changing position on this one. I think we’re about to hit 50B and I will change my way of thinking that a dividend isn’t necessary until that future day when growth starts to slow down. I think we can afford 2B a quarter to go back to shareholders and merely slow the growth of the cash. I know all the arguments against, but I think it will increase demand for the stock as a new class of institutional and retail investors will now be buying Apple. As well, given our tendency for wild swings a little yield support as a stabilizer wouldn’t be a bad thing either. It will also head off some upcoming anger that you can easily see coming from dissident investors who are about to get pissed for not seeing some of this cash not coming back to the shareholders. There, I said the “D” word….now come and get me!!

         
  • Posted: 28 September 2010 11:51 PM #34

    It feels to me like since people can’t think of a reasonable way to invest large sums of money they feel it should be returned.  Maybe that would be prudent but I’m hoping that they have more grandiose plans in mind.  I don’t know what’s left of Bell Labs or Xerox Parc but if there is something this country is in serious need of it’s a vision/hope for a better future.  Apple has been more of a technological implementer than inventor historically.  Why not an Apple Labs with the intent of actually building resultant products.  Robotics, waldoes, artificial intelligence, Reardon Steel, Arthur Clarkes elevator to an orbital station?  Grab the craziest one you can find and try to build it.  You might not get the intended result but they’ll probably stumble across 10 other really great things just from the attempt.  We need our visionaries desperately.

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    Posted: 29 September 2010 12:41 AM #35

    BillH - 29 September 2010 02:51 AM

    It feels to me like since people can’t think of a reasonable way to invest large sums of money they feel it should be returned.  Maybe that would be prudent but I’m hoping that they have more grandiose plans in mind.  I don’t know what’s left of Bell Labs or Xerox Parc but if there is something this country is in serious need of it’s a vision/hope for a better future.  Apple has been more of a technological implementer than inventor historically.  Why not an Apple Labs with the intent of actually building resultant products.  Robotics, waldoes, artificial intelligence, Reardon Steel, Arthur Clarkes elevator to an orbital station?  Grab the craziest one you can find and try to build it.  You might not get the intended result but they’ll probably stumble across 10 other really great things just from the attempt.  We need our visionaries desperately.

    Could not agree more, that is why the re-purposing of NASA really bothers me. So many great things have come from the space program.

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    Posted: 29 September 2010 12:57 AM #36

    Apple is a “Real Artists Ship” company.  We’ll never see Apple Labs so long as SJ is CEO.

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  • Posted: 29 September 2010 01:32 AM #37

    Mav - 29 September 2010 03:57 AM

    Apple is a “Real Artists Ship” company.  We’ll never see Apple Labs so long as SJ is CEO.

    Maybe, but I do recall reports of a mea culpa to one of the HP guys when he was kicked out of Apple that had to do with him dropping a mantle that was bestowed upon him or sum such.  That would leave me believing that there is a bit of pioneer and not just builder in him.  Besides…,he’s more than fulfilled his shipping ambitions and may be open to considering “what’s next”.

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    Posted: 29 September 2010 04:43 AM #38

    BillH - 29 September 2010 02:51 AM

    ...  Why not an Apple Labs with the intent of actually building resultant products.  Robotics, waldoes, artificial intelligence, Reardon Steel, Arthur Clarkes elevator to an orbital station?  Grab the craziest one you can find and try to build it.  You might not get the intended result but they’ll probably stumble across 10 other really great things just from the attempt.  We need our visionaries desperately.

    This is the early Apple.  Many pet projects of senior management prop up.  Lots of resources spent with no result.  All these wasteful expenditure were stopped during second coming of SJ.

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    Posted: 29 September 2010 04:47 AM #39

    cranium - 29 September 2010 02:13 AM

    ... some upcoming anger that you can easily see coming from dissident investors who are about to get pissed for not seeing some of this cash not coming back to the shareholders. There, I said the “D” word….now come and get me!!

    Let’s pray that these dissident investors sell their shares so we can pick them up cheap.

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    Posted: 29 September 2010 05:14 AM #40

    I like your thinking, Mace.  smile

    When growth is as explosive as it is, despite the “large numbers” Apple’s already putting up, dividends are utterly irrelevant.  Let’s revisit the subject after FY 2011.

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  • Posted: 29 September 2010 06:41 AM #41

    Dividends may be irrelevant, but we’ve all been down the road where buybacks increase returns for shareholders (so long as the share price increases afterwards).  And since almost all of us here believe AAPL is undervalued, I just don’t understand why people aren’t more supportive of buybacks.  Don’t you want to make more money?!?!?

    On a side note, dividends are terrible for holders of options…  this is one of my main concerns about buying LEAPS or other long dated options in AAPL.  A large one time dividend like what MSFT did would wreak havoc on them for sure.

         
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    Posted: 29 September 2010 07:16 AM #42

    JonathanU - 29 September 2010 09:41 AM

    ... And since almost all of us here believe AAPL is undervalued, I just don’t understand why people aren’t more supportive of buybacks.  Don’t you want to make more money?!?!?

    Buy n hold investors don’t need stock buyback because after some time, any short-term stock price increase would vanish.  Any theoretical benefits would not last.  Don’t trust textbook.  Do some due diligence on businesses that have done stock buyback.

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    Posted: 29 September 2010 08:43 AM #43

    Buying RIMM is not in the cards. Apple’s enterprise strategy against BlackBerry is to leverage Microsoft Exchange. Once Apple has a sufficient enterprise foothold, I think they’ll provide their own solution.

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  • Posted: 29 September 2010 09:57 AM #44

    There are only two things I can think of that might use this amount of cash.  The first would be if Apple bought or created it’s own countrywide transmission network.  The second would be if Apple got into another field entirely such as auto manufacturing or a new technology such as a breakthrough battery technology.

    Frankly, I could Imagine either happening.

         
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    Posted: 29 September 2010 10:08 AM #45

    We as investors all know what kind of opportunities can present themselves when some unforeseen “black swan” event comes to pass.  As with BRK and WB, having a stash of cash to capitalize on these types of opportunities is a great thing to have.

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