Apple Poised to Surpass Microsoft's Cash - Now What?

According to Piper Jaffrayis Gene Munster, at the rate Apple is accumulating cash, it could have US$40B in cash in two years. Investors continue to wonder what Apple will do with all that money, but no one seems overly concerned for now. If recent merger difficulties are an example of what can go wrong, Apple may be wise to just sit on the money.

Apple is currently sitting on $20.8B in cash and short term investments.Theyire adding $1B each quarter, and could soon surpass Microsoftis $23.7B.

Given Appleis penchant for acquiring small, focused, high-tech companies, thereis no way Apple can utilize that much cash. If Apple were to acquire a company in the kind of routine way that companies do it today, seeking salvation or market dominance, it would tax and distract the executive team.

There have been proposals that Apple acquire or merge with Disney, and that makes some sense. Others have proposed that Apple acquire a record label and change the way its does business, setting an example for the rest. One key to Appleis thinking is that modern technical companies should have strategic partnerships, like Apple and Google, and not try to buy each other -- which can introduce technology and culture clashes - the kind Microsoft and Yahoo! would have faced.

Given Appleis growth since 2000, analysts arenit willing to raise a fuss right now. Apple shows signs of a new kind of thinking in this accumulation of cash.

For example, other companies have sought to merge in order to solidify their business or become more competitive. Microsoft was long distracted by Yahoo! and sent a bad message that they were letting their flagship OS, Vista, linger. Recently, Steve Ballmer sent an e-mail to MS employees that reaffirmed the companyis commitment to basics.

XM and Sirius radio spent a lot of time seeking to merge. Meanwhile the new technologies of Wi-Fi, iPods, smartphones and HD radio may have passed them by. Blockbuster sought to expand their market presence and augment with hardware sales by looking into a Circuit City acquisition, then backed off after wasting a lot of time. Meanwhile Netflix, more focused, moved forward aggressively with the Roku box and a outlet on the Xbox 360.

These recent examples suggest that a company can become very distracted by a "grass is greener on the other side" kind of merger. Apple hasnit shown signs of needing another companyis assets or technology to succeed right now, so candidate companies to buy are few and far between.

Disney, with the infusion of Pixar, CEO Robert Iger and Steve Jobs on the board of directors just reported a 9 percent jump in profits to US1.28B for the quarter. With that example, and the economy in the shape it is, a not inconsiderable amount of money in the bank looks a lot better than the time and grief associated with a merger or acquisition.