Apple's Cash Stash Helps Means More Control in Tough Times

It's a long understood business principle that in tough economic times, companies with a strong balance sheet and sound fundamentals often have more opportunities for growth, market share gains, and even new business models than they might have during good times.

Apple has been busily putting that principle to work for itself -- as I noted in a news report Thursday, the company has been on a hiring binge for the last year or two, raiding AMD for two top chip executives, IBM for another chip executive, and even stodgy old, beleaguered Microsoft for a gaming executive.

The Wall Street Journal reported Thursday that Apple's recruiting extends even further, finding more than one hundred profiles on Linked-In of people working at Apple with chip experience on their resumes. Don't forget, too, that Apple bought PA Semi, semiconductor manufacturer, in April of 2008.

So, while other companies have laid off employees, Apple has been assembling a larger team of executives and engineers that will give the company even more control over its product line, and help propel the company even further ahead of its competition with its iPhone, iPod touch, and the broader iPod line.

(It should be noted that Apple has outsourced some of its Enterprise sales efforts, and the company has also reduced the number of full-time retail positions it has, but gathering top-shelf executives and engineers and embarking on what amounts to a new business far outweighs cyclical headcount changes.)

It's all about the control

Let's look at why Apple would bother hiring all these folks and working hard to do something it doesn't have too much of a history doing, which is making chips (Apple co-created and co-developed the PowerPC chips it used in its Macs, but the lion's share of the work was done by Motorola and IBM).

Apple has been directing the development of the version of the ARM processor it uses in the iPhone and iPod touch. In its report, the Wall Street Journal said that Steve Jobs is concerned that the technologies and techniques Apple is adding to these processors could be finding their way into competing products through the third-party fabs and other companies Apple is using to outsource their development.

If Apple could control that entire process, so the reasoning goes, what happens at Apple would stay at Apple. While Apple didn't confirm the Journal's report, my understanding of the situation is that this is precisely right.

Apple wants to be able to do new and very different things with the iPhone, the iPod touch, this supersized iPod touch I am waiting for, and who knows what else, and the company wants to be able to do it in ways that the competition will simply not be able to touch, or even have access to.

That fits in with Mr. Jobs's penchant for controlling the whole widget, and I think it's smart. I think that what we're getting a glimpse of through these high-profile hirings is the tip of the iceberg, and that Apple is going to be unstoppable juggernaut for the next few years.

And this is the power of having all that money -- Apple has more than US$29 billion cash -- and of having a business model that supports such things as developing new technologies and performing real R&D. As other companies cut back or face a slowing down of their business, Apple is in the position to hire who it wants and buy whatever it needs, and it has the vision to understand both concepts.

The company is going to be in the position of developing products that no other company will have the resources to even touch, and most of it will be under its total control. We are seeing today how Apple intends to position itself for the next 5-10 years, and as a tiny shareholder in the company, I couldn't be happier.

Loose Ends

I do not think Apple is going to develop its own video cards for Macs, as it is in the best interest of the company to work with industry-standard products from Nvidia and ATI, and I don't think Apple is going to leave Intel for its Mac CPUs for the same reason.

No, these chip moves and the purchase of PA Semi are all about the iPhone, iPod touch, and other devices running iPhone OS.