6 things Apple could do with its $100 billion in cash

The total amount of cash on the tech giant's books is at absurdly high levels. It's well past time for Tim Cook to take action.

By The Fiscal Times Feb 27, 2012 12:51PM

Apple moneyBy Suzanne McGee, The Fiscal TimesThe Fiscal Times

Apple (AAPL) has a problem.

It's actually not the kind of problem most businesses experience. There is no lack of buyers eager to snap up its iPhones, iPads and other gizmos. It's a problem other companies (like Kodak, to name only one) would love to have, and it flows directly from Apple's success: It has a lot of cash on its books. More cash than the GDP of several small nations -- rolled together. And CEO Tim Cook and Co. are just sitting on it.

Apple shareholders have been patiently, or not so patiently, waiting for Cook to announce just what he plans to do with the hoard, since burying it under the sand on a deserted island really isn't practical, or a very good way to discharge his fiduciary duty. It has been reasonably easy for investors to be patient, given the remarkable performance of the company's stock (now trading north of $500, up from about $350 a year ago at this time). But the total amount of cash on Apple's books -- nearly $100 billion -- is at absurdly high levels.

 

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It's reassuring that Cook recognizes, as he said at the company's shareholder meeting last week, that "it's more than we need to run the company" and that the board has been thinking "very deeply" about what to do next.

So, what could Apple do with that $100 billion?

1. Acquisitions
Well, Apple just bought Chomp. Inc., a company that helps users sort through all the myriad apps out there to find the one they need, for about $50 million. For $100 billion, they could pick up 2,000 more Chomps. Of course, then comes the challenge of integrating them. The vast majority of acquisitions are failures, either because the acquirer has made a bad business decision as to what to buy (perhaps the cash was burning a hole in their pocket?) or because they fail to properly integrate the new company. There's no reason to suppose that Apple would be any more successful than, say, JDS Uniphase was when it went on an acquisition spree a decade or so ago, and ended up struggling to absorb about 1% of the number of companies Apple might be able to acquire.

2. Product Promotion
Apple could buy every one of the 313 million U.S. citizens (the legal ones, anyway) an iPod touch on their birthdays. They'd have enough left over to buy each man, woman and child $120 in gift certificates to let them add content to their new gadgets. Of course, if you give away your devices, you're not really promoting them, so this might be a foolish use of Apple's nest egg.

3. Invest in the Future
Apple, and other U.S. technology companies, need skilled employees, right? So why not use the $100 billion to develop them? That chunk of change could finance three years of graduate school at MIT (including living expenses) for about 400,000 students. Of course, the problem with that would be finding jobs for them all after they graduate.

4. Worker Salaries
Apple has been getting some bad press of late about conditions for workers at Foxconn (FXCNF), which runs plants where Apple products (among others) are assembled. With $100 billion, Apple could instantly put an end to the question of unpaid overtime and other issues. In fact, Foxconn’s 1.2 million workers (currently toiling at $1.78 an hour, and working 60 hours a week) could get as much as $27 an hour if Apple chose to share its largesse with them during 2012. Of course, that would destabilize the Chinese economy and shareholders would complain about the money being handed out to Chinese workers.

5. Public Interest
California has a debt problem that's too large for even Apple's $100 billion to solve. But it could eliminate unemployment in its home state at a stroke, offering each one of the state's unemployed citizens a job with a salary of $45,000 a year. (That would be eight times the number of jobs created in January nationwide, so it would do wonders for the national unemployment rate, too.) Of course, that would only last for a year, and shareholders would probably have the same objections that they would to No. 4, above.

6. The Obvious
There really is only one sensible option for Apple, and it's about time the company admitted it. Apple should pay a dividend -- a generous and regular one -- to its shareholders, and soon, before that ridiculously large cash mountain grows still larger. According to some reports, Morgan Stanley (MS) analyst Katy Huberty has calculated Apple can afford to give a dividend that would yield (at a share price of $500) up to 3.8%, well in excess of the average yield of 2.2% for the S&P 500.

Apple has been taking advantage of its shareholders' patience and goodwill, and the fact that the stock market has rewarded its success and given those shareholders the potential of hefty capital gains. But why should those investors be required to sell their stock to profit from Apple's success? That's irrational, particularly when there is no rational alternative to paying a dividend in sight for Apple's board.

Related Links:
The Two Questions on Apple Investors' Minds
Steve Jobs: 10 Revealing Quotes from His Biography
The Apple Economy: An Insanely Great Year




143Comments
Feb 28, 2012 10:00AM
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How about bringing the jobs back to the USA from China!
Feb 28, 2012 1:18AM
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They have 100 billion dollars and pay the Chinese 1.78 an hour? How bout bringing the company back to the United States and pay our out of work people a decent wage to make their products. Thats where all our products should be made. The U.S.,s economy is in the toilet and Apple sits on their dead asses and wonders what to do with 100 billion dollars. There definitly sonething wrong here.
Feb 27, 2012 9:09PM
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Build some manufacturing plants in the Unites States employing Americans instead of the Communist Chinese.
Feb 28, 2012 8:51AM
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take that money and build a I-factory in the U.S. and tell china and their made in chine junk where to go. 1.2 million american jobs sure would help the economy and unemployment
Feb 28, 2012 2:21PM
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No, if Apple can afford to pay the Chinese workers more, then it can afford to pay American workers, period. Bring it on home, Apple.
Feb 28, 2012 4:44AM
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Apple could also kill two birds with one stone by bringing manufacturing jobs back to CA thereby reducing unemployment, helping the state economy recover, eliminating the bad press from Foxconn, and earning themselves some goodwill with the people.
Feb 27, 2012 11:10PM
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We want all the products

MADE IS USA

MEDE IN USA

MADE IN USA

MADE IN USA

MADE IN USA

MADE IN USA

 

 

Feb 27, 2012 3:36PM
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I am a Republican. But, how about a few of it's manufacturing jobs to be in the UNITED STATES?
Feb 28, 2012 1:23PM
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Perhaps Apple should build a plant in the USA and employ a few gazillion americans....other might follow..
Feb 28, 2012 2:24PM
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Why not bring the jobs back to America instead of out sourcing to China.
Feb 27, 2012 9:21PM
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they could give people a fair price on their products, and still make money 
Feb 28, 2012 12:58PM
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Use the money to build plants here and bring the jobs back home!! There are so few things made here anymore. Apple could set a fine example by creating jobs here. Bringing the high tech jobs back. It is very hard to find anything built completely in the USA today.
Feb 28, 2012 2:12AM
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Apple could possibly stop paying overseas laborers slave wages.
Feb 28, 2012 1:56AM
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Apple will do what most big corporations do with their cash, pay their CEOs big bonuses, invest it so they can make more money or put it in over seas accounts so they don't have to pay taxes on it. No matter how much they make, they want more, while roughly 4 billion people live on $2.50 a day or less.
Feb 27, 2012 11:12PM
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I'm not jealous of Apple or its shareholders, but I see a even bigger divide between the rich and poor. It's gonna be an "either you have it or you don't" economy. 100 Billion dollars is a lot of cash, but really, it does nothing for me as I neither own an Apple stock or product. I'm just hoping I can pay for gas to get to work tomorrow..LOL
Feb 28, 2012 2:31AM
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maybe someday this country will get tire'd of being sh.t on....and buy USA

 

 

Feb 28, 2012 1:42PM
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Funny how the author says "Citizens, the legal one's anyway". If you are illegal, you're not a citizen. Pretty simple. Nice editing.
Feb 28, 2012 7:53AM
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Here's a thought, maybe, just maybe.... Apple could do whatever they want with their money... Last time I checked they earned it by selling products that every one wants.
Feb 28, 2012 6:21AM
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How about paying their "Fair" share of Income Tax on that $100 billion!!!!!!!!
Feb 27, 2012 11:19PM
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they can loan me some of that money
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