Remember the days when Apple was trading in the low $180’s? Or even 160’s? Those days are long gone as Apple shares continue to get slammed. Economic crisis, coupled with lower consumer spending and slumping interest in the computer market, have made Apple’s stock suffer immensely.
Apple (Nasdaq: AAPL) shares were slammed today, down 8%, closing at $100.10 per share. Since reaching an all-time high above $200 December 2007, Apple has lost 50% in total market cap based on stock price. Of course, I’m comparing extreme situations on both ends, but its still staggering when put this way. Through everything Apple seems to be going through, there hasn’t been much mention of Apple’s enormous pile of cash, with mainstream focusing on their inability to deliver with the Apple TV.
Over the years, Apple has managed to amass a gargantuan sum of money. The Cupertino tech firm has nearly $20 billion in the bank, sitting around accumulating low level interest. The only real assertion Apple has made for the money is that they are choosing to “preserve their flexibility, by letting the sum build up.”
On first listen, a statement like that could infuriate an Apple shareholder, making him question whether or not low level interest is good enough at this point. Aside from a $225 million acquisition of chip maker P.A. Semi, little to nothing has been done with the cash. As I’ve mentioned before, if Apple thought there was a better place for the money, it would be there. Apple’s massive sum of money compliments a strong position in the market, which puts Apple even further ahead of its competitors. When the timing is right, expect Apple to make aggressive moves with their money.
Some investors and shareholders are content with Apple continuing to build up a very impressive pile of cash. Others would like to see Apple make some more acquisitions, “Valuations are low, and Apple has the marketing horsepower” to turn promising technologies into hits, says Murray M. Beach, managing director at investment bank TM Capital.
“One radical possibility would be for Apple to snap up content. Some analysts think the company should explore acquisitions in the music business, taking advantage of the major labels’ dire straits. Though that may create conflicts, Apple could use its knowledge of shoppers to create innovative sales incentives and promote new acts. “The music industry has come to believe that their industry will be smaller,” says one source close to Apple. “Apple wants it to be a bigger, more profitable industry,” Burrows explains. Apple declined to comment, we previously explained.
Even though the market is currently very vulnerable, and a takeover/acquisition could take place for cheaper, the risk at this point could be much higher and Apple may not want to gamble after all this time. Either way, can you think of anything Apple should acquire at this point? No internet ventures or hardware developers seem to do anything Apple can’t, and iTunes holds a massive user base waiting to be tapped. I’m not talking about the idea of going social with it, because we all know how little money is in that (especially for the headache involved). However more so referring to experimenting with various business models, actual hardware such as the Apple TV and figuring out how to dominate the consumer living room. Partnering with major cable providers, or setting out to re-invent the set-top box could bring Apple and its shares some positive inflation.
Perhaps Apple could use some of the money to increase positions with more studios and get nearly every television station on board, selling their content on iTunes. Maybe Apple could even whip up some crazy scheme with cable providers like Comcast and Verizon so as to allow the Apple TV to be an “upgrade” version of the set-top box you get when signing up for cable service. This way, Apple could design the User Interface that powers Comcast and Verizon’s cable services and the Apple TV would become a simple option for many more consumers. Nobody would need another box, another remote or another interface to get used to. Apple has done the exact same thing with iPhone 3G global expansion. Giving a little attention to the Apple TV for the sake of lost revenue, may be something to think about. Even if its simply for pure speculation or Wall Street’s assessment, it would lighten up share price beatings, and help regain confidence and traction in the stock.
