Apple has many options for its growing war chest. One thing is for certain: as economic uncertainty grows and credit dries up, having a large cash reserve is a benefit to the Cupertino company.
Apple CEO Steve Jobs said last month:
“…we have almost $25 billion safely in the bank and zero debt. This provides us tremendous stability and the ability to invest our way through this downturn. This is what we did during the last downturn. We [increased] R&D investments and created some of our best new products and businesses, like the Apple retail stores for one. This downturn may also present some extraordinary opportunities for companies that have the cash to take advantage of them, like Apple does.”
Its clear Mr. Jobs is relishing his company’s financial position – Apple now has even more cash than Microsoft. Though Apple is tight-lipped about its future plans, here are some ways Apple could use its cash:
Buy Other Companies: Apple bought PA Semi, a semiconductor designer, earlier this year in a move to start making their own mobile processors. Here are some more companies Apple could buy:
• Electronic Arts, $6B – Video game developer. Steve Jobs could guide the creative company from a distance as he did successfully with Pixar.
• NVIDIA, $3.55B – The leader in graphics card technology. Their cards are now used in most of Apple’s computers alongside Intel’s CPUs.
• AMD, $1.1B – Semiconductor maker fallen on hard times. Apple could use AMD to develop their own proprietary processors. Similar to how Apple will use its acquisition of PA Semiconductor, but on a larger scale. AMD is trading 80% below its 52 week high, but is losing money and strapped with debt.
• Panic, (private) – Successful Apple software developer. Apple “borrowed” their Coda toolbar for Leopard. Almost developed iTunes (good story).
Increase R&D spending: Apple has already been increasing its investment in research and development – from $535 million in 2005 to $712 million in 2006, $782 million in 2007, and now $1.1 billion in fiscal 2008. With their $25 Billion, Apple could comfortably double or triple its R&D budget.
Shareholder Dividend: Apple could write dividend checks to its shareholders, either a large one-time distribution or start issuing smaller dividends annually. A $10 billion dollar distribution would be about $11.25 per share.
Invest in other companies: As recent economic turmoil has dried up credit sources to many tech start ups, apple could bank roll aspiring companies, especially ones developing hardware, software, and services for Apple products. This could be similar to the recent $100 million dollar iFund started by Kleiner Perkins, a venture capital firm, to invest in iPhone App developers.
Bailout the auto industry: Just kidding, but imagine how competitive an American automaker would be under Apple management.
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20 Comments to “How Apple Could Spend Its $25 Billion Cash”
Oh man. If Apple made cars? LOL, America could probably compete with Japan, and cars would probably be flying by 2020. I wish!
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$10 billion is too much for a shareholder distribution/buyback. It’s too much, and would wipe out nearly 1/3rd of Apple’s reserves. Maybe $5 billion. That sounds a little more reasonable.
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The Panic (iTunes/Audion) story is a MUST READ — http://www.panic.com/extras/audionstory/
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Banks and credit card companies will be terrific deals this coming year. Apple could buy one up and create a financial services division to replace Quicken and to integrate with the iPhone, providing barcoded credit purchasing, localized services, and thereby one hardware and software and cloudware solution to money management. After all money is the ultimate content stream.
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@Steve Nagel
Good point. Apple could set up a financing arm for its computers. Like GMAC did for GM. They could offer sub market interest rates and let people buy their $2500 MacBook Pros over time.
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Juniper Visa does this, but you only have 180 days (Six months), and it’s getting involved with Visa, an entirely different credit corp. Apple could have Apple financials and it would be like the auto industry’s % rates.
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apple did their own credit for a while and gave it up to Juniper. they didn’t want to be a credit card company. just like they don’t want to be a mobile phone service company
I say first and foremost they should invest some of that money in their people. they claim their staff is the core of the company, especially the retail staff. but from what I hear, almost every one of them is part time with no health insurance assistance (by the by medical bills are the key reason folks couldn’t pay mortages in this whole mess), some of them are barely trained in what they are selling and the stores at least in my area have been barely staffed for weeks.
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@Steve Nagel: Ha. Haven’t heard that once yet. You think Apple could deal with those legalities?
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Would expansion into a cell carrier network be ridiculous? Is it just me that thinks it would make sense for Apple to buy some coverage and tailor it to their exact specifications? They wouldn’t be reliant on any cell carriers this way.
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and then they would still have folks unlocking phones etc. and suing them because coverage takes time. would probably take the whole reserve to set up the system too. which is likely why they didn’t just do that in the first place
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Bail out the auto industry? Apple could buy Ford, GM and Chrysler and still have about $20 billion in cash left.
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They could buy Tesla with some spare change too. Give away an iPod touch with every purchase.
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tesla needs what $100 mill? that’s nothing for apple. just seems like a headache though.
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Buying GM, Apple would also inherit $85+ billion in debt obligations, a portfolio of products people weren’t buying, the UAW, and healthcare and pensions for millions of people. Awesome fun…
I’m seeing big click wheels in place of steering wheels already.
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Apple needs to monopolize technology before they make cars
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“monopolize technology” — what? Why would they want to be a monopoly?
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@Gouch Meister: I think you mean they need to increase their market share in technology before they span industries. Right?
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Sun Microsystems…? – it’d be easy to swallow it now…
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I like Steve Nagel’s comment above about buying banks and cc companies. Apple definitely needs to get something like this in place on their side. This could be game changing just like the iPhone. They wouldn’t be managing financials because of how deeply stacked they are ($25B) — But Apple could get itself in a position to be on top of the world, and when the economy bounces back, Apple will be too powerful of a force to compete against. I hope these are their plans. I really do.
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If not buy them (Tesla), sell their software for battery charging, and some of their battery technology to the auto industry.
As cars get more complex they require more and more computing power.
I can just image walking up to a car, it unlocking for me as I send a command from my iPhone. I sit down and plug the iphone into a slot, the radio comes on/music starts playing from one of my playlists. The seat shifts to my settings as opposed to my wifes or my companion.
I tell the iPhone where I’m going and a navigation image appears on the iphone screen.
It will be your key, your gps, your navigation system, keep track of all of your cars info – gas mileage, rpm info, oil pressure, air pressure, service info, etc. and it will all be stored in your iPhone.
With the computing power the iPhone already has it could do all of this, it’s just integrating the the mac os into the vehicle chips. Or better having the vehicle chips info be readable by mac os.
How hard could that be?
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