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Apple CEO Tim Cook
Summary:

Apple CEO Tim Cook and CFO Peter Oppenheimer will host a conference call Monday with investors and discuss company’s position on its massive pile of cash — nearly $100 billion — and what it intends to do with it.

Apple has nearly $100 billion in cash on its books. It is also a source of constant nagging by Wall Street investors who want  Apple to do something with it: a dividend, give it back to investors or something.

In order to address the cash balance issue, Tim Cook, Apple’s CEO, and Peter Oppenheimer, Apple’s CFO, are going to host a conference call to announce the outcome of the company’s discussions concerning its cash balance, the company announced Sunday. The call will be held on Monday at 6 a.m. PDT (9 a.m. EDT.)

During the Steve Jobs era, Wall Street’s demands fell on deaf ears. In a recent conference call, Cook’s position on cash balance wasn’t that extreme. As my colleague Erica Ogg pointed out, Cook and the board have been in discussions about the company’s cash position, which continues to rise. “We have more cash than we need to run the business on a daily basis,” he said during a Goldman Sachs investors’ conference last month.

I, for one, believe the company should just sit on the cash and not worry too much about Wall Street just yet. It is important that they use the cash to lock up supplies of components for its products. The cash cushion gives the company room to actively compete for talent as well as any future startups it might need to acquire to enhance its overall ambitions. 

  1. Steve Ardire Sunday, March 18, 2012

    Om you say the company should just sit on the cash and not worry too much about the Wall Street just yet.

    I say they’re buying Twitter and still will have 90% of immense cash reserves remaining.

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    1. Sure or they could use the cash to lock up components for their core products and make sure they are controlling the supplier market and keeping their rivals twisting in the wind. I think that is bigger and better use of cash.

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      1. Shameer Mulji Sunday, March 18, 2012

        Locking up components and controlling the supplier market is something they’ve been doing for years. I don’t see that changing anytime soon.

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      2. No, Om, they can’t. They’d have to pre-buy years worth of components to use that much cash. This would invite all sorts of nasty anti-trust scrutiny as they’d be controlling far too many markets.

        They have to find uses of cash because it’s become irresponsible not to. I can’t wait till tomorrow till all of the ridiculous nonsensical notions that Apple can somehow make use of this money for >other< than entirely financial purposes get set aside.

        At least some of it has to be returned to shareholders. Management runs the risk of becoming seriously undisciplined if they keep looking at their barely-interest-earning bank accounts and saying, "well, we have years of safety net, we don't really have to worry much". You should want Apple to worry.

        No matter what they announce (and the smart idea is a dividend, the far-less good one is a buyback), they'll still maintain a huge cash horde with which to control enough of the supplier markets and maintain a rainy-day fund.

        No acquisition Apple would ever contemplate would take a meaningful chunk of the firm's cash. Period.

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  2. Albert Hartman Sunday, March 18, 2012

    Wait, did he say no toga party?

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  3. As an Apple shareholder, I am quite interested to hear what Cook & Oppenheimer announce about Apple’s Cash hoard.

    The company has SO much more cash than they could possibly have any use for that I think a change is coming.

    Apple has an incredible amount of shareholder goodwill that management can do whatever they want (in the short term) and not have to worry about any serious criticism. I believe Tim Cook is not dogmatic about the cash hoard and will make a change from current policy.

    “I for one, believe the company should just sit on the cash and not worry too much about the Wall Street just yet. It is important that they use the cash to lock up supplies of components for its products. The cash cushion gives the company to actively compete for talent as well as any future startups it might need to acquire to enhance its overall ambitions. ”

    Apple has so much cash that they can do everything Om suggests and still use up some cash. Their current rate of cash generation is staggering.

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  4. Apple should use some of their cash for strategic acquisitions and set aside $10 Billion for a startup fund for companies that build on their platform and help push their platform into Video and IPTV.

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  5. Richard Fawcett Sunday, March 18, 2012

    As a shareholder Apple should hold the cash for future needs. The company is in a unique position where no future business decisions need be effected by financial concerns. Paying dividends will open Pandora’s box, and become a nagging management distraction.

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    1. Shameer Mulji Sunday, March 18, 2012

      Agreed.

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    2. See, this kind of “Apple knows best” dis-logic is terrifying. Dividends don’t open a Pandora’s box. They are not a distraction. They are a way to return money to shareholders when the firm cannot make use of the money. Apple’s ever-growing cash horde is proof the firm cannot make use of as much cash as they have.

      Not paying a dividend is the irresponsible path. The management distraction is the ever-growing cash horde and the lack of discipline it enforces.

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  6. 2 comments.

    1. They have more than $100B. They had $98B on Dec 31, 2011. They retain somewhere around $10B per quarter, average. So they’re closer to $110B.

    2. They can afford both to give a $10-$20 annual dividend AND continue to grow their cash pile, obviously more slowly though. Numbers: http://www.kerryduncan.com/users/studuncan/weblog/9ea07/Can_AAPL_afford_a_dividend.html

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  7. Eddie Maddalena Sunday, March 18, 2012

    I don’t think Apple will declare a dividend. It would be expensive, and constrain their cash reserves, as well as setting up an expectation for future dividend payments.

    http://connectingthecircles.blogspot.com/2012/03/siri-will-apple-announce-dividend.html

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  8. Just how much cash to they need to lock up components? $100b $145B? #clueless

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  9. Maybe they could pay their workers. Just kidding! More suicide nets!

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  10. Why call an investor meeting to say “no change?”
    I think they’re going to do something notable with the money, but we’ll soon know for sure.

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