4 Comments

Summary:

Apple’s CEO defended the company against attacks that it’s irrationally conservative about cash and reiterated that the board of directors is in “very active discussions” about returning more money to shareholders.

Tim Cook, Apple CEO
photo: Chris Hondros/Getty Images

Investors have not been very kind to Apple over the last few months. But on Tuesday morning CEO Tim Cook sat for questioning about the current and future health of the company as part of Goldman Sachs’ annual Technology Conference. He didn’t say much that we didn’t hear during last month’s earnings call, but he did use the time to defend his company from accusations that Apple is irrationally hoarding too much cash: $137 billion at last count.

Cook issued a somewhat snippy response to a shareholder lawsuit last week, in which hedge fund manager David Einhorn of Greenlight Capital said Apple had a “Depression-era mentality” about money and behaved like someone who “can never have enough cash.” Besides calling the lawsuit “a waste of shareholder money, a distraction, and not a seminal issue for Apple” he disagreed with the characterization of how Apple thinks about cash.

“My definition of ‘Depression-era mentality’ wouldn’t include a company investing a pair of tens [$10 billion in capital expenditures] over two years,” said Cook. “We announced we’re returning $45 billion to shareholders a year ago. We’ve completed $10 billion so far. I don’t know how a company with a Depression-era mindset would have done all those things.”

Cook then explained Apple’s long-held convictions on why having ample cash on hand is important:

  • Investing in R&D, supply chain and infrastructure. Apple’s CFO had said during last month’s earnings call that the company was planning to spend about $9 billion beefing up manufacturing facilities, data centers and its infrastructure this year.
  • Saving it for possible acquisitions. While Apple hasn’t bought any large companies, it has kicked the tires on some and ended up walking away. Still, Cook said Apple will keep looking at those kinds of deals. “We’re disciplined and thoughtful and we don’t feel pressure to go out and acquire revenue. If a large company could help us do better that would be good…but…cash is not burning a hole in our pocket,” he said.
  • Investing in retail. Apple will “continue to invest like crazy” in its chain of Apple Stores in 2013, with the goal to enter more countries. This year the first store is coming to Turkey, he said.

“Now, we do have some cash,” Cook deadpanned, eliciting a laugh from the audience. So, in addition to the plans listed above, Cook reaffirmed that Apple’s management and board of directors are in “very active discussions” about how to return additional cash to shareholders.

While Cook made no official announcements, his subtle hints may cheer some shareholders hoping to get its hands on some of that money Apple has squirreled away: it’s the same phrasing Cook used at the same conference venue a year earlier right before the company made the historic decision to issue a dividend. However, Apple stock dipped after Cook’s comments. As of the writing of this post, it was down nearly two percent to $471.20.

You’re subscribed! If you like, you can update your settings

  1. how about returning some cash to its employees.

  2. I’m sure Tim Cook had a lot to say today and judging from Apple’s instant share price collapse, investors hated every word of it. Tim Cook’s spittle has an action like gasoline on an open fire. It’s rather amazing how when Apple management speaks it enrages Wall Street and Apple shareholders. I’m really not feeling any love among them.

  3. The next play was Steve Jobs’ favorite. Apple will pressure the US government to give them a tax holiday so they can bring all the money back to the US free of charge. They’ll give us the usual rhetoric about job creation and such, which will be backed up by Wallstreet because of how much money they stand to make. In effect they will be paying share holders with tax payer money. Aaaaaaaaand this is what happens when you let Corporations become too powerful.

  4. William Diaz ✔ Tuesday, February 12, 2013

    Apple is smart to actually keep a stockpile of cash. One of the reasons it started to fail in the 80s and 90s was lack of cash, lack of R&D, lack of ability to acquire anything beneficial. Eventually this changed, and the cash flow has proved this. Now that it is in a better position, it is wise to always keep a savings, like a 401K when people want to retire Apple, it has enough to keep it floating for the next project.

Comments have been disabled for this post