Apple’s investors have voiced concerns over the company’s vast pile of cash, claiming that it could be using its wealth more wisely.
With over $51billion – more than the GDP of Costa Rica – stored away in cash and investments it is noted by Bloomberg that Apple’s cash is still earning it less than the average US savings account.
A regulatory filing last week showed that Apple received a 0.75 percent return on investments in the last financial year, which is “significantly less than the 10 percent that investors would have a taken from Standard & Poor’s 500 Index and the Dow Jones Industrial Average, though Apple’s stock itself also was a much better investment rising 60 percent,” according to Bloomberg.
One Apple investor argued that such Scrooge McDuck levels of hoarding were not necessary. “That amount of cash is way above what’s needed to have a prudent war chest. It would be a real shame for them to do an acquisition to get into another line of business or dilute something they already have going on.” said Keith Goddard, CEO of Capital Advisors Inc.
Goddard did imply, rather diplomatically, that it is anyone who replaces him that is of real concern and not Steve Jobs, who is presumably fine to fill as many swimming pools with cash as he likes. “The idea that a different management team is in charge of all that liquidity is more scary to me,” added Goddard.
Another major investor, Ryan Jacob, chairman and chief investment officer of Jacob Funds in New York which has $3million of stock, has raised similar concerns: “The point is they can’t keep accumulating it. I don’t understand the hesitation about a stock buyback and/or dividend,” said Jacob.
But is Apple really that tight with its cash? It is noted that Apple generaly finances smaller deals with nothing more than $500 million to date.
Considering that Apple has seen a 44 percent rise in stock in this year, and is the third most valuable company based on market value, it is fair to say it is more than able to throw some cash around.
However Jobs is convinced that he is right to take a more prudent approach that will avoid overpriced acquisitions, saying last month that he believes that the company has a fantastic history using cash, and is well positioned for one or more “strategic opportunities.”
“We’ve demonstrated a really strong track record of being very disciplined with the use of our cash,” Jobs said in a conference call with financial analysts. “We don’t let it burn a hole in our pocket. We don’t allow it to motivate us to do stupid acquisitions. And so I think that we’d like to continue to keep our powder dry because we do feel that there are one or more strategic opportunities in the future.”