Tim Cook says Apple isn’t religious about “holding or not holding cash”

Thu, Oct 20, 2011


Apple’s cash on hand now checks in at $81 billion dollars. That’s insanely high and will only further encourage shareholders to clamor for either a dividend of a stock buyback. Apple of course is pretty conservative with its cash holdings. It doesn’t go out and buy companies half-heartedly and hasn’t issued a dividend in quite a few years.

Apple’s ever increasing cash hoard was touched upon briefly during Apple’s earnings conference call yesterday. When asked if Apple was pursuing a different investment strategy vis-a-vis its cash holdings, Apple CEO Tim Cook responded.

We want to maintain flexibility. I think everyone who knows us knows that the cash isn’t burning a hole in our pocket. We don’t want to do silly things, and will continue to invest conservatively. We’ve done a very good job in an extremely difficult market and have done things in Apple’s best interest. We acquired several companies, acquired intellectual property, invested in supply chain and invested in new stores. What we’re doing with cash, the cash we do spend, we’re doing an extremely good job and are very frugal.

And while no one can dispute Apple’s frugality, Apple went on a relative spending spree this past quarter. They opened up a number of high profile and expensive stores overseas, and more than that, they put down a lot of money to acquire intellectual property.

Back in July, Apple was part of a consortium (along with RIM, Sony and Microsoft) that put up a $4.5 billion winning bid for over 6,000 Nortel patents. Apple allegedly contributed $2 billion of its own money to the final tally and also received outright ownership of Nortel’s 4G patents.

Cook continued,

I’m not religious about holding or not holding cash. I’m religious about other things, but not that. We will continually ask ourselves what’s in Apple’s best interest and always do what is in Apple’s best interest. It’s a topic for the board on an ongoing basis and we will continue to discuss it. Of the little more than $81 billion in cash, a bit more than 2/3rds of it was offshore.

Following that, an analyst followed up and asked if Apple was reluctant to initiate a stock buyback because it might indicate that Apple’s ability to innovate is sloping downward. Indeed, we’ve covered before the well-accepted tenet that companies that initiate buybacks, and to a lesser extent those that issue dividends, often don’t know what to do with their cash holdings which is why they resort to the two aforementioned options.

Cook, however, promptly squashed that notion.

“I think that anyone looking at us and our track record would not come to any conclusion that we’re waving a white flag on innovation,” Cook said. “We’ve had a series of unbelievable products, the best products of the world according to our customers. We’ve got a pipeline that’s unbelievable.”

You can accuse Apple of many things, but failure to innovate isn’t one of them.

Still, Apple, in typical fashion, said that the perception that accompanies a stock buyback wouldn’t prevent it from buying back its shares if that was deemed to be in the company’s best interest.


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