Apple: More money than the US government

1st August 2011

On certain calculations this is true, though as the Daily Beast points out, the comparison is arguably a little too easy.

Technically the US balance was $74bn – that of Apple's $76bn.

As the website notes Apple's balance represents the amount of cash held in its bank accounts, while the U.S. Treasury's number represents the amount of cash left before it hits the legal debt limit, and it can be changed – and this morning looks likely to be changed – by the federal government.

The Daily Beast quotes Laurie Hodrick, a professor of business economics at Columbia University's business school saying: "One of the reasons U.S. companies have amassed so much cash is that it provides them financial flexibility in times of heightened uncertainty."

But undoubtedly Apple has a lot of money so perhaps the more pertinent question remains what should Apple do with it?

Apple is the second largest company in the world behind Exxon Mobile but while the latter firm could for example, spend a huge amount of investment on oil and gas exploration or developing renewable fuels or taking over other companies, it is less easy to see what Apple, which has grown organically should do with the cash. 

For example, if Apple set off on the acquisation trail it would represent a dramatic departure from its business practices in the past.

Considering the issue Fox Business writes that "while most companies return extra cash to shareholders via dividends, fast-growing tech companies traditionally hoard it for expansion opportunities and rainy days, like the 2008 financial crash."

It quotes Roger Kay, president of Endpoint Technologies Associates saying he doesn't know what they could buy other than a small European country.

He adds that he doesn't want Apple to be a fund manager – i.e. to actually start adding businesses that were not core to what it does for something to spend the cash on.

The article also notes that in these nervous times, Apple shares have actually put in a better performance than gold in the last twelve months, and crossed above $400 a share last week having been worth just below $90 a share during the financial crisis.

Here Spencer Knight on Seeking Alpha considers the dividend issue and suggests Apple would be better spending the money on cloud computing and Apple smart TV.

He writes: "Another project Apple might be spending their cash flow on is Apple Smart TV and Apple HD TV screen displays.

As with the above speculations, these two projects are also currently rumours as well.

However, just as the other two these rumours have evidence.

The thought behind Apple Smart TV is the same thought that is behind the Genius button on iTunes. Which means that the television could suggest other movies and shows you may be interested in.

Another feature of Apple TV could be the ability to play your movies from your iPad or iPhone directly on your television; which would work better if Apple has these set up on the cloud network."

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