How will Apple spend its $100 billion surplus?

Mar 19, 2012

Rumours abound as CEO Tim Cook announces that Apple has 'more than we need to run the company'

UPDATE: After this article was published, Apple announced it would be handing out a quarterly dividend of $2.65 per share starting in July. It will also be buying back $10bn of its own shares from 2013. 

APPLE CEO Tim Cook and CFO Peter Oppenheimer announced on Sunday that the company would hold a conference call at 6am on Monday morning (1pm GMT) to cover “discussions concerning its cash balance”. The Wall Street Journal says that Apple’s “cash, cash equivalents and short-term and long-term marketable securities totalled roughly $97.6 billion” – more than the US Treasury’s operating cash balance.

Apple used to pay a quarterly dividend, but that ended in December, 1995 – just prior to the return to the company of co-founder Steve Jobs, who was famously cool on the idea. A dividend payout has strong support among analysts, but the bloggers have some other ideas on how to spend all that money.

Buy component suppliers
GigaOM thinks “it is important that [Apple] 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 start-ups it might need to acquire.” Apple relies on competitors for components for some of its devices, and they could end this by buying big.

Buy a telecom company
The only “game-changer” Apple could spend the money on is clear to blog The Next Web: “total freedom from the carriers. The only way to ensure this is for Apple to create its own carrier. A carrier that serves iOS devices with an always-on data connection that allows them to take advantage of their features in a way that the current carrier system never could.”

Pay out a dividend
The smart money is on Apple paying out its first dividend for over 17 years. The Wall Street Journal thinks Apple will join Microsoft and Cisco Systems and yield to “investor demand for dividends”. Analysts have said the return of cash to shareholders could take the form of a one-time dividend or even an annual payout. Alternatively, the return could be carried out through a share buyback. Apple shares rose 2.9 per cent following Cook’s announcement to just over $602.

Buy into social networking
The Daily Telegraph reports that it may be time for Apple to seriously consider taking control of a social networking platform. "The most likely option,” it says, “is an acquisition in technology of some sort. Perhaps Apple will acquire Twitter, the social network that it has so tightly integrated into its iOS and OS X operating systems."

Buy a rival
MG Siegler, Silicon Valley columnist and co-founder of venture capital firm Crunchfund says on his blog Paris Lemon: 'Maybe crazy, but what about buying Samsung? It would both harm Google (Samsung is by far the most successful Android partner) and help Apple (which still heavily relies on Samsung chips and screens)”.

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