Apple spanks expectations, again. Shares up $40 in after hours trading

[red_dog007]

Having $100+ Billion in the bank, they can make some mad interest off of that and fast. In the next few years, if Apple gets to say $1,000 per share and gets ever closer to $1 Trillion in reserves, which at the rate they are going I can easily see this as a possibility, I wonder if the US government or any government would come in and attempt to pop Apples balloon.

Though I wonder if government will step in with tax increases on large corperations as we find out large business isn't paying much in taxes. GE didn't pay a penny last year, and apparently Apple only paid at a 9.8% rate in 2011 themselves.


What I am waiting for is Apple to break new ground. Get people to buy something they could have cared less about before. They got a great MP3 player, and people bought it up. Then they came out with the smartphone that people bought up and the same with tablets. They may not have been the first, but they were the first to at least break some ground and make headway before others. Be the first to come out with that great product everyone wants. Where is there next market break through and what will it be?
I could care less about the rest of their products. They give US something new, then I'll be interested. :-)

[RainWind]

They give US something new, then I'll be interested. :-)

How about a phone that can detect when your girlfriend is calling and transfer it to a special call center with an agent who will respond appropriately to all questions and act as if he's paying attention.

[sadisti]

People keep bleating about Apple prices being high, but never seem to mention the fact that competing smartphones and tablets are all priced around the same area. Why is that?

Smart phones, sure. Personal computers? So much fluff in the hardware prices it's ridiculous.

Luckily you can get compatible hardware from a PC retailer and a cheap copy of OSX to go with it.

[dangermoose]

Smart phones, sure. Personal computers? So much fluff in the hardware prices it's ridiculous.

Luckily you can get compatible hardware from a PC retailer and a cheap copy of OSX to go with it.

Go price up a high end Sony, Dell or IBM against a MacBook Pro.

People always see $400 laptops and compare them with MacBook's. It's apples and oranges.

[RainWind]

Go price up a high end Sony, Dell or IBM against a MacBook Pro.

People always see $400 laptops and compare them with MacBook's. It's apples and oranges.

High end Sony, Dell, and IBM laptops are overpriced too.

[dangermoose]

High end Sony, Dell, and IBM laptops are overpriced too.

Nothing is overpriced if people are prepared to pay for it.

[Inept]

Having $100+ Billion in the bank, they can make some mad interest off of that and fast.

No they can't. That's actually part of the problem.

Apple has a hundred billion dollars in the bank and it doesn't know what to do with it. Getting a couple percent on your cash is a really crappy investment and Apple shareholders aren't buying Apple because they want to own T-Bills. They could just buy T-Bills if that's what they really wanted. The whole point of operating a business and/or investing in a business is to beat that, and in terms of its operations Apple beats that very, very handily. The issue that as Apple's stockpile of cash grows and adds to the company's assets and equity, the company's returns on those assets will tend downwards. There's so much that they just can't reinvest that cash at the same rate of return - this is called reinvestment risk.

Apple is already executing at the top of the industry and it has so much cash left over after funding its operations, research and development and capital expenditures that it's mind boggling. And this isn't only a problem for Apple. Google, Microsoft, Intel, etc. Most major tech companies are just flush with cash.

Apple's cash is, in and of itself, no better than anyone else's. Everyone in the industry is bumping into the problem of more cash than they can reinvest attractively. That's why they commenced a dividend, which I suspect will increase over time and which I believe should be a lot higher right now. It's why Microsoft has a handsome dividend and why it has, in the past, paid shareholders special one-time dividends.

In any case, this says nothing of competition. Competition will compress Apple's margins in the mobile space... Eventually. Carriers don't like the Apple business model and they are actively pushing competing platforms that are more advantageous to them. This will come at Apple's expense and their cash won't help them here.

[Zoolook]

Go price up a high end Sony, Dell or IBM against a MacBook Pro.

People always see $400 laptops and compare them with MacBook's. It's apples and oranges.

I think you meant Apples and lemons...

--- Post Update ---

No they can't. That's actually part of the problem.

Apple has a hundred billion dollars in the bank

Nope. They have about $10bn in cash. The rest is about $20bn in short term liquid equities, about $10bn in net receivables and vendor trade receivables (meaning money they paid to vendors in advance), about $80bn in long term marketable securities of which about 60% is non-US, almost $10bn in in property value, and another $10bn in intangible assets (including $1bn in inventory). Then there is about $10bn in deferred taxes and goodwill.

So the 'cash in the bank' figure of $150bn is actually $10bn... and for a company worth north of $600bn, it's a relatively small percentage.

[Inept]

Nope. They have about $10bn in cash. The rest is about $20bn in short term liquid equities, about $10bn in net receivables and vendor trade receivables (meaning money they paid to vendors in advance), about $80bn in long term marketable securities of which about 60% is non-US, almost $10bn in in property value, and another $10bn in intangible assets (including $1bn in inventory). Then there is about $10bn in deferred taxes and goodwill.

So the 'cash in the bank' figure of $150bn is actually $10bn... and for a company worth north of $600bn, it's a relatively small percentage.

In this context, "cash in the bank" doesn't literally mean cash-money. It means liquid financial assets that bear interest. This would include cash and equivalents, short term investments and long term investments. Even if they're not cash-equivalent, they are interest bearing securities that are marketable and are delivering returns well below those of Apple's operations.

They don't make Apple more competitive and they don't offer investors much in the way of returns. It's very important for companies to have cash on hand to fund new initiatives and research, fend off competitive advances, etc. Apple has so much "aggregate money" on hand that it can do all of this and more, and it cannot invest the difference effectively. This is the problem I am talking about and it's real.

[Zoolook]

In this context, "cash in the bank" doesn't literally mean cash-money.

I know that - that's what I said.

It means liquid financial assets that bear interest. This would include cash and equivalents, short term investments and long term investments.

...and that too! :)

Even if they're not cash-equivalent, they are interest bearing securities that are marketable and are delivering returns well below those of Apple's operations.

Well that depends on what they're investing in. But even if it's true, aside from it actually hedging against unforeseen events, and the fact that it does actually add to Apple's overall valuation, it cannot be used to scale Apple's operations. So the choice isn't interest ROE Vs operations ROE it's interest ROE Vs giving the money back to shareholders, which results in zero ROE, but a higher share price.

They don't make Apple more competitive and they don't offer investors much in the way of returns. It's very important for companies to have cash on hand to fund new initiatives and research, fend off competitive advances, etc. Apple has so much "aggregate money" on hand that it can do all of this and more, and it cannot invest the difference effectively. This is the problem I am talking about and it's real.

I don't agree - I think that banking the cash actually makes Apple more efficient and valuable, than exponentially growing and becoming less efficient along with it, ultimately lowering returns and becoming less valuable. This already happened to IBM, MS, Sony and even Google along with many others.