Every so often Apple critics, prognosticators, and those of us with little else to do come up with a list of where Apple should invest those tens of billions in cash sitting in banks around the world. Admittedly, I’m not a fan of dividends or stock buy backs, regardless of the black on the balance sheet. Apple can do the former for years to come, but based upon the languishing stock the past few years, and the historical evidence that indicates nominal value, I don’t see much advantage for buying back your own stock. Remember, there’s a buyer for every share that gets sold, whether high or low.
What should Apple buy with all that money?
Adobe’s stock has done well in recent years, but the market cap at $50-billion or so makes it affordable. Buy Adobe and make Creative Cloud work better on the Mac, iPhone, and iPad, but not so great on Windows PCs, or Android devices. Hey, it’s competition.
Likewise, Apple could dump a similar amount of money and own a full-fledged, functioning, profitable automobile company. With trucks. Ford’s market cap barely touches $50-billion, $20-billion more than Tesla.
Apple has yet to make much of a dent in the entertainment business other than music and iTunes. Sony seems cheap and it’s making a little money again. Disney might be too expensive, even for Apple, but a merger would make a powerhouse of devices and content.
A huge chunk of Apple’s cash-on-hand remains not so much local as it does international because U.S. tax laws make it exorbitantly expensive to repatriate some of the riches. Apple could buy France. Or, New Zealand.
Netflix is affordable and would get Apple into the entertainment game in a big way, but here’s the deal with the streaming TV show and movie leader. It’s mostly U.S. while Apple is international. Netflix is only as good as the content deals it can make, and there’s no guarantee Apple would be able to keep such deals with skittish content providers. Apple could afford chipmaker NVIDIA and AMD. At the same time. And pay for them with profits from the next quarter or two. Starbucks might be a good fit, too.
What I think Apple will do with all those riches is what Apple has always done.
Beats Music cost a few billion and that investment might payoff with streaming music subscriptions and Beats headphones, but the company seems to have acquired bigger bang for the buck when it purchased the chip design expertise from P.A. Semi back in 2008, but similar amounts went to C3 Technologies (map maker), AuthenTec (Touch ID), and Anobit (flash memory). Apple spent nearly the same money on Quattro Wireless which does mobile advertising but that seems to have been a bust.
The second largest Apple expenditure seems to have been one that often is overlooked. Back in 1996 Apple CEO Gil Amelio bought Steve Jobs’ NeXT to power the next generation of Macs. That worked out well for Apple, Jobs, NeXT employees, and Apple customers, but not so well for Amelio.
Acquisitions aside, what I really want from Apple is better products; Macs, iPhones, iPads, Watch– that work better, last longer, and are priced less. The fact that Apple gives away so much money on dividends and stock buybacks indicates that Apple’s executives don’t know what to do with all that money, either.