Has {complink 379|Apple Inc.} finally reached a decision about what it should do with the enormous cash the company has built up over the last five years? CEO Tim Cook has scheduled a conference call for Monday morning during which he will announce the “outcome of the Company's discussions concerning its cash balance,” according to a media alert issued on Sunday night.
Apple's board of directors had been holding discussions for some time on how the company should dispose of its $97.6 billion in cash, short-term, and long-term investments. During its last conference call with analysts, the company said it expects to announce a decision soon.
The company's cash hoard has grown strongly over the last five years, jumping from $24.5 billion in the fiscal year ended September 27, 2008 to $34 billion in fiscal 2009 to $51 billion in fiscal 2010 and $81.6 billion by the end of the last fiscal year. The increase has come on surging demand for Apple products, first with the iPod digital music player and exploding once the company entered the wireless handset market with the iPhone.
The cash has become a problem for Apple, however, with more than two-thirds of the funds now packed in investments outside the United States as the company — like many other cash-rich technology companies — tried to avoid a huge tax payment on its overseas profits. As long as the funds stayed outside the United States, Apple could indefinitely defer tax payments.
Some industry observers have speculated Apple could issue a special dividends payment to shareholders. Others have criticized the company for taking so long to take a decision. Today's conference call should end the controversy.
Apple has already announced it will spend about $10 billion to buy back shares over the next three years and will start paying dividends of about $2.65 per share for a total of $10 billion in the first fiscal year. Click here for the conference call.
 At long last Apple finally arrived at a decision with its cash piles. It will be interesting to watch the outcome.
Bolaji, that is only about 10% of the money. In last 5 yrs the cash reserve has increased more than 3 folds. Why does not Apple expand into other businesses as other companies do when they have so much cash? Did executives discussed about it.
Himanshu, I think they have to diversify their business to allied sectors too. As of now they have only a few products like IPad, IPod and Laptops and they can look in to other IT related products or services. I strongly feel that instead of distributing the surplus cash, they have to invest for new ventures or R&D.
Definitely, i think in just 1-2 years competitors will catch up very fast.
@Jacob, Apple executives are not even giving hint that they are planning to expand. There have been rumors about Apple TV but this is not a sure shot thing. I think that Apple is keeping its former customer strategy of wait, watch and get drench in entertainment. I do not think that Apple will expand in any other market than the consumer productsÂ
@Jacob, Apple executives are not even giving hint that they are planning to expand. There have been rumors about Apple TV but this is not a sure shot thing. I think that Apple is keeping its former customer strategy of wait, watch and get drench in entertainment. I do not think that Apple will expand in any other market than the consumer productsÂ
@Himanshugupta – I agree, with the amount of cash they have on hand, it seems like they should be investing in business interest somewhere. Issuing dividends and stock buybacks is fine for some of the funds, but doesn't do anything to grow the business or find future products/services.
@Eldredge: I agree with you. It seems to be the more socially responsible approach. In times like these where the industry is already suffering I think companies like Apple can create new jobs for a lot of people. Not only will it create jobs but will eventually increase production which in some areas is necessary to meet demands.Â
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@t.alex
“Definitely, i think in just 1-2 years competitors will catch up very fast”
I think that Apple still has a good leap ahead its competitors and it might take more than 2 years for them to catch up. But you are right Apple should continue to innovate in order to keep that lead.
So at ~$10/share/year, what do you think about the dividends?
How do you think it will affect people's decision to invest in APPL?