An iPhone Christmas! Spending Apple’s $200 billion cash hoard on…

Brian S Hall  By on 27 Dec 12

As 2012 draws to a close, Apple, maker of iPhone, iPad and Mac is valued at approximately $500 billion. To some, this is low, given that Apple’s smartphone, tablet, MP3 and laptop business lines are among the most popular, most highly coveted in the world. Undervalued or not, it’s hard to overstate Apple’s size. It is the most highly valued public company, it is within reasonable striking distance of $200 billion in annual revenues – and, possibly most noteworthy of all, its incredible margins have rained down money onto the company. Apple has cash/investments and equivalents on hand of about $130 billion. Expect this to rise to a stunningly high $200 billion in 2013.

Apple cash

If cash is king, then Apple ($AAPL) is Emperor of the Known Universe. The market value of Microsoft is just over $200 billion, as is Google. Apple is approaching having as much ‘cash on hand’ as these two tech giants are worth! Which begs the question: how should Apple spend all that money?

I know!

Let’s play ‘how to spend Apple’s money’! The rules of this game are simple: you have to spend all of Apple’s cash but it must be on something that will improve Apple, somehow. I’ll go first:

Apple has initiated a $2.65 quarterly dividend under CEO Tim Cook. They also plan on a three-year, $10 billion stock buyback program. These will barely make a dent in all that cash and I’m not going to suggest something as dull and non-innovative as dividends or stock buybacks. Apple is one of the most innovative companies on the planet. We can put all that cash to far better use.

Bonuses

Go big, go epic, go legendary on bonuses. Hand out cash to staff in a way that Steve Jobs would never even consider. My suggestion: give out a supplemental $5 billion in bonuses to Apple (non-retail) employees and another $5 billion to Apple Store employees. That’s $10 billion. Talk about creating happy, loyal staff! If we use the $200 billion cash total Apple is expected to have next year – since we can’t spend this money all at once – that leaves us with $190 billion remaining. Fair enough, staff bonuses taken care of, it’s time now to go truly big.

Buy Bloomberg

Bloomberg is a financial data, news and information behemoth. There are pricey Bloomberg ‘terminals’, Bloomberg publications, databases, television channels, magazines and financial market tools and algorithms.

If Apple were to acquire Bloomberg, Apple’s content ecosystem, already the best in the world, will now include the most valuable digital assets there are: critical financial data. More than that, every banker, every financial analyst, stock trader and wannabe will demand an iPad and iPhone, allowing Apple to breach the massive enterprise market. The once-lowly Mac can become the go-to desktop computer for millions in the financial and media industry now chained to legacy systems.

Based on analysis of the private Bloomberg, it will likely cost Apple $30 billion. That leaves us with $160 billion remaining.

Buy Twitter

Apple should definitely buy Twitter. Twitter has over 100 million active users, and a potential 500 million total user accounts. Twitter is one of the few businesses with a workable mobile business model and their service is optimized for iPhone and iPad. Imagine if every activity on iTunes and iPhone, for example, could be auto-tweeted? That would enhance the overall value of the Apple ecosystem. But there’s an even greater opportunity: Twitter has the potential to become the de facto service we all use while watching television: we tweet out what we watch, what’s happening – particularly for sporting events. Twitter is a natural ‘second screen’ service. With Twitter, Apple could sell more iPhones and iPads, probably more Apple TVs, and, yes, it could support the purchase decision of the still-imagined Apple Television. I estimate a price of $15 million. That leaves us with $145 billion remaining.

Buy Nokia

If Apple were to buy Nokia, they gut the nascent Microsoft Windows Phone platform in one fell swoop. Apple + Nokia now have a combined IP portfolio in mobile second to none. With this purchase, Apple acquires staff with proven talent in mobile design and mobile optics. And, yes, they get one of the world’s better mapping solutions.

Apple would incite a bidding war for Nokia. I estimate they could get the company for $25 billion under such a scenario. We now have $120 billion remaining.

The Apple Endowment

I am not sure if this is legal, given the financial regulations that public corporations in America must follow, but I would create an “Apple endowment”. Apple is one of the most innovative tech companies in the world. Yet, surprisingly, they spend only about $3.5 billion annually on research and development. With all their cash, why not set aside an endowment that could fund Apple R&D for the entire 21st century? For example, if Apple were to set aside $50 billion, and earn 10% a year on that, that could provide $5 billion for R&D every year, forever.

We now have $70 billion left.

Disney

Apple is building out its global retail footprint. They have over 300 stores spread around the world. Their iTunes/App Store ecosystem is available in over 100 countries. They have over 400 million users with credit cards on file. I would like them to build an Apple Television that can standalone, but also the can leverage their existing massive global media ecosystem. There is one company they could acquire that should guarantee success for the Apple Television: Disney.

Disney owns, well, the entire Disney catalog. Plus, ESPN and its high-profit sports domination. The ABC network in the US and several others are Disney properties. So is Star Wars. And Pixar. What if these were Apple exclusives? What if every Disney and Pixar character was used in Apple marketing?

Disney has a market value of $90 billion. Darn. I don’t have enough money. Sorry, Nokia, you have to stay wedded to Microsoft. I will abandon the Nokia acquisition and acquire Disney and still have several billion dollars remaining. My work is done.

How would you spend Apple’s booty?

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  • Thomas

    First they need to repatriate the $80bn cash abroad and pay the $20bn in taxes owed, to the US, which liability is already set aside, so no impact on earnings. Before doing so they need to tell the US corporate world that good citizenship includes paying taxes, and that AAPL will pay if all the others step up to the plate. Shame them into doing the right thing. The resulting $0.5tn paid to the Treasury will materially and positively impact the finances of the US and have zero impact on the payers’ ability to continue in business. The $2tn cash hoard of US corporations is senseless.

    As for all your ideas about acquisitions, please detail the history of successful acquisitions of this size. These ideas would result in very poor use of stockholders’ money, erode margins and further compress the PE multiple. Simply return the money to the stockholders and help the stock recover. That will impact both consumer spending and wealth significantly.

  • http://www.amazon.com/-/e/B002VH8ECQ Brian S Hall

    Some valid points but if Apple were ever going to return that money to shareholders, they would have done it long before it reached near $200 billion.

  • http://www.BarnesFamily.com/ davebarnes

    I am not sure Apple would have to repatriate the money. Some shares of Disney must be held overseas. So use overseas money to buy overseas shares.

  • nokia_lumia_920

    you guy are an abominable apple-fanboy as you have admitted through your non-sense article now. i bet you that from next year onwards apple will start losing interest from people as well as from google’s android. i dare say that, albeit windows phone os’ slow start, they’ll start improving soon once they rectify the horrible windows 8 and its RT experience. also bb10 will do good but that will be a very short term revival. even if windows phone does well, it may or may not guarantee nokia’s success in the long term as its loosing money like bleeding profusely. they need to start acting wisely and release only flagship a year and remaining phones that dont hurt the flagship like they did with the lumia 800 and 900. best of all they should improve top management cause not only did they screw themselves with some stupid announcements back in 2011 but also in 2012. and microsoft are just adding insult to injury on them.

    long story short, microsoft’s gonna succeed in the long term future even if you dont like it cause they got loads of cash (cause of the idiot Ballmer’s leaving, and they could do better if they dont keep Elop as well). and nokia (i’m afraid) they’ll be graving themselves into a bigger ditch thru more stupid decisions and also because of microsoft. i really hope there’s some saviour (in the form of steve jobs) that can save nokia out of this ditch and bring nokia back properly to the playing level of apple and samsung.

    i’m sorry to say this but if google’s doing better today is only because of samsung, so samsung’s success in the longer term is more likely than google. and dare i say that with every day samsung improving, google is decimating as well. so google will be failing. we’ll also be seeing samsung acquiring google as well. so it’ll be very much apple and samsung in the future. goodbye everone else.

    i’m a nokia fanboy and not a microsoft fanboy as i type this tragic and depresing story of mine. sorry man if i were ruining your happy moment of how to spend apple’s trucks load of money.

  • http://www.amazon.com/-/e/B002VH8ECQ Brian S Hall

    After spending my Christmas holiday using my old Meego N9,which sucks, I have to say that I find it hard to believe Nokia has any future other than as a hardware partner for Microsoft.

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