Apple’s $15 billion cash hoard

Pop quiz: Which tech company has the most cash?

(A) IBM (IBM)

(B) Hewlett-Packard (HPQ)

(C) Intel (INTC)

(D) Google (GOOG)

(E) Apple (AAPL)

If you picked E, congratulations. Apple’s $15.4 billion stash is indeed the biggest of the group, putting the iPod maker in the elite ranks of well-heeled Fortune 500 tech companies. (Only Microsoft (MSFT) and Cisco Systems (CSCO) stockpile more.) And lately the stacks have been rising fast; Apple has added $5 billion to its coffers in the past year alone, according to regulatory filings.

Unlike Microsoft or Cisco though, Apple (AAPL) doesn’t pay a dividend, doesn’t make big acquisitions, and doesn’t buy back many shares. Last month the company reported that since 1999, it has spent a relatively paltry $217 million to repurchase stock, though its board has authorized $500 million for that purpose.

So what does CEO Steve Jobs have in mind for all those greenbacks?

Traditional money managers would say he has to spend them somehow. Sure, a growing mound of cash looks impressive on financial reports; and a growing cash reserve also can be a sign of above-board profitability, since it’s easier for companies to play games with income numbers than with cash flow. But if the money just sits there, it smacks of waste.

When asked about Apple’s plans for the cash, a spokeswoman referred to chief financial officer Peter Oppenheimer’s statements earlier this year. When a Lehman Brothers analyst asked him where the money would go, Oppenheimer didn’t offer specifics beyond saying that having a few billion on hand helps to fund big projects, and “we do discuss share buyback and other forms of returning cash to the shareholders with the board from time to time.”

Apple vs. Microsoft Indeed, investors tend to discuss those things, too — they like to see that kind of money either used to place big bets that drive future earnings, or handed back to them through buybacks and dividends. Technology companies often resist such suggestions, but not always. Under pressure from investors, Microsoft began offering a dividend five years ago.

Of course, as a quick glance at a stock chart makes obvious, Apple is not Microsoft. While the Redmond software giant has performed well — shares are up a respectable 15 percent this year on the strength of Windows Vista sales — Apple’s stock price has doubled. Considering Apple’s standout performance, and a big year ahead as the iPhone and redesigned iPod push into new overseas markets, no one’s about to start lecturing Jobs on shareholder value.

But that still doesn’t answer the question of where Apple’s going to put that $15 billion, not to mention the next couple billion dollars it will probably pocket during this holiday season alone. Though Apple isn’t talking about its spending plans, history offers some clues.

http://bigtech.blogs.fortune.cnn.com/2007/12/07/apples-15-billion-cash-hoard/