Apple has more cash on hand than Google and IBM and is second only to Microsoft, according to a story at seattlepi on Monday. While Microsoft’s cash has dwindled due to dividends and share buy backs, Apple’s has steadily grown. In fact, Apple has more cash than Hewlett-Packard and Dell combined.
The trend, according to Tod Bishop, has implications fot the two companies. Apple has consistently claimed that the purposes of that cash is for possible acquisitions or stock buyback when quizzed by analysts. On the other hand, Microsoft was recently in a position where it would have had to borrow money to acquire Yahoo! — a deal that has collapsed.
“Stock buyback programs and other forms of returning the cash are discussed with the board from time to time,” Peter Oppenheimer, Apple’s chief financial officer, typically reiterates at earnings reports. Apple wants to “maintain a strong balance sheet in order to preserve our flexibility to make strategic investments and/or acquisitions,” he has said.
The idea behind a stock buy back is to decrease the number of outstanding shares and improve the earnings per share (EPS) ratio.
Pacific Crest analyst Andy Hargreaves continues to believe that Apple is over capitalized. “You’d like to see them return that in one way or another, or put it to work.” Exactly that kind of large, strategic acquisition has been recently hypothesized by Robert X. Cringely.
While Microsoft still has more cash than Apple, Microsoft’s recent failure to utilize its cash in contrast to Apple’s steady hand with its own is revealling contrast in the two comany’s management styles. In the long run, it could also dictate the health of the two companies in difficult economic times.