[MrHobbes]

The most valuable publicly traded company anyway. I am quite sure that Saudi Aramco is more valuable than either Exxon or Apple.

With that said, it is perhaps unlikely that Apple will be able to maintain its current advantage in the smartphone and tablet markets over the long-term.

On the other hand, at a P/E ratio of roughly 14 Apple does not exactly seem to be overvalued at this point in time.

Something else to consider is their cash hoard. What exactly do they intend to do with that $28.4 Billion dollars in cash? That is a mystery that I would love to know the answer to.

Personally, if I were Apple, I would be supplying investors with a dividend at this point in time. The fact that they are not indicates that they are either stubborn or they believe they are still capable of significant growth.

Let's assume they believe they are still capable of significant growth. The cynic in me doubts that this is the case - just because of the significant amount of competitive pressure that they are facing. The optimist in me thinks that it just may be possible for Apple to still expand.

Apple's history encourages the optimist in me. Apple is one company that, historically, it has always been a serious mistake to count out. However, how much of this amazing resiliency depends on Apple having Steve Jobs. Well... That's another wildcard.

I just don't know. It should be a very interesting next decade for Apple customers, investors, and competitors.

This post does not constitute investment advice.

[jmreid]

Apple has about $76 billion in cash after the last quarter. Not sure where you got $28.4 billion from.

Also, I'm not sure why you say that Apple is unlikely to maintain it's advantage in the smartphone and tablet industry. I'd say they are very likely to maintain an advantage, especially when it comes to profits. No other manufacture has an entire ecosystem in place for it's customers quite like the way Apple does (digital stores, iCloud, Retail stores, etc).

[MrHobbes]

I understand why you may be confused, because this was pretty poorly reported recently and I was not completely specific in my post.

Some Miscellaneous References:

http://www.google.com/finance?q=NASDAQ:AAPL&fstype=ii

http://finance.yahoo.com/q/ks?s=AAPL+Key+Statistics

http://www.apple.com/pr/library/2011/07/19Apple-Reports-Thir...

Apple does not have 76 billion in cash. It has 76 billion in cash, cash-equivalents, and long-term marketable securities. There is a significant difference.

For clarification, please see here:

http://seekingalpha.com/article/258268-debunking-the-myths-o...

This post does not constitute investment advice.

[jmreid]

Thanks for the clarification. I've just never heard anyone be as specific about it as you, and I appreciate it. Almost everyone (non-financial sites and reports) considers it all "cash" and reports it as such.

[joshuamerrill]

Yes, the $76 billion includes $47.7 billion of long term investments, and possibly in there are the value of the supplier agreements that Apple is so famous for.

On the other hand... potato, po-tah-to?

While I'm acutely aware of the vast difference between $28 billion and $76 billion, can anyone name the largest acquisition Apple has ever completed?

More importantly, can anyone recall the amount?

Apple is one of the most acquisition-averse large companies I've ever seen. What they will do with $28 billion--let alone $76 billion--is beyond me.

[ellyagg]

I'm pretty sure MrHobbes was just waiting to jump on someone for that. Although Apple doesn't have $76 billion in "cash and cash equivalents", it's not as if those extra assets are suddenly rendered valueless because they're harder to convert to cash. As you surmise, they provide a lot of leverage.

[MrHobbes]

Hello ellyagg,

No, I was not waiting to jump on someone for that, and I would hope that my response was not agressive in tone. That really was not intentional, but I apologize to jmreid if that was the case.

I actually up-voted jmreid's post (before typing my response) because he raised an extremely important point.

If I may share something? I like to keep this in mind as I move around online. With the lack of faces and tone of voice to help, I find that it is helpful to remember: http://www.paulgraham.com/randomness.html

[ugh]

Those $28 billion are excluding long-term marketable securities, the $76 billion include them.

[6ren]

Cash hoard: Maybe they will buy their own hardware manufacturing facilities, right down to silicon foundries. They like vertical integration, and they don't like their manufacturers (e.g. Samsung) becoming competitors.

Long term: although Apple is defending its current properties, I think it is setup to routinely create new categories of products. This is where Apple's talents are most valuable (especially combining hardware and software to push the envelope), when new things are still difficult; they don't seem to be good at commodities (e.g. cheaper phones) nor want to be. They've gone iPod, iPhone, iPad. They're also trying TV hardware. What's next? Maybe a game console; a watch; a much smaller smart phone; an ARM/iOS laptop or desktop; or something I haven't imagined.

But yes, the question is whether they can manage it without Jobs.

[hackingOnAJet]

Apple has not demonstrated any interest in buying its own manufacturing facilities. Doing so would not provide the company with the flexibility and agility required to stay ahead of the market. Instead, Apple uses cash incentives to allow its manufacturing partners to invest in new technologies earlier than market demand would have otherwise made feasible. In exchange, Apple signs deals for exclusive purchasing rights to these new technologies.

By providing incentives to third parties instead of assuming the manufacturing risk internally, Apple can accomplish the same goals with comparable payoff while taking on much less risk.

This strategy is, in part, one of the reasons why Apple is able to offer tech like the retina display in the iPhone 4 long before its competitors.

[balakk]

I was thinking bigger.. how about a new car? electric of course. Completely different from what we know. A mobile computer we can travel in.

[marknutter]

Please let it be a watch (dead serious).

[r00fus]

The current iPod Nano with bluetooth would have been killer. Wireless headphones tied to your watch... now that's wearable computing.

[Game_Ender]

As a watch wearer I agree. I would love for someone to really reinvent the product into something better.

[adamtmca]

They use the hoard, in part, to lock up supply of components that they think will be strategic in the near to medium term future. They had a strangle on the supply of NAND flash leading up to and through the christmas season when the first ipod nano's came out, for example.

http://www.tuaw.com/2011/04/26/apple-lays-out-11-billion-in-...

http://allthingsd.com/20110124/tk-3/

http://www.quora.com/What-would-be-a-good-use-of-Apples-76-2...

[bane]

"Something else to consider is their cash hoard. What exactly do they intend to do with that $28.4 Billion dollars in cash? That is a mystery that I would love to know the answer to."

Apple has long held a huge rainy-day fund. For example this reason: "With that said, it is perhaps unlikely that Apple will be able to maintain its current advantage in the smartphone and tablet markets over the long-term."

This approach is pretty much what got them through the Jobless 90s.

[megablast]

Isn't Apple's problem that a lot of this money is overseas, from overseas operations, and could not easily be bought back into the US?

[jacques_chester]

My understanding is that repatriating the money to the USA would cause it be taxed, even if it's already been taxed in the country of origin. I believe that the USA is one of the few countries that is prepared to tax extra-territorial earnings, but I am not a tax accountant.

[vessenes]

In short, this is generally true.

In long form, this might or might not be true, depending on tax-treaties and jurisdictions.

Back to short form, smarter people than you or me have worked out all the angles for Apple on this already.

[jacques_chester]

> Back to short form, smarter people than you or me have worked out all the angles for Apple on this already.

Exactly.

[eru]

What would they do with the money in the US that they can't do elsewhere?

[Retric]

Dividends