Cash historically has been a poor long-term investment. So if I were an Apple (AAPL) shareholder, I might wonder whether there’s a better use of the company’s $97.6 billion in cash — up from $81.6 billion in the previous quarter — than letting it pile up. If Apple were a mutual fund, how happy would you be to see these reserves not being put to work for you?
Companies today certainly need a stockpile of cash to deal with the uncertain macroeconomic environment. But almost $100 billion is enough to withstand more rain than in Blade Runner.
On Jan. 24 the company reported excellent results for the most recent quarter, with sales of the new iPhone and other products exceeding expectations and the outlook remaining positive. Management acknowledged the cash balance on the conference call by saying the company isn’t “letting it burn a hole in our pockets.” When analysts asked for additional information, management provided little additional color than to characterize the discussions as “active.”
The cash build-up isn’t surprising because of the nature of Apple’s business, and the rising levels are the result of the company executing extremely well. And Apple is just one of many large companies in this position: Microsoft, Cisco, Intel, Oracle and other large technology-related companies also have large war chests.
But as time goes on, shareholders might grow increasingly uneasy that Apple’s cash reserves aren’t being invested in the business, used for share buybacks or returned to them as dividends. And they might start to wonder whether the company can’t find any suitable growth opportunities.
