As if the tremendous and continuing success of products like the iPhone and iPad isn't enough to entice investors, Apple also has more than $81-billion in cash on its books with two-thirds of that amount held outside the United States.
What the company should do with that money has been the subject of debate for years with cries surfacing occasionally for Apple to issue a dividend, do a buyback, or perhaps acquire complementary companies to help maintain its torrid growth.
After all, Apple doesn't need that kind of cash hoard to fund day-to-day operations, secure parts, or even invest in research and development at this point.
New CEO Tim Cook has said that he is “not religious” about holding cash, as his predecessor Steve Jobs seemed to be. When Jobs returned to the company he co-founded, Apple was notoriously stingy with its cash. It's only done a handful of mergers over the $200-million mark (P.A. Semi, Quattro Wireless, C3 Technologies, and supposedly Siri).
That means the substantial free cash flow the Cupertino, Calif.-based company generates each quarter sits in the bank, doing nothing for shareholders.
Here's a list of five ways Apple could put some money to work outside conventional options like dividends and buybacks, and still have plenty left over to churn out the iPads, iPhones and MacBooks that consumers line up in droves for.
Safari, Apple's proprietary browser had 4.2 per cent of the market share in October 2011 according to W3 Schools, compared to 38.7 per cent for Mozilla Firefox and 21.7 per cent for Internet Explorer.
In the latest iPhone and iOS releases, Apple has heavily featured Wolfram Alpha, a search engine which allows for a wide variety of different searches, as opposed to the standard image and text searches that Google , Yahoo and Microsoft's Bing generate.
If Apple were to buy Wolfram Alpha, designed by British scientist Stephen Wolfram, and successfully integrate the product into Safari, making it the default search to differentiate Safari from other browsers, this could potentially help Apple capture browser market share.
Apple could also look to monetize Wolfram Alpha's API [application programming interface] basically its source code, with its vast reach and resources. Right now, Siri uses Wolfram Alpha to display answers to questions, and integrating the two companies could potentially be beneficial for Apple down the line.
Apple came out with a social function for iTunes in 2010 known as “Ping” in an attempt to compete with the likes of Facebook, Twitter, LinkedIn, and other social networking sites. Apple has stopped mentioning how Ping is doing in its press releases, which some analysts have said means Ping is a failure. When Apple released iOS 5, along with the iPhone 4S, there was a deep integration of Twitter.
In a blog post this summer, Twitter co-founder Jack Dorsey wrote, “This means that you'll be able to sign in to your Twitter account once and then tweet with a single tap from Twitter-enabled apps, including Apple's apps – Camera, Photos, Safari, Contacts, YouTube and Maps. And developers of all of your favourite apps can easily take advantage of the single sign-on capability, letting you tweet directly from their apps too.”
With news that Facebook is looking to go public at a valuation of $100-billion, Apple could decide to make a preemptive strike and use a chunk of its cash to purchase Twitter, allowing it to integrate social networking into its products even more.
Apple has already purchased a significant number of patents along with a consortium of others from the now bankrupt Nortel Networks, and technology companies are increasingly viewing patents as a significant asset. InterDigital is a name that has been the subject of rumors in the past.
Google's purchase of Motorola Mobility has fueled speculation of a “patent war” between some of the largest technology companies, and brought to light the patents that Research in Motion has at a time when the BlackBerry maker is struggling to stay relevant in shareholders' minds.
Apple's iTunes is the leader in digital music delivery, generating revenue of $1.4-billion in the third quarter. MySpace was once a pioneer of the social networking space before Facebook blew it away.
But MySpace is still a place where bands put some of their music, and a group including Justin Timberlake purchased the company for $35-million. That's pocket change for Apple and the deal would bring more social networking into iTunes than the company already has with Ping.
Flash memory maker Fusion-IO is one of Apple's largest suppliers. The company already has a relationship outside of being a supplier to Apple though. The Chief Data Scientist of the Salt Lake City-based company is none other than Steve Wozniak, who co-founded Apple along with Jobs and Ron Wayne in 1976.
Fusion-IO has been of the most successful tech IPOs this year, rising 46 per cent year-to-date. The company reported quarterly earnings earlier this month, with revenues growing 175 per cent year-over-year to $74.4-million. For the full year, Fusion-IO expects revenue growth of approximately 55 per cent.
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