Apple`s Jobs says cash hoard allows for bold moves
Cupertino: Steve Jobs defended Apple Inc`s decision to maintain a USD 40 billion cash pile and said it was better to save the money for bold risks, like acquisitions, than to spend it on stock buybacks or cash dividends.
Faced with shareholders` questions over his intensions for the company`s cash balance, equal to about one-fifth of its market capitalization, the chief executive said buy backs and dividends would not have a lasting impact on the Apple`s share value.
"We`re a large enough business now, that in order to really move the needle, we`ve got to be thinking pretty bold, pretty large. And who knows what`s around the next corner," Jobs said at Apple`s annual general meeting.
"When we think about big, bold things, we know that if we needed to acquire something, a piece of the puzzle, to make something big and bold a reality, we could write a check for it," he said.
Shares of Apple have been hovering around $200 since October as investors wait for a fresh catalyst to extend a rally that has seen the stock more than doubled from year-ago levels.
Despite Jobs` comments about acquisitions, analysts did not believe a big M&A deal to be on the horizon.
Hudson Square analyst Daniel Ernst said he thought Jobs` comments did not signal a change in strategy, and added Apple Chief Operating Officer Tim Cook had said earlier in the week that the company had yet to see a large target that made strategic or financial sense.
"I don`t think they`d do a big acquisition. There simply isn`t a business out there that would be a cultural fit with them. They`re not like other companies," Ernst said.
He said Jobs was likely trying to explain how valuable Apple`s cash was strategically, as it provides the company with the security to take chances with its products.
Apple`s more recent acquisitions include: semiconductor firm PA Semi, mobile ad company Quattro Wireless, and music subscription service Lala. All were relatively small deals
"Large M&A doesn`t work with their business model," said Broadpoint Amtech analyst Brian Marshall.
"Their historical use of cash has worked obviously very well," he added. "Doing small deals, buying private companies with 100 to 150 engineers and integrating them with the Cupertino establishment and then taking their technology and making it pervasive throughout the organization."
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