What Should Apple Inc. Do with Its Cash?
Apple Inc. (NASDAQ:AAPL) is working on the biggest spending program in corporate history. No, this isn’t a huge new investment in research and development. Rather, the company announced in April that it will spend over $200 billion in dividends and buying back AAPL stock through 2017. (Source: “Apple Expands Capital Return Program to $200 Billion,” Apple Inc., April 27, 2015.)
Lucrative? Definitely. But while an Apple stock buyback may be smart, it’s also incredibly boring.
Imagine, for the sake of discussion, if Apple ploughed that money back into its business. With its hundreds of billions, Apple could purchase a well-established corporation with the infrastructure needed to cement its dominance in the marketplace. Alternatively, it could buy a promising startup to springboard the company to something mind-blowingly new and exciting.
If anyone is reading this in Cupertino, here are a few suggestions:
1. Tesla Motors, Inc.
Tesla Motors, Inc. (NASDAQ:TSLA) Elon Musk has been clear to reporters what he really thinks of Apple’s efforts to enter the car industry. In an interview with Handelsblatt, the tech visionary bluntly told the German newspaper that Apple hires the engineers Tesla fires. (Source: “All Charged Up in Berlin,” Handelsblatt, September 25, 2015.)
Whether Musk is serious or blowing smoke, building an automotive company from scratch is a challenge, even for Apple. So why bother? With one check, Apple could become the dominant player in the automotive industry. With a price tag under $30.0 billion, Tesla would still be a rounding error on the company’s balance sheet.
2. Sony Corporation (ADR)
Buying Sony Corporation (ADR) (NYSE:SNE), with its leading edge 4K resolution video, would come in handy if Apple ever decided to launch a proper TV. The “PlayStation 4” would also make Apple a huge player in the video game industry overnight. Given Sony’s struggles in recent years, Apple would be able to pick up the electronics giant for a relatively modest $34.0 billion.