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Jobs' death turns focus on Apple's $76-bn reserves

Bloomberg  |  San Francisco 

At a meeting with Apple Inc finance chief Peter Oppenheimer this year, investor Kishore Rao asked the company to tap its billions in cash to pay a dividend.

Oppenheimer had heard the request before and explained Apple was keeping its powder dry for “strategic opportunities,” without elaborating on what those could be, Rao said. The stock had almost doubled in the year before that meeting, and Oppenheimer argued Apple has been a good steward of its cash and investments, currently worth $76.2 billion.

The drumbeat to open that treasure chest may now grow louder, following the death of Steve Jobs, Apple’s former chief executive officer (CEO), on October 5. Jobs, who rescued Apple from near- bankruptcy and turned it into the most valuable company, engendered faith in his insistence on hoarding cash. In his absence, as the stockpile grows, Oppenheimer faces renewed calls to fund a dividend or stock buyback.

“They don’t need all that cash,” said Keith Goddard, CEO of Tulsa, Oklahoma-based Capital Advisors Inc., whose largest holding is Apple. “It won’t change their growth rate to pay a dividend.”

Apple, which almost couldn’t make payroll when Jobs returned as CEO in 1997, has more than doubled its cash and investments in the past two years, fueled by sales of the iPhone and iPad. Jobs resisted returning money to shareholders as he pushed Apple into new markets.

The company has used the money to buy long-term supplies of certain critical components, such as memory chips and touch- screen panels. Oppenheimer had, in January, said Apple would spend about $3.9 billion over the next two years on unspecified component prepayment and capital expenditures.

Steve Dowling, a spokesman for Cupertino, California-based Apple, reiterated the company’s longstanding position that it has a good track record of managing cash and is keeping it available for potential strategic opportunities.

Cisco Systems Inc started paying a dividend earlier this year when its cash and investments reached about $40 billion. And Apple’s competitors, including Microsoft Corp and Google Inc, have devoted their cash to making big acquisitions—something Apple has avoided. As sales keep growing, the company would have to find ways to spend its capital, said Ryan Jacob, chairman of Jacob Asset Management in New York.

“They have a high-class problem,” said Jacob, whose firm owns Apple shares. “They’re generating so much quarter after quarter, and it’s just growing.”

Profit more than doubled to $7.31 billion in the third quarter, adding to Apple’s coffers. The stock has climbed 15 per cent this year, defying a stock-market slump and concerns about Apple’s CEO succession. With a valuation of $342.8 billion, Apple is almost 60 per cent bigger than the second most valuable company, Microsoft.

Rao, the investor who met Oppenheimer, complimented the company for its overall business performance. He said dipping in to its cash wouldn’t affect Apple’s long-term plans.

First Published: Tue, October 11 2011. 01:05 IST