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Any article that speculates on Apple's future viability in the market would be remiss not to mention Apple's unprecedented cash hoard. Currently, Apple is sitti

Any article that speculates on Apple's future viability in the market would be remiss not to mention Apple's unprecedented cash hoard. Currently, Apple is sitting on $126B in net tangible assets. With 100,000 full-time equivalent employees, that means that Apple could pay every one of their full-time equivalent employees (which, as a reminder, includes a large number of retail employees) an average yearly salary of $100K for 12 years while making $0 in revenue and still not deplete their cash reserves! Or, to put it all in perspective, based on Wikipedia's cited estimate (https://en.wikipedia.org/wiki/International_Space_Station#Cost https://en.wikipedia.org/wiki/International_Space_Station#Co...) the International Space Station cost $150B to construct. Personally, I'm looking forward to visiting the iSS at some point in the future.

adventured 9y ago
That's not actually how things unfold when a company gets into trouble. Your scenario is the perfect, idealized, never-happens outcome. We have dozens of historical examples at this point, from elite, massive corporations unraveling: what they basically never do, is the strictly rational idealized scenario. What actually happens is closer to chaos loaded with self-interest and stupidity by management and the board. The board gets attacked aggressively by large investors. Existing management and the board goes into bunker war bribery mode. The board bribes shareholders, further depleting its cash position. See: IBM's most recent idiocy as their revenue melted for 23 straight quarters, while they continued to buy back stock aggressively. The cost of their staggering $100+ billion in debt climbs over time as their financial and earnings situation erodes. By the time a serious problem erupts, they'll probably have $200+ billion in debt (they'll have that in just four or five years now), continuing their existing mistake. They intentionally avoid paying off all of their debt while they can, to hold onto the cash (because hey, debt is cheap today, forget about tomorrow, tomorrow is valhalla and rainbows), which they then make the mistake of expending to bribe shareholders as the stock plunges. Because, you know, things are going to turn around any day now. Then they end up with less cash than they have debt, and down it all goes from there, in a spiral they can't pull out of. If we're talking about what happens in a bad scenario, that's more like what commonly happens in reality. That net cash position will not be preciously saved to protect employees, the employees are the first ones to go. That net cash will be used as a bribery slush fund. Their earnings haven't increased in years. They're facing a zero growth future, if only because of their immense size. The smartphone market contracted by ~9% in 2017 (-16% in China). They're facing a PC market scenario, where consumers start replacing devices a lot less often (while simultaneously smartphones face increased competition from all sorts of cheaper AI-focused devices). Their cash accumulation is far slower now than it was in the past, because it's all going to shareholder bribery. Meanwhile, they've added $50 billion in debt in about two years, with that pace continuing in the latest quarter. Their income to debt ratio has been eroding for five straight years. Consider: right now Apple is making the incredibly foolish mistake of aggressively buying back stock with their capital, while its AI efforts are an embarrasment and they get their ass kicked by Amazon. Spend $50 billion catching up in AI etc? Or buy back stock? Apple has made its choice, and it shows.
- greedo 9y ago
  "Their earnings haven't increased in years." I'd love to own more companies that have this earnings profile for the last eight years. They've gone from $14B in 2010 to over $48B last year. [1] [1] https://www.statista.com/statistics/267728/apples-net-income-since-2005/ https://www.statista.com/statistics/267728/apples-net-income...
- AnthonyMouse 9y ago
  Just because you have a hundred billion dollars doesn't mean it's worth spending it to try (and quite plausibly fail) to topple an entrenched competitor in a tangential line of business. Monolithic corporations are massively inefficient because the combination of wealth and bureaucracy is the recipe for waste. Let them give the money to shareholders -- isn't that why they were supposed to be in business? Then if it makes sense to invest the money in some other line of business, the investors will invest it in some other company doing that thing. The fact is that smartphones are now a mature product. There will continue to be incremental improvements, but nobody is really expecting a future iPhone to be to the current iPhone what the original iPhone was to Blackberry. The market is now a cash cow. They have an existing technology and customer loyalty that they can milk for multiple years until increasing competition eats away at their margins, doing that is a profitable medium-term strategy, so that's a completely reasonable and expected thing for them to do. They could invest their cash in some speculative technology and maybe get lucky, but so can their shareholders.
- baxtr 9y ago
  I agree, Apple is doomed. They always have been
- KKKKkkkk1 9y ago
  Well, in 2016 they spent > $10B on research. So clearly they're trying to catch up, it's just that they're not very good at it.
- makecheck 9y ago
  If you look back just a few years, Apple has responded multiple times to saturated markets by introducing new product classes. We don’t have iPods anymore for instance, now we have watches (even though at one point you could have argued that the music player market was full too). If phones really do start to lose steam, Apple should have plenty of opportunity to create a new interesting product.
lazypenguin 9y ago
I generally agree with you but there is the case for negative revenue that could deplete those reserves at a rate faster than you have calculated.
- deleted 9y ago
  [deleted]
- fauigerzigerk 9y ago
  How would that negative revenue come to pass? People returning their iPhones en masse for a refund?
  - perseusprime11 9y ago
    You end up spending lot more money than you make. To counter that, you invest $20 billion dollars in a game changing innovation but it fails leading to a write off. Then you go acquire a company that also becomes a dud. There are 100 different ways to go broke. Take a look at how GE messed up.
    - fauigerzigerk 9y ago
      Absolutely, but that's not negative revenue.
anvandare 9y ago
You could try visiting, but it would have a proprietary docking port. :>
ekianjo 9y ago
The ISS is going to be de-orbited by 2020. You don't have much time left to visit it, and NASA does not operate any shuttle service anymore.
- energybar 9y ago
  Prolonged till 2024 https://en.wikipedia.org/wiki/International_Space_Station_program https://en.wikipedia.org/wiki/International_Space_Station_pr...
  - mattkrause 9y ago
    (You’re both missing the joke)
    - jhpankow 9y ago
      Open the iPod bay doors, Siri.
draw_down 9y ago
Come on. You’re not saying anything.
dsr_ 9y ago
Considered another way, if Apple could make 8% more than inflation on their investments each year, they can run forever without selling anything.
deleted 9y ago
[deleted]

adventured 9y ago

That's not actually how things unfold when a company gets into trouble. Your scenario is the perfect, idealized, never-happens outcome. We have dozens of historical examples at this point, from elite, massive corporations unraveling: what they basically never do, is the strictly rational idealized scenario. What actually happens is closer to chaos loaded with self-interest and stupidity by management and the board. The board gets attacked aggressively by large investors. Existing management and the board goes into bunker war bribery mode. The board bribes shareholders, further depleting its cash position. See: IBM's most recent idiocy as their revenue melted for 23 straight quarters, while they continued to buy back stock aggressively. The cost of their staggering $100+ billion in debt climbs over time as their financial and earnings situation erodes. By the time a serious problem erupts, they'll probably have $200+ billion in debt (they'll have that in just four or five years now), continuing their existing mistake. They intentionally avoid paying off all of their debt while they can, to hold onto the cash (because hey, debt is cheap today, forget about tomorrow, tomorrow is valhalla and rainbows), which they then make the mistake of expending to bribe shareholders as the stock plunges. Because, you know, things are going to turn around any day now. Then they end up with less cash than they have debt, and down it all goes from there, in a spiral they can't pull out of. If we're talking about what happens in a bad scenario, that's more like what commonly happens in reality. That net cash position will not be preciously saved to protect employees, the employees are the first ones to go. That net cash will be used as a bribery slush fund. Their earnings haven't increased in years. They're facing a zero growth future, if only because of their immense size. The smartphone market contracted by ~9% in 2017 (-16% in China). They're facing a PC market scenario, where consumers start replacing devices a lot less often (while simultaneously smartphones face increased competition from all sorts of cheaper AI-focused devices). Their cash accumulation is far slower now than it was in the past, because it's all going to shareholder bribery. Meanwhile, they've added $50 billion in debt in about two years, with that pace continuing in the latest quarter. Their income to debt ratio has been eroding for five straight years. Consider: right now Apple is making the incredibly foolish mistake of aggressively buying back stock with their capital, while its AI efforts are an embarrasment and they get their ass kicked by Amazon. Spend $50 billion catching up in AI etc? Or buy back stock? Apple has made its choice, and it shows.

greedo 9y ago
"Their earnings haven't increased in years." I'd love to own more companies that have this earnings profile for the last eight years. They've gone from $14B in 2010 to over $48B last year. [1] [1] https://www.statista.com/statistics/267728/apples-net-income-since-2005/ https://www.statista.com/statistics/267728/apples-net-income...
AnthonyMouse 9y ago
Just because you have a hundred billion dollars doesn't mean it's worth spending it to try (and quite plausibly fail) to topple an entrenched competitor in a tangential line of business. Monolithic corporations are massively inefficient because the combination of wealth and bureaucracy is the recipe for waste. Let them give the money to shareholders -- isn't that why they were supposed to be in business? Then if it makes sense to invest the money in some other line of business, the investors will invest it in some other company doing that thing. The fact is that smartphones are now a mature product. There will continue to be incremental improvements, but nobody is really expecting a future iPhone to be to the current iPhone what the original iPhone was to Blackberry. The market is now a cash cow. They have an existing technology and customer loyalty that they can milk for multiple years until increasing competition eats away at their margins, doing that is a profitable medium-term strategy, so that's a completely reasonable and expected thing for them to do. They could invest their cash in some speculative technology and maybe get lucky, but so can their shareholders.
baxtr 9y ago
I agree, Apple is doomed. They always have been
KKKKkkkk1 9y ago
Well, in 2016 they spent > $10B on research. So clearly they're trying to catch up, it's just that they're not very good at it.
makecheck 9y ago
If you look back just a few years, Apple has responded multiple times to saturated markets by introducing new product classes. We don’t have iPods anymore for instance, now we have watches (even though at one point you could have argued that the music player market was full too). If phones really do start to lose steam, Apple should have plenty of opportunity to create a new interesting product.

lazypenguin 9y ago

I generally agree with you but there is the case for negative revenue that could deplete those reserves at a rate faster than you have calculated.

deleted 9y ago
[deleted]
fauigerzigerk 9y ago
How would that negative revenue come to pass? People returning their iPhones en masse for a refund?
- perseusprime11 9y ago
  You end up spending lot more money than you make. To counter that, you invest $20 billion dollars in a game changing innovation but it fails leading to a write off. Then you go acquire a company that also becomes a dud. There are 100 different ways to go broke. Take a look at how GE messed up.
  - fauigerzigerk 9y ago
    Absolutely, but that's not negative revenue.

anvandare 9y ago

You could try visiting, but it would have a proprietary docking port. :>

ekianjo 9y ago

The ISS is going to be de-orbited by 2020. You don't have much time left to visit it, and NASA does not operate any shuttle service anymore.

energybar 9y ago
Prolonged till 2024 https://en.wikipedia.org/wiki/International_Space_Station_program https://en.wikipedia.org/wiki/International_Space_Station_pr...
- mattkrause 9y ago
  (You’re both missing the joke)
  - jhpankow 9y ago
    Open the iPod bay doors, Siri.

draw_down 9y ago

Come on. You’re not saying anything.

dsr_ 9y ago

Considered another way, if Apple could make 8% more than inflation on their investments each year, they can run forever without selling anything.

deleted 9y ago

[deleted]