5 ms·

> as we continue to make progress toward our goal of reaching a net cash neutral position over time Can someone more business savvy explain what that means?

by zsmi 5y ago

nabla9 5y ago
It means that they plan neither accumulate or decrease their net cash holdings. No dividends or stock buybacks to reduce cash, but no accumulating it either.
- deleted 5y ago
  [deleted]
pdpi 5y ago
Apple has massive cash reserves that it can't really put to use. That cash isn't doing much of anything for anybody, so growing it any further is pointless. Going cash neutral here means "instead of uselessly adding to our cash reserves, we're going to aggressively dispose of our revenue", which presumably means dividends (they wouldn't have the cash reserves they do if they thought they had other productive ways to spend the money)
- Angostura 5y ago
  I suppose it could also mean increased investment in plant, R&D. aquisitions or reduced margins.
  - smoldesu 5y ago
    I'd hope that money could be put towards researching ways to make their machines less fragile, or how to engineer an M.2 slot in a professional device with more than enough room. Maybe a thinner camera?
    - brokencode 5y ago
      Infinite money doesn’t translate into infinite R&D, unfortunately. As pointed out by books like The Mythical Man Month, you can’t necessarily speed up development by adding more engineers/resources.
      - eyelidlessness 5y ago
        Put another way, infinite R&D will produce diminishing returns very quickly in the same time frame with the same constraints. R&D is a very long game to play, and depends on anticipating and adapting to more favorable constraints. Edit: that said! The benefit of investing in it anyway is potentially changing the course or severity if those constraints by having more control over them.
  - cronix 5y ago
    My bet is on their own fab(s) at some near-future point. They are one of the few who can afford the infrastructure (buildings/equipment) and talent, and they totally rely on a supply chain that is currently dubious, and has the real potential to get a lot worse. And it would fit into all current and likely all future projects Apple does and would likely do since they have proven they are more than capable of designing their own chips.
    - sneak 5y ago
      It makes logical sense from a supply chain standpoint, but I fail to see how the fact that Apple is good at designing chips has any relevance whatsoever to the idea that Apple may or may not be good at manufacturing those same chips. "Everybody knows" that a big chunk of the M1/mac performance dominance right now is due to their buying out huge amounts of TSMC capacity at leading edge nodes. Thus, much of the recent M1/M1Pro/M1Max "great leap forward" (pun intended) are directly attributable to TSMC specifically. If every ROI-seeking multibilliondollar hedge fund in the world can't build a leading edge node fab or two to compete with TSMC, what suggests that Apple's money would do any better? Note that this isn't rhetoric - Apple may well be able to do this, and better than some/most; I just don't have any data at hand (myself, it may exist) to suggest that the Apple cash reserves are in any way smarter at this task than big institutional dumb money reserves (which dwarf Apple in market aggregate).
      - kmeisthax 5y ago
        A decade and change prior we could have said the same thing about doing in-house chip design instead of just buying off-the-shelf Samsung parts. Or designing their own GPU technology instead of just licensing PowerVR cores. Apple did not have those skills internally and there was no guarantee that those projects would pan out. If there is one thing Apple is actually "good at", it's hiring people who are good at things they don't specialize in, and using those people to build out their own capabilities. So if Tim Cook decided that they need in-house fabs, they would use their massive cash reserves to hire and buy whoever and whatever they need to set up in-house fabs.
      - djrogers 5y ago
- deleted 5y ago
  [deleted]
- iamcreasy 5y ago
  Isn't cash looses its value over time due to inflation? Why Apple maintains a cash reserve?
  - kuratkull 5y ago
    They have it stored around the world, moving it to the US would force them to pay taxes
    - mikeyouse 5y ago
      Only in an accounting sense is their money stored "around the world". It's all managed by their Nevada investment company Braeburn Capital. They can freely move it to banks in the US or to anywhere else they need it, it's only "overseas" in the sense that they recognized the revenue elsewhere. Cash and cash equivalents is the line on the balance sheet and includes things like T-Bills and other low-risk investments. Apple almost certainly does better than inflation and regardless, it's completely normal treasury management to return ~0% since if your shareholders wanted exposure to riskier assets, they'd buy those assets with their own money.
      - colinmhayes 5y ago
        > They can freely move it to banks in the US or to anywhere else they need it But then they'd have a massive tax bill.
      - Keyframe 5y ago
        At which point, at what level do you operate your own bank? These are gargantuan holdings.
        eyelidlessness 5y ago
        I mean, they basically do operate their own bank and a significant size lending operation.
        5y ago
- novok 5y ago
  Apple could hire more engineers to make it's software less buggy at least and to fix a lot of long time small annoyances. And to double their devtools engineer count to make the entire company and all of their external developers more effective.
  - pwinnski 5y ago
    You think adding more engineers would make their software less buggy? Really? This seems contrary to literally everything I have ever read, experienced, or in any way known for my entire career, including reading books written about software engineering 30+ years ago.
    - rsj_hn 5y ago
      One way it can work is if devs are already overcommitted on multiple projects, so letting them focus more does help. E.g. horizontal scaling, rather than piling more devs onto the same project.
    - Gigachad 5y ago
      They could create more products with their own teams. Apples cloud offering pales in comparison to Google's and part of the reason is they are just missing too many services. iCloud web feels like a bare minimum effort that doesn't get any attention. I don't know how successful this would be, but they could also start building and selling more apps/programs but perhaps this could be seen as anti competitive.
      - threeseed 5y ago
        iCloud web is a bare minimum effort. They are trying to push you to use native apps on their devices not use the web.
        Gigachad 5y ago
        Which is why it just doesn't work so well compared to Google products. I'm an Apple user on basically every platform but cloud services are a collaborative experience so I'm not going to host anything on iCloud when it works like crap for half the people I need to work with. They have become a little better at this, facetime can now be joined by Android and web users as long as an ios user starts the call.
- devwastaken 5y ago
  They have a lot of productive options to choose from, but it's either charity, or improving their products beyond being faster. Apple would sooner dump money into the ocean than do either.
matwood 5y ago
As other explained, it's to keep cash inflows and outflows as close to even as possible. They have enough cash for future investments and thus don't need to stockpile any more. Apple has been saying this for awhile, and at this point I see it as a joke/humblebrag ('we're making so much money we literally can't spend it all').
- smoldesu 5y ago
  It's not a joke when the SEC isn't laughing.
sandymcmurray 5y ago
This started in 2018. See https://www.fool.com/investing/2018/02/02/understanding-apples-new-net-cash-neutral-goal.aspx https://www.fool.com/investing/2018/02/02/understanding-appl...
mandeepj 5y ago
> a net cash neutral position over time It's debt to cash-in hand ratio. Apple currently, as of March 2021, had US$120.2B of debt [1]. So, if they have $120.2B of cash, then it neutralizes their balance sheet. And, that's what the net cash neutral position is. [1] - https://simplywall.st/stocks/us/tech/nasdaq-aapl/apple/news/apple-nasdaqaapl-could-easily-take-on-more-debt https://simplywall.st/stocks/us/tech/nasdaq-aapl/apple/news/... Edit - I missed adding liabilities. But, it will complicate the above terminology, a bit more. Although, I hope you got the idea.
- ksec 5y ago
  This really should be the top comment under the OP's question. And Apple have stated this goal for a few years already. So this isn't new.
niels_olson 5y ago
They’re going to do their version of “Other bets”.
ericpauley 5y ago
Apple has been continually buying back shares with the goal of having as much cash on hand as debt (simplification). This returns the cash to shareholders.

> as we continue to make progress toward our goal of reaching a net cash neutral position over time Can someone more business savvy explain what that means?

by zsmi 5y ago

> as we continue to make progress toward our goal of reaching a net cash neutral position over time Can someone more business savvy explain what that means?

nabla9 5y ago

It means that they plan neither accumulate or decrease their net cash holdings. No dividends or stock buybacks to reduce cash, but no accumulating it either.

deleted 5y ago
[deleted]

pdpi 5y ago

Apple has massive cash reserves that it can't really put to use. That cash isn't doing much of anything for anybody, so growing it any further is pointless. Going cash neutral here means "instead of uselessly adding to our cash reserves, we're going to aggressively dispose of our revenue", which presumably means dividends (they wouldn't have the cash reserves they do if they thought they had other productive ways to spend the money)

Angostura 5y ago
I suppose it could also mean increased investment in plant, R&D. aquisitions or reduced margins.
- smoldesu 5y ago
  I'd hope that money could be put towards researching ways to make their machines less fragile, or how to engineer an M.2 slot in a professional device with more than enough room. Maybe a thinner camera?
  - brokencode 5y ago
    Infinite money doesn’t translate into infinite R&D, unfortunately. As pointed out by books like The Mythical Man Month, you can’t necessarily speed up development by adding more engineers/resources.
    - eyelidlessness 5y ago
      Put another way, infinite R&D will produce diminishing returns very quickly in the same time frame with the same constraints. R&D is a very long game to play, and depends on anticipating and adapting to more favorable constraints. Edit: that said! The benefit of investing in it anyway is potentially changing the course or severity if those constraints by having more control over them.
- cronix 5y ago
  My bet is on their own fab(s) at some near-future point. They are one of the few who can afford the infrastructure (buildings/equipment) and talent, and they totally rely on a supply chain that is currently dubious, and has the real potential to get a lot worse. And it would fit into all current and likely all future projects Apple does and would likely do since they have proven they are more than capable of designing their own chips.
  - sneak 5y ago
    It makes logical sense from a supply chain standpoint, but I fail to see how the fact that Apple is good at designing chips has any relevance whatsoever to the idea that Apple may or may not be good at manufacturing those same chips. "Everybody knows" that a big chunk of the M1/mac performance dominance right now is due to their buying out huge amounts of TSMC capacity at leading edge nodes. Thus, much of the recent M1/M1Pro/M1Max "great leap forward" (pun intended) are directly attributable to TSMC specifically. If every ROI-seeking multibilliondollar hedge fund in the world can't build a leading edge node fab or two to compete with TSMC, what suggests that Apple's money would do any better? Note that this isn't rhetoric - Apple may well be able to do this, and better than some/most; I just don't have any data at hand (myself, it may exist) to suggest that the Apple cash reserves are in any way smarter at this task than big institutional dumb money reserves (which dwarf Apple in market aggregate).
    - kmeisthax 5y ago
      A decade and change prior we could have said the same thing about doing in-house chip design instead of just buying off-the-shelf Samsung parts. Or designing their own GPU technology instead of just licensing PowerVR cores. Apple did not have those skills internally and there was no guarantee that those projects would pan out. If there is one thing Apple is actually "good at", it's hiring people who are good at things they don't specialize in, and using those people to build out their own capabilities. So if Tim Cook decided that they need in-house fabs, they would use their massive cash reserves to hire and buy whoever and whatever they need to set up in-house fabs.
    - djrogers 5y ago
deleted 5y ago
[deleted]
iamcreasy 5y ago
Isn't cash looses its value over time due to inflation? Why Apple maintains a cash reserve?
- kuratkull 5y ago
  They have it stored around the world, moving it to the US would force them to pay taxes
  - mikeyouse 5y ago
    Only in an accounting sense is their money stored "around the world". It's all managed by their Nevada investment company Braeburn Capital. They can freely move it to banks in the US or to anywhere else they need it, it's only "overseas" in the sense that they recognized the revenue elsewhere. Cash and cash equivalents is the line on the balance sheet and includes things like T-Bills and other low-risk investments. Apple almost certainly does better than inflation and regardless, it's completely normal treasury management to return ~0% since if your shareholders wanted exposure to riskier assets, they'd buy those assets with their own money.
    - colinmhayes 5y ago
      > They can freely move it to banks in the US or to anywhere else they need it But then they'd have a massive tax bill.
    - Keyframe 5y ago
      At which point, at what level do you operate your own bank? These are gargantuan holdings.
      - eyelidlessness 5y ago
        I mean, they basically do operate their own bank and a significant size lending operation.
        5y ago
novok 5y ago
Apple could hire more engineers to make it's software less buggy at least and to fix a lot of long time small annoyances. And to double their devtools engineer count to make the entire company and all of their external developers more effective.
- pwinnski 5y ago
  You think adding more engineers would make their software less buggy? Really? This seems contrary to literally everything I have ever read, experienced, or in any way known for my entire career, including reading books written about software engineering 30+ years ago.
  - rsj_hn 5y ago
    One way it can work is if devs are already overcommitted on multiple projects, so letting them focus more does help. E.g. horizontal scaling, rather than piling more devs onto the same project.
  - Gigachad 5y ago
    They could create more products with their own teams. Apples cloud offering pales in comparison to Google's and part of the reason is they are just missing too many services. iCloud web feels like a bare minimum effort that doesn't get any attention. I don't know how successful this would be, but they could also start building and selling more apps/programs but perhaps this could be seen as anti competitive.
    - threeseed 5y ago
      iCloud web is a bare minimum effort. They are trying to push you to use native apps on their devices not use the web.
      - Gigachad 5y ago
        Which is why it just doesn't work so well compared to Google products. I'm an Apple user on basically every platform but cloud services are a collaborative experience so I'm not going to host anything on iCloud when it works like crap for half the people I need to work with. They have become a little better at this, facetime can now be joined by Android and web users as long as an ios user starts the call.
devwastaken 5y ago
They have a lot of productive options to choose from, but it's either charity, or improving their products beyond being faster. Apple would sooner dump money into the ocean than do either.

matwood 5y ago

As other explained, it's to keep cash inflows and outflows as close to even as possible. They have enough cash for future investments and thus don't need to stockpile any more. Apple has been saying this for awhile, and at this point I see it as a joke/humblebrag ('we're making so much money we literally can't spend it all').

smoldesu 5y ago
It's not a joke when the SEC isn't laughing.

sandymcmurray 5y ago

This started in 2018. See https://www.fool.com/investing/2018/02/02/understanding-apples-new-net-cash-neutral-goal.aspx https://www.fool.com/investing/2018/02/02/understanding-appl...

mandeepj 5y ago

> a net cash neutral position over time It's debt to cash-in hand ratio. Apple currently, as of March 2021, had US$120.2B of debt [1]. So, if they have $120.2B of cash, then it neutralizes their balance sheet. And, that's what the net cash neutral position is. [1] - https://simplywall.st/stocks/us/tech/nasdaq-aapl/apple/news/apple-nasdaqaapl-could-easily-take-on-more-debt https://simplywall.st/stocks/us/tech/nasdaq-aapl/apple/news/... Edit - I missed adding liabilities. But, it will complicate the above terminology, a bit more. Although, I hope you got the idea.

ksec 5y ago
This really should be the top comment under the OP's question. And Apple have stated this goal for a few years already. So this isn't new.

niels_olson 5y ago

They’re going to do their version of “Other bets”.

ericpauley 5y ago

Apple has been continually buying back shares with the goal of having as much cash on hand as debt (simplification). This returns the cash to shareholders.