Intel issues dividend, Apple sits on $97.6bn
A tale of two companies
By Rik Myslewski • In Financial News • At 18:52 GMT 25th January 2012
At the end of last year, Intel had $14.84bn in cash and short-term investments, from which it pays its dividends to shareholders. Apple, on the other hand, announced in its quarterly earnings report on Tuesday that it's sitting on an astonishingly large $97.6bn pile o'cash – and Cupertino has no plans to issue a dividend anytime soon.
Well, none that it has announced, in any case. During a call with analysts and reporters after the Q1 2012 earnings release, CFO Peter Oppenheimer refused to be drawn out on what Apple plans to do with its cash hoard, repeatedly saying only that the company is "actively" examining its options.
He also noted that "We continue to be very disciplined with the cash and are not letting it burn a hole in our pocket." Or, for that matter, in anyone else's pocket – such as Apple's shareholders.
After a few more successful quarters, that pocket could hold enough for Apple to buy Intel, which as of this Wednesday has a market capitalization of about $136bn. Or, for that matter, Apple could buy AMD with only a mere 5 per cent of its cash – that Intel rival is worth around $4.5bn.
But as Oppenehimer reminded listeners during the conference call, Apple isn't one for large, splashy acquisitions. Its recent snapping up of flash-chip baker Anobit for $390m was its biggest acquisition since it bought NeXT – and Steve Jobs – for $404m back in 1997.
So what will Apple do with all that cash? Well, for starters, it plans to fork out about $8bn in capital expenditures in the current fiscal year, a big jump over the $4.6bn it spent in fiscal 2011. But that $8bn is still dwarfed by chipbaker Intel's massive capex outlays of $10.7bn in 2011 and $12.5bn in 2012.
One use for Apple's big ol' cash pile will undoubtedly be the continuance of CEO Tim Cook's time-tested – and successful – policy of locking down key components in long-term deals. And then there's that new "spaceship" they're building in Cupertino – perhaps it will include solid gold bathroom fixures.
Or, for that matter, Apple could do the patriotic thing and move some of those Chinese Foxconn jobs back to the good ol' US of A. Failing that – and don't hold your breath – it could at least give those hardworking Foxconners a hefty raise. And breath-holding is ill-advised for that latter scenario, as well.
Or perhaps Apple will follow the lead of Intel and many, many other companies, and finally issue a dividend to its shareholders. One analyst from Cannacord Genuity predicts that Apple will, indeed issue a dividend this year, and The Street is running a yes/no poll asking "Should Apple pay a dividend?", with "yes" beating "no" by about two to one.
After all, Apple is under new management, so anything could happen – dividends and share buybacks being among the possibiities.
So we suggest that Cook give Intel CEO Paul Otellini a quick call. After paying out $4.1bn in dividends and spending $14.1bn to buy back 642 million shares during 2011, Otellini might be able to give Cook a few pointers on how to better reward shareholders. ®