Steve Jobs defends Apple's cash hoard

 

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By Reuters

Posted on 26 Feb 2010 at 08:52

Steve Jobs has defended Apple's decision to maintain a $40 billion cash pile, claiming it's better to save the money for possible acquisitions, than to spend it on stock buy-backs or cash dividends.

Faced with shareholders' questions over his intentions for the company's cash balance, equal to about one-fifth of its market capitalisation, the chief executive said buy-backs and dividends would not have a lasting impact on the Apple's share value.

"We're a large enough business now, that in order to really move the needle, we've got to be thinking pretty bold, pretty large. And who knows what's around the next corner," Jobs said at Apple's annual general meeting.

Our judgment and our instincts tell us to just leave that powder dry right where it is right now and it's going to come in awfully handy one of these days

"When we think about big, bold things, we know that if we needed to acquire something, a piece of the puzzle, to make something big and bold a reality, we could write a cheque for it," he said. "Our judgment and our instincts tell us to just leave that powder dry right where it is right now and it's going to come in awfully handy one of these days."

Shares of Apple have been hovering around $200 since October as investors wait for a fresh catalyst to extend a rally that has seen the stock more than doubled from year-ago levels.

Despite Jobs' comments about acquisitions, analysts did not believe a big M&A deal to be on the horizon. "I don't think they'd do a big acquisition. There simply isn't a business out there that would be a cultural fit with them. They're not like other companies," said Hudson Square analyst Daniel Ernst.

Apple's more recent acquisitions include: semiconductor firm PA Semi, mobile ad company Quattro Wireless, and music subscription service Lala. All were relatively small deals

"Large M&A doesn't work with their business model," echoed Broadpoint Amtech analyst Brian Marshall. "Doing small deals, buying private companies with 100 to 150 engineers and integrating them with the Cupertino establishment and then taking their technology and making it pervasive throughout the organisation."