Apple Saves Cash for Massive Strategic Acquisition

Apple Sees Strategic Takeover Opportunities Incoming

by Anton Shilov
10/20/2010 | 04:49 PM

Apple has around $25 billion in cash at the moment, but it does not have plans to pay significant dividends or purchase shares back just yet. The company is looking forward a massive strategic acquisition target so that to increase value and capabilities of the company.

 

"We strongly believe that one or more very strategic opportunities may come along that we are in a unique position to take advantage of because of our strong cash position. I think we have demonstrated a really strong track record of being very disciplined with the use of our cash. We do not let it burn a hole in our pocket, we do not allow it to motivate us to do stupid acquisitions," said Steve Jobs, chief executive officer of Apple, during a conference call with financial analysts.

In the recent years the company took over a couple of small chip designers that resulted in creation of A4 chip that powers the iPad and the iPhone 4. Given the size of those companies, it is clear that while both brought strategic value for Apple, those were not major acquisitions. A major takeover for Apple would be a large chip designer, but since influential makers of chips that can actually be bought (such as AMD, Nvidia, Qualcomm, etc) are usually involved in sales of components, something they will not be able to continue doing as part of Apple, such a deal hardly makes a lot of sense.

Keeping in mind that Apple not only designs chips, but also creates software, sells content, offers a number of services and does a number of other things, it may acquire respective companies in some of those areas.

"We would like to continue to keep our powder dry because we do feel that there are one or more strategic opportunities in the future. That is the biggest reason. And there are other reasons as well that we could go into. But that is the biggest one," added Mr. Jobs.

Apple this week announced financial results for its fiscal 2010 fourth quarter ended September 25, 2010. The company posted record revenue of $20.34 billion and net quarterly profit of $4.31 billion, or $4.64 per diluted share. These results compare to revenue of $12.21 billion and net quarterly profit of $2.53 billion, or $2.77 per diluted share, in the year-ago quarter. Gross margin was 36.9%  compared to 41.8% in the year-ago quarter. International sales accounted for 57% of the quarter’s revenue.