What Will Apple Do With It’s Cash…It Should Be Payments and Needs to be Social!

The fun speculating about what $aapl will do with it’s cash horde will end tomorrow. They are not going to do something small. It makes no sense to have a separate press conference for that.

As a shareholder I am quite happy that they have never given me the cash. How would I have done better than them to date. My friend John Melloy at CNBC did a quick scan of his great rolodex and all he could come back with is a 2.5 percent annual dividend. Way too conservative and why cater to underperforming closet ETF managers. If Tim declares a big dividend, I can see Steve Jobs rolling over in his grave.

They won’t buy $amzn. It’s just too big and risky at $84 billion and assuming no premium.

They should get into banking and payments and if I knew more about the sector I would speculate with names. They would not buy a legacy bank.

It has to be social and should be content related. They hate dealing with the music companies. They hate dealing with the TV people and cable people. Also, Spotify and Rdio are already gat music options. Apple TV is great (I just bought one) but after using it for a few days it is not a cable killer. That may take another generation especially without Steve Jobs around to negotiate.

In Social they have had their clocks cleaned. They display Facebook and Twitter but have little control. They can’t buy Facebook for the same reasons as $AMZN. Too big. Too fast.

It has to be Twitter.

They can afford it. Even if they overpay for Twitter…say $12 billion, the market would chase the synergies higher for a long time. It’s a great short-term trade for US treasuries and long-term investment thesis as a payment and utility that even Steve Jobs could take credit for from the heavens.

Nothing else moves the needle worthy of a special announcement.

Update…Disclosure – Long $aapl and $twit …sorry

87 comments

  1. hex says:

    ….and it may get them Jack Dorsey….who maybe the next Jobs.  In fact maybe they grab square while they are at it.

      • hex says:

        my only problem with square …is it is a great solution if you dont control the hardware of the phone.  but with NFC chips, apple has no use for an add on hardware device…they can put it right in the phone.

        but i agree with the thesis….man if they can get into banking…and turn their phones into credit cards…where they get a cut.  any question they get to a trillion?

        nflx, spotify, hulu, …….so many options when you are at the top of the mountain.

  2. Friedrich5 says:

    Apple is too logical of a corporation. The only thing that makes sense to me is a vertical integration move like a cell phone infustructure play, like ……..T-Mobile???. This would allow Apple to gain additional leverage with Verizon and AT&T as well as make profits on both sides of the cell phone sale (Phone + usage).

  3. As per Netflix…no way.  appl needs to own content going forward as a simple twitter like ‘terms of Service’ and netfliz is only one large square on a map that does net help make apple TV the homerun any quicker.  just cost.

  4. bobmonsour says:

    I think that it it’s a large acquisition, it’s the beginning of the end. Many know how hard those are and it’s not been in their DNA. Call be dumb, but I don’t see that owning Twitter (and then not screwing it up) does much for them. I’m thinking it’s dividends and I think it makes sense.

  5. bobmonsour says:

    If it were an acquisition, they would have put out a release saying that they have an announcement tomorrow. And then at the announcement, they would say it was an acquisition. Instead, they put out a release that has this as the first 2 sentences: “Tim Cook, Apple’s CEO, and Peter Oppenheimer, Apple’s CFO, will host a
    conference call to announce the outcome of the Company’s discussions
    concerning its cash balance. Apple® will not be providing an update on
    the current quarter nor will any topics be discussed other than cash.”

    It ain’t an acquisition.

  6. Douglas_Blake says:

    I would like to see a buy back. When asking WWSJD, one thing he’d NEVER do is give it back to us muggles. Who could argue with the notion that the best possible investment in the world remains Apple, especially at a discount to the S&P?

    • if you are buying back….than go for it all…not some chickenfeed stuff. buy twitter, get into payments, go private and than take on bloomberg (a stocktwits tuck in is acceptable along the way :) )

  7. bobmonsour says:

    They could get AMD for maybe $10 billion, give Intel a run for their money and add significant gross margin on every Mac.

  8. stupid guy says:

    $S end run around cable providers that are going to be give them problems with bandwidth usage fees.

  9. Pbalser says:

    I was thinking that a div would allow the only long-only folks to have any $$ inflows in the last 12 mos (D&I) to finally buy the name.  they’ve all underperformed in 1q w/o AAPL in their portfolios, and they all reside in huge MF complexes where other funds have owned/loved AAPL.  gotta find the marginal new buyers for the stock if ur mgmt – no?  add a 10 or 20:1 split to get the px low enough for retail to buy even lots, and VIX gets a 20% bump on the announcement.  heard it here 1st.  if they do twitter – look for wholesale insanity on the social side.

  10. Deep Thoughts says:

    The elephant in the room – buy Twitter, StockTwits, and iBankCoin – pairing Howard, Jack, and The Fly.  

  11. hex says:

    Yes…agreed …in the end it will be a dividend.  Have to allow more people to buy the stock if the stock is to ever be fairly valued.

    And while apple does have an obligation to their shareholders, they have a larger obligation to their employees (who are also share holders) who have worked hard to create all the great products we see today.  Stock needs to be properly valued to continue rewarding their employees.

  12. Conversati says:

    so you believe they are going to buy a company and NOT announce a dividend at all. From all I have read, you are the only person who believes that – I am not saying you are wrong, but your opinion is far outnumbered by the thought of a quarterly div, one time special div and a merger or buy out — or some kind of combo –

    • read the post….i open with ‘fun’…

      that said, it makes sense. forget the communications part that would allow $aapl to move into data and even bloomberg world over time

      • Conversati says:

         I see a combo of a special div and buy out of some type of company – I did not think of twitter, I thought maybe Yahoo – but twitter will probably make better sense. I also see a sell on the news tomorrow – could be wrong, we shall see. Lots of people would like to get back into Apple at below 550.

  13. Joemcmackin says:

    I will throw Waze into the mix. Apple needs a gps integrated app. It’s really the only thing I like more about my android phone than my iPhone. Combine the Waze community and the iPhone and you get an amazing tool for driving all over the world.

  14. ivanhoff says:

    Dividend is a boring, non-creative use of the cash and only the government wins (double taxation).

    Acquiring a payment service like Square makes a lot of sense and it would be a foundation for the Apple bank. I would switch in a heartbeat.

    Where do you see the synergies with Twitter? 

  15. steven spencer says:

    they should buy all the television shows being produced currently and tell the cable providers to f off….

  16. reuben e katz says:

    Good call. Apple buying Twitter would be a great acquisition move and would nail them Square-ly into social. Not sure about buying Square considering the slap in the face PayPal just nailed on them, although Square is far cooler and the design is very Jobs-esque. Apple buys Twitter FTW!

  17. Nick Delos Santos says:

    My guess is that Apple will buy Valve Software. The rumored ‘Valve Console’ will be Apple’s entry into the gaming market and another step into conquering the living room. With it, Apple will compete with Microsoft when it releases the new Xbox in 2013. By purchasing Valve, Apple will also acquire Valve’s Steam, which is already the premier game delivery platform on PCs.

  18. Ryan Romero says:

    i like the creative thinking on what they will do. That being said, a dividend is a bad idea? really? 

    “how would i have done better than them to date.”?

    am i the only one noticing that reinvesting dividends in AAPL stock would’ve been a good idea? wouldn’t that have helped out you–or any shareholder–more than NOT doing so?

    Twitter might be a nice idea, though they’d be stepping away from their business model a bit to do so. As others have said, perhaps more vertical integration in the mobile space. Perhaps even RIMM to lock up the corporate market?

    • ok on rimm…please dont go there. never.

      i dont disagree with me being dreaming here, but its not a stretch for apple. 10 bil is a month of profits these days.

      the average investor does not reinvest dividends, just spends them and unless he gives a coupon dividend to only spend at an apple store i dont like it. even than its a yawner and would feel forced.

  19. Jay Zalowitz says:

    Alright, outlandish call of the day time. 
    WOZ was in line in LA for the IPad3, he could not shut up about how much better verizon was than the others… I think half cash half stock for verizon would be epic… so many synergies.

  20. roy kaller says:

    My bet is no dividends and no acquisition announced tomorrow.  They are a growth company and will keep the powder dry.  Dividends and pointless buy-backs pander to shareholders of companies whose growth as plateaued.  I suspect they will indeed make future highly disruptive technology and media acquisitions and want the cash on hand.  Just a nerd’s view……

  21. Ryan Romero says:

    Howard,

    far be it for me to imply i have my finger on the market as much as you but…

    Twitter wouldn’t feel forced? 

    Completely going away from their business model to chase a growth market isn’t forcing it?

    Im afraid i don’t really follow that line of logic if thats the argument.

    the fact we are debating all of these options shows they could (should?) do multiple things with all of that cash. They could in effect do three or four of the ideas mentioned on this board. Or as often the case with this company, they go off and do something no one else was ever thinking of. 

  22. Jay Zalowitz says:

    Ok, my final guess is a dividend with a 40b fund being established for purchases/patent acquisition.

  23. Prince Bhojwani says:

    They should just buy Jack Dorsey. He would definitely help Apple’s plans for world domination 

  24. Mike Langford says:

    I agree on the Twitter acquisition 1,000% As soon as I laid eyes on Google+ I knew Apple would certainly pursue Twitter. They need a social solution in a big way. (BTW: Facebook should be scared as hell that Apple and Google will both own social networks fully baked in to their OSs) Then when the iOS5 Twitter integration his it became a done deal. I wouldn’t surprise me if they have been negotiating for over a year. I shared some thoughts a after the iOS5 release on SocBiz.TV http://socbiz.tv/choosing-your-path-of-pursuit-on-linkedin (Minute 15:30 or so)

    I also see the move to commerce as a forgone conclusion. Think of the hundreds of millions of credit cards already hooked up to iTunes and ready to go to work at checkout counters around the world.Apart from that I would like to hear that Apple is going to invest heavily in battery technology and/or faster internet infrastructure. The only thing that can slow Apple down is slow pipes. It cable providers and telcos decide to turn the screws with bogus data caps and other nonsense it would be a royal pain for Apple.

  25. david_putnam says:

    Sadly, I think buying more real estate in the mix will also be announced. Probably all of Cupertino and maybe up to Palo Alto.

  26. William Mougayar says:

    I think Apple’s next move will be around the TV/video ecosystem.  I’m still waiting for the super slick Apple TV (the big screen one, not the 99$ device) with a fully integrated video streaming experience from films to TV programs to Internet streaming, and with built-in connectivity into home Wi-Fi, Apple devices & access to some private high-speed Internet service. 

    I don’t think Apple will buy Twitter nor Amazon. That doesn’t fit with their strategy. They’re good with connected devices, not connected software. 

  27. Jimib5349 says:

    They could easily buy Netflix for Apple TV and Sprint for all iOs devices. Buy movies and minutes at the Apple Store.

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  30. Brian Topping says:

    I disagree that Apple should buy Twitter.  Fandroids and Apple haters with tin-foil hats would stop posting on it, then the microblogging world would start to fragment.  Bad for Twitter, bad for it’s new owners.  

    Apple *should* get in to social, however.  

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