Does Icahn Know What’s Best for Apple’s Enormous Cash Hoard?
An analysis conducted by Moody’s this week suggests that Apple (NASDAQ:AAPL), already one of the largest companies on the planet, claims nearly 10 percent of all corporate cash held by nonfinancial companies. That comes out to about $147 billion out of the $1.48 trillion held by over 1,000 companies analyzed by the ratings and investors services firm.
Corporations have pretty much hoarded cash in the wake of the financial crisis, generally unwilling to engage in aggressive spending because of uncertain economic conditions and volatile fiscal policy. Total cash stockpiled by corporations is up 2 percent since the end of 2012 and is up an incredible 81 percent from 2006 when the same corporations held just $280 billion.
It may not come as a surprise that just as most individual and household wealth is concentrated at the top, most corporate wealth is held by just a few major corporations.
The 50 corporations with the biggest war chests accounted for approximately 62 percent of all cash holdings, while the biggest five — Apple, Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOG), Cisco (NASDAQ:CSCO), and Pfizer (NYSE:PFE) — held about 25 percent.
Apple, apparently, just can’t seem to spend its money fast enough. Despite announcing earlier this year that it would spend $100 billion on share buybacks and dividends, Apple’s war chest has still grown about 9.5 percent from the end of 2012. The tech company has managed this not just by generating a huge amount of sales but by taking on some debt, a strategy that activist investor Carl Icahn wants the company to employ again.
Icahn, who has a reputation for finding ways to increase shareholder value, recently met with Apple CEO Tim Cook and proposed that the company begin a $150 billion buyback program. “Had a cordial dinner with Tim last night. We pushed hard for a 150 billion buyback. We decided to continue dialogue in about three weeks.” – Carl Icahn (@Carl_C_Icahn) October 1, 2013.
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