Putting Apple’s Cash War Vault in Perspective

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The phrase “more money, more problems” does not ring true in all aspects of life, but it certainly appears applicable to Wall Street’s largest tech giant. Due to a wildly successful business, Apple (NASDAQ:AAPL) has accumulated a stockpile of cash that would make even the most successful hedge funds jealous. However, with shares of the company well-off their all-time highs made in September, more focus is shifting to its massive cash hoard.

Apple is a money-making machine. At the end of December, the company finished the quarter with a total of $137.1 billion in cash, cash equivalents, and marketable securities. David Einhorn, the hedge fund manger of Greenlight Capital, believes Apple’s current capital allocation strategy is flawed, though.

In a public and rather unusual public conference call, Einhorn laid out his case for why Apple should use some of its cash to issue a new type of preferred stock, appropriately named “iPrefs.” As the chart below from the presentation shows, Apple is not short on cash to say the least.

Screen Shot 2013-02-22 at 11.44.25 AM

Apple’s cash position is more than double its closest balance-sheet competitor, Microsoft (NASDAQ:MSFT). Other tech giants such as Google (NASDAQ:GOOG), Cisco Systems (NASDAQ:CSCO), EMC (NYSE:EMC), and Dell (NASDAQ:DELL) do not even come close. Apple’s cash hoard is also best-in-class when viewed as a percentage of market cap.

Einhorn explains, “In most sectors, companies run with debt, and issue equity currency as needed for growth or acquisitions. Technology companies have operated differently – particularly some of the largest, most successful companies. They have accumulated enormous amounts of cash that sit idle on their balance sheets for years on end.”

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