Apple’s Cash Hoard(blogs.wsj.com)
blogs.wsj.com
Apple’s Cash Hoard
http://blogs.wsj.com/digits/2009/08/14/apples-cash-hoard-it-just-keeps-on-growing/
46 comments
I wonder if it would have been possible to have made the Segway a success on launch? Is there anything different (in hindsight) they could have done to the product itself to make it a "great product" on launch. Steve obviously was interested in the idea from an early stage, so what did he feel was missing from the product before launch?
I'm not sure why this is so important; it's a bit of a fluff/filler piece.
Every major software company hoards cash. MSFT, GOOG, APPL, everybody. So Apple's got a lot of cash... so what?
It's a lot of cash, but they've been doing well lately. :)
Every major software company hoards cash. MSFT, GOOG, APPL, everybody. So Apple's got a lot of cash... so what?
It's a lot of cash, but they've been doing well lately. :)
Apple makes hardware too, as its major products. They're as much a hardware company as they are a software company. The cash cache gives them a lot of flexibility. Microsoft was able to use its cash for the Xbox, and Apple can use its cash for all its stuff (iPhone prototypes, tablets, whatnot).
i know i'll be downgraded for saying this and i'm ok with that because most of the hackers are apple lovers and this is hackers community and not marketing forum :) but anyway if you think that apple charges reasonably for their products then you've no clue how apple is doing in other parts of the world - marketing research says that companies like apple had made money from westerners ONLY !!!
yes, apple offers quality products
yes, apple charges for premium
yes, apple has all the innovation working for them ....
But
Apple is a hit in western world only where people spend blindly .... look at the success rate of apple in 3rd world countries (where population is huge) - you will know that they are nowhere in top 10 --- surprised? let me give you an example:
ipod: a music player that is a huge hit in north-america is a super-flop product amongst south-asians!!! WHY? Why people who are known as a smartest consumers in the world don't buy ipods? the reason is not only the price of an ipod but also the lack of features in ipods ... the other mp3 player offer way more features than ipods ... and sound quality is as good as ipods .... So why one would pay more price for less features and get a same quality of output???????????? this is not me who is saying it, its a huge market research for all the premium products that has a good following in western countries but no takers in other parts of the world.
So the same product that we call "premium" in america (or western world) is labeled as a "rip-off" in other parts of the world where a person is called as a foolish for paying more price and getting same quality output but way less features...
yes, apple offers quality products
yes, apple charges for premium
yes, apple has all the innovation working for them ....
But
Apple is a hit in western world only where people spend blindly .... look at the success rate of apple in 3rd world countries (where population is huge) - you will know that they are nowhere in top 10 --- surprised? let me give you an example:
ipod: a music player that is a huge hit in north-america is a super-flop product amongst south-asians!!! WHY? Why people who are known as a smartest consumers in the world don't buy ipods? the reason is not only the price of an ipod but also the lack of features in ipods ... the other mp3 player offer way more features than ipods ... and sound quality is as good as ipods .... So why one would pay more price for less features and get a same quality of output???????????? this is not me who is saying it, its a huge market research for all the premium products that has a good following in western countries but no takers in other parts of the world.
So the same product that we call "premium" in america (or western world) is labeled as a "rip-off" in other parts of the world where a person is called as a foolish for paying more price and getting same quality output but way less features...
yes, a lot of us here are partial to apple's products. but we still like to hear opposing viewpoints, so long as it's done respectfully. telling us that we 'have no clue' is not respectful. that's why you're getting downmodded, not because you're taking an opposing view.
There's a way of saying what I think you're trying to say. Unfortunately I think you failed in the method of delivery. Personally I see that (part of) the success is the fashion element of the iPod etc and I feel this has a stronger pull in the west than elsewhere, partly because of the sophistication of the marketing machine.
Apply that argument to clothing. Stylish clothing.
Well, no wonder, they sell their exploding crap for double the price while producing Made in China as everybody else.
Perhaps, BUT: Designed by Apple in California.
Even better - Design stolen in Germany:
http://gizmodo.com/343641/1960s-braun-products-hold-the-secr...
Very interesting. I had not seen that before. Some of those Braun designs are lovely (I've looked further at this). Even if Jonathan Ive has borrowed from this design, the Apple designs do look lovely in comparison to many of the other computer company designs out there. I must admit to being conflicted though as to whether this should be treated as inspiration or not. Thanks for sharing this
It is all just Bauhaus, no?
To those that think Apple's products are reasonably priced: Where do you think they got all this money from?
I think they got all this money from selling lots of products at a price people were willing to pay.
And other people to work 60h+ a week for Chinese minimum wage (a dollar a day).
Are you suggesting that this is different with any other electronics manufacturer?
No, but like I pointed out in my first comment on this post Apple sells the same products for twice the amount of money:
http://news.ycombinator.com/item?id=762944
The whole is greater than the sum of its parts.
Plenty of people seem to have reasoned that Apple's prices (and products) are good enough for them to pay up. What's wrong with that?
Nothing's "wrong" with people think it's fair value. It's just that some people think 2000 dollars for a laptop is inexpensive.
I'm just saying that Apple charges quite a premium on their products.
I'm just saying that Apple charges quite a premium on their products.
So what? Apple charges what people are willing to pay the same as just about anyone in a free market. Do you really think Dell is giving discounts out of the goodness of their heart? Or that they wouldn’t charge more if they could?
So why then do you have a problem with Apple and not with Dell (or any other company)?
So why then do you have a problem with Apple and not with Dell (or any other company)?
I love the free market! Nothing's wrong with the free market! Buy what you want, people!
I'm simply saying that, in my opinion, they do not offer fair value, despite what other people say. I'm of the opinion that Apple would have to lower their price significantly before I would consider a purchase of any of their products. I'm saying that Apple's excessive extra cash comes from an extremely high premium on all their products.
I'm simply saying that, in my opinion, they do not offer fair value, despite what other people say. I'm of the opinion that Apple would have to lower their price significantly before I would consider a purchase of any of their products. I'm saying that Apple's excessive extra cash comes from an extremely high premium on all their products.
I understand and appreciate that you don't find value in their products. That's your call and not anyone else's to make.
But where you're making a mistake is assuming that value in the market is tied to Apple's internal costs of making a product. That an Apple laptop is not a good value, because its price is 30% above the costs to produce it.
That's not a useful definition of value. Value is the utility people get from a product, relative to the cost they incurred in obtaining the product.
Suppose a computer manufacturer produces a real stinking pile of garbage laptop. It's hard to use, the screen flickers, keys break, you name it. But it's half the price of the existing lowest cost product, and they're only making 1% gross margins on it. Is that a good value? If you value your ability to get anything done on it, probably not. What their margin was on it really doesn't matter.
Similarly, many people value the product attributes of an Apple laptop so highly (they see fewer bugs, ease of use, productivity, etc) that the fact that it costs so much more than what they could get elsewhere doesn't translate to a poorer value, because they get so much more out of it. Imagine a professional, for example, who is 10% more productive on a Macbook than a Dell laptop. Their time is worth $100 an hour. Suppose the price difference was $1k. In as little as 100 hours of work -- two weeks' of use -- they begin realizing better value from that MacBook than the Dell.
Now, those numbers are facetious, but the principle stands: it's quite easy for a more costly product with higher margins for the manufacturer to be a better value to the buyer than a less costly product from a manufacturer with lower margins.
But where you're making a mistake is assuming that value in the market is tied to Apple's internal costs of making a product. That an Apple laptop is not a good value, because its price is 30% above the costs to produce it.
That's not a useful definition of value. Value is the utility people get from a product, relative to the cost they incurred in obtaining the product.
Suppose a computer manufacturer produces a real stinking pile of garbage laptop. It's hard to use, the screen flickers, keys break, you name it. But it's half the price of the existing lowest cost product, and they're only making 1% gross margins on it. Is that a good value? If you value your ability to get anything done on it, probably not. What their margin was on it really doesn't matter.
Similarly, many people value the product attributes of an Apple laptop so highly (they see fewer bugs, ease of use, productivity, etc) that the fact that it costs so much more than what they could get elsewhere doesn't translate to a poorer value, because they get so much more out of it. Imagine a professional, for example, who is 10% more productive on a Macbook than a Dell laptop. Their time is worth $100 an hour. Suppose the price difference was $1k. In as little as 100 hours of work -- two weeks' of use -- they begin realizing better value from that MacBook than the Dell.
Now, those numbers are facetious, but the principle stands: it's quite easy for a more costly product with higher margins for the manufacturer to be a better value to the buyer than a less costly product from a manufacturer with lower margins.
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Good design is expensive.
addendum: not just industrial design
Stolen design is cheap:
http://news.ycombinator.com/item?id=763491
Well then Apple isn't paying their designers enough...
Statements like this are short-sighted. Apple sells based on design, so I would say that in this instance you are incorrect (based on the number of people who like Apple kit for the design). Hacker News is a business-focused site related to programming and so whilst people might not 'like' Apple, as a company, you should learn from what they do. I have learned from watching both Apple and Microsoft right the way down to smaller companies.
Apple delivers it-just-works to me. And the price is absolutely ok for that, not a premium at all. Years ago I bought a Commodore, because the alternative was better, but priced at a premium, it was called Indigo. And I was not willing to pay the premium, too much money. The "premium" Apple wants doesn't feel like a premium at all.
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Apple does not compete on the low end, where margins are razor thin. They own the premium computer market where margins are high.
I bought a Jaguar XK because I love the car, the attention to detail and the style. Yes, I could have bought something much cheaper, probably just as reliable (or more so!) but I chose this route as it has a sense of style. If there's anything about business that I've learned it's that there are products for every niche, be it low cost food through to high priced watches.
Not paying the cash out to shareholders saves Apple a lot. And I'm not the first to say this, but paying out to shareholders isn't exactly the most innovative way to use your cash. It's like saying, "We couldn't think of anything to invest this cash in that will push the business forward, so let's just write you a check."
And not using it for anything isn't super innovative either. The investors own the company, what's wrong with giving them their own profits?
Income from dividends is taxed at a higher rate than income from capital gains. Therefore, if you're investing in a company and you're not doing it through a retirement plan or a similar tax-sheltered fund, you might rather see profits reinvested in the company and returned to you in the form of a higher stock value than simply given out to you in the form of a dividend.
(I think this tax policy is... unwise, but that's a debate for another time.)
(I think this tax policy is... unwise, but that's a debate for another time.)
The easy way around that is to repurchase stock to hold in the treasury. Returns cash to the investors through a higher stock price and eliminates the tax delta.
It's pretty obvious that Apple continues to have a growth strategy. If you want dividends, the tobacco companies have some good ones I hear.
well, this is the big question - how will they use all this cash? having tons of cash and not using it in any way is quite stupid actually.
btw, I read form Balance Sheet that cash and short term investments is 24bn. 35bn is total current assets. slight misrepresentation on reporter's side?
btw, I read form Balance Sheet that cash and short term investments is 24bn. 35bn is total current assets. slight misrepresentation on reporter's side?
I just read the book about the making of the Segway "Code Named Ginger" and in it there is a Jobs quote where he says "Screw the lead times. You don't have a great product yet! I know burn rates are important, but you'll only get one shot at this, and if you blow it, it's over." http://hbswk.hbs.edu/archive/3533.html In my opinion this is how Apple operates for a lot of products where they are seen as innovative and the cash in the bank allows them to do this.