Cash-rich Apple makes a promise to spend $163B
Apple has promised shareholders it will spend $163 billion in cash, leading to breathless speculation about large acquisitions.
That type of spending is not like Apple, however. The company’s largest acquisition ever was headphone-maker Beats Electronics for $3 billion, and the next-largest was NeXT, the merger that brought Steve Jobs back to Apple.
While Apple has reportedly checked in on some potential large targets, the company is more likely to spend much of the cash in three areas: Original content, bringing down the costs of manufacturing its signature iPhone, and rewarding investors.
Here’s a closer look at those potential approaches.
Original content: Apple has already expressed interest in expanding its original-content offerings, and recent moves and commentary suggest this is still an area of priority for the company. Last week, Apple said that it would acquire Texture, a magazine-subscription service, for an undisclosed amount, the type of small “tuck-in” acquisition that Apple is comfortable doing.
Apple has been trying to distinguish Apple Music through original video content since its June 2017 debut of “Planet of the Apps,” a dull “Shark Tank”-like series about the making of Apple apps. Apple executive Eddie Cue has admitted that it’s taken Apple some time to make the right hires for its content business and added that Apple is “not after quantity, but quality” when it comes to original content.
Cutting manufacturing costs: Driving efficiencies in the supply chain is a key area of interest for Apple CEO Tim Cook (left), who served in operational roles at the company before taking over the company from cofounder Steve Jobs.
“Historically, Apple has tried to make sure that it has multiple sources for some of their contracts, balanced across countries,” said Horace Dediu, founder and analyst at Asymco.
The company has reportedly started making its own display screens for the first time, according to a report.
Return of capital: CFO Luca Maestri said on the company’s latest earnings call that Apple typically returns 100 percent of its free cash flow to shareholders and planned to take a similar approach going forward. Goldman Sachs analyst Rod Hall models $58 billion in buybacks for the current fiscal year, $74 billion for fiscal 2019, and $60 billion for fiscal 2020.