Apple Inc. (NASDAQ:AAPL) has a hefty cash balance of $164.5 billion with which it can buy companies like Tesla Motors Inc (NASDAQ:TSLA) (market cap $27.74 billion) and Twitter Inc (NYSE:TWTR) ($22.81 billion) or another company listed on the New York Stock Exchange or NASDAQ. However, from an inorganic growth point of view, Apple CEO Tim Cook has been letting down analysts for a long time. This year, the Beats Electronics deal was only a “blip” in Apple Inc.’s multi-billion dollar ocean, says a report by Sean Campbell from Tech Insider.
What makes Tesla, Twitter a fit for Apple?
Making irrational acquisitions is not a suggestion here, but Apple should buy companies that are strategically beneficial, opening up new industries. For instance, the iPhone maker can gain immense benefit by acquiring a cutting-edge automotive technology company or a company that has a multi-billion user base.
Elon Musk’s brainchild Tesla is replicating what Apple did in the fields of computing, music and telecommunications. Both the companies thrive on innovation and create products that keep consumers in consideration with awesome design power. There could not be a more reasonable acquisition than Tesla as the electric automaker will get the much-needed capital to expand itself and Apple will get Elon Musk, who is seen as being a parallel to Steve Jobs by most, says the report.
In Twitter’s case, Apple will get a social platform from which it can access a plethora of user data, using it in a most unique way beyond anyone’s imagination. Twitter, on the other hand, can escape the burden it has inflicted upon itself by going public, says Campbell.
Retail investors don’t care
As per information from U.S. Trust, Bank of America’s Wealth management division, Apple Inc.’s cash is triple to that of the U.S. government. Major shareholders are not very happy, as the company has kept its cash idle. Shareholders would prefer buyback programs instead of the company piling up cash. Buyback programs will also increase earnings per share. Carl Icahn echoed same concerns and solutions for Apple to Tim Cook.
Icahn is a major stakeholder in Apple, and he will be one of the biggest beneficiaries of the buyback program. Apple is, however, keeping the development and sale of technology above providing value to shareholders. The company is posting solid sales volume, which gives it the confidence to keep its cash locked. The fact that Apple has a hoard of cash hardly matters as long as investors are getting returns.