Apple Inc. (NASDAQ:AAPL) will remain under the crosshairs of Carl Icahn and investors about what it does with its cash at least until its next shareholders’ meeting in February. But why does the company feel like it needs to hoard so much cash? And does this mean that we’ll see some exciting new products in the coming year? Speaking on Bloomberg TV, Jon Erlichman and Adam Satariano discussed why Apple might be hoarding its cash and what the company thinks the outcome of the upcoming vote on the topic will be.
Apple generates enormous amounts of cash
Erlichman noted that last year alone, Apple Inc. (NASDAQ:AAPL) raked in $45 billion in cash from operations. At the beginning of this year, David Einhorn went public with his push to get the tech giant to release more cash to shareholders. Apple was then comfortable having a conversation with shareholders about the best uses of its capital, and it initiated a $100 billion capital return plan which will run through the end of 2015.
Now here we are a year later, and it’s the same argument, except a different investor is broaching the subject: Carl Icahn.
Apple thinks investors side with it
Last week Apple Inc. (NASDAQ:AAPL) published its annual recommendations to the questions being voted on at its shareholders’ meeting in February. The company recommended that shareholders vote against Icahn’s proposal of buying back $50 billion more shares, saying that its current plan is enough and that it needs the cash to work on new products.
Satariano believes Apple thinks long-term investors are on its side rather than Icahn’s.
Apple working on new products?
Erlichman said even if Apple Inc. (NASDAQ:AAPL) is working on developing a smart television or a smart watch or any other major new product that will come out over the next few years, it won’t need all of its cash to do it. However, not everyone seems to be convinced of that. Others believe Apple will burn through its U.S. cash quite rapidly.
According to The Wall Street Journal, Evercore analyst Robert Cihra believes the biggest question Apple Inc. (NASDAQ:AAPL) is facing right now isn’t how much it should return to shareholders. Instead, he thinks it’s about how to make the most of its overseas cash stash without having to pay hefty tax penalties. In his estimations, Apple will burn through its U.S. cash by the middle of 2014. At that point, he said the company will have to decide whether it’s going to pay the taxes which will be due for repatriating more cash or raise additional debt. Cihra thinks Apple will choose to raise cash instead.