The iPhone maker prefers buying smaller companies that fit easily into its existing business
Yesterday, Apple reported the biggest every quarterly profit in the corporate history. The iPhone maker generated $74.6 billion in sales and $18.02 billion in profits for the quarter ending December 2014. The record-breaking profits have given it more cash. Now Apple has enough cash to buy many of the world’s largest corporations and rivals, and still have a few billion dollars to spare.
Apple can buy 483 of the S&P 500 companies
Apple now has more cash than the market value of Intel ($173 billion), IBM ($152 billion) and Amazon ($142 billion). As Tyler Durden of Zero Hedge points out, Apple’s cash pile is greater than the market cap of all but 17 companies in the S&P 500 index. The valuations of Intel, AT&T, Visa, Walt Disney, Comcast, Cisco are less than Apple’s cash reserve.
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If Tim Cook wanted to buy hot tech companies, he could acquire Uber, Airbnb, Tesla, Netflix, Twitter, Snapchat, Dropbox, and SpaceX and still have more than $20 billion left over. However, some of its biggest rivals are still out of reach. For instance, Microsoft is currently valued at $346 billion, Google is worth $352 billion, and Facebook’s market value stands at $212 billion. By Comparison, Apple itself is valued at $686 billion.
Apple may not pursue big-ticket acquisitions
But Apple may not be interested in buying those companies. It spends money on smaller acquisitions. Apple’s biggest ever acquisition was Beats, for which it paid $3 billion last year. Earlier this month, the iPhone maker purchased music analytics firm Semetric for an undisclosed sum. The Cupertino company buys smaller businesses that fit easily into its existing business.
A large chunk of Apple’s cash is stashed outside the United States. The company exploits tax loopholes in countries like Ireland to keep its tax bills low without breaking a single tax law. Apple will be hit by a huge tax bill if it repatriates its cash. That’s why the company prefers taking out debts to reward its shareholders, despite huge cash pile.
Apple shares skyrocketed 7.77% to $117.62 at 10:14 AM EST on Wednesday.