Shareholders questioning Apple’s (NASDAQ:AAPL) large cash holdings must realize that the company may be more desperate to save it for bad times than they think, Jefferies analyst Peter Misek says in a research note.
According to the analyst, the iPhone maker may face several dangers in the coming few quarters to earnings and revenue, and hence, fiscal prudence is the right move to make.
“We believe Apple is potentially facing a very rough two-year period due to capital expenditure requirements, new subsidy models, slowing international sales, and whitebox smartphones,” Misek writes. “In our view, Apple’s need for cash on hand is larger than many believe.”
Misek estimates that Apple’s capital expenditures are likely to double to add $10 billion per year in the next two years. Most of that will be due to the company being forced to finance its chip and touchscreen suppliers’ factory expansions and build up its iCloud and online service centers, he says. In addition, if Apple were to try and expand its iPhone sales into pre-pay countries such as India by getting rid of its carrier subsidy model, the company’s cash balance may be reduced by $10 billion…