Putting Apple’s Cash War Vault in Perspective

The phrase “more money, more problems” does not ring true in all aspects of life, but it certainly appears applicable to Wall Street’s largest tech giant. Due to a wildly successful business, Apple (NASDAQ:AAPL) has accumulated a stockpile of cash that would make even the most successful hedge funds jealous. However, with shares of the company well-off their all-time highs made in September, more focus is shifting to its massive cash hoard.

Apple is a money-making machine. At the end of December, the company finished the quarter with a total of $137.1 billion in cash, cash equivalents, and marketable securities. David Einhorn, the hedge fund manger of Greenlight Capital, believes Apple’s current capital allocation strategy is flawed, though.

In a public and rather unusual public conference call, Einhorn laid out his case for why Apple should use some of its cash to issue a new type of preferred stock, appropriately named “iPrefs.” As the chart below from the presentation shows, Apple is not short on cash to say the least.

Screen Shot 2013-02-22 at 11.44.25 AM

Apple’s cash position is more than double its closest balance-sheet competitor, Microsoft (NASDAQ:MSFT). Other tech giants such as Google (NASDAQ:GOOG), Cisco Systems (NASDAQ:CSCO), EMC (NYSE:EMC), and Dell (NASDAQ:DELL) do not even come close. Apple’s cash hoard is also best-in-class when viewed as a percentage of market cap.

Einhorn explains, “In most sectors, companies run with debt, and issue equity currency as needed for growth or acquisitions. Technology companies have operated differently – particularly some of the largest, most successful companies. They have accumulated enormous amounts of cash that sit idle on their balance sheets for years on end.”