4 Ideas for Apple’s Cash That Didn’t Come from Icahn
Billionaire investor Carl Icahn’s widely publicized demand that Apple (NASDAQ:AAPL) increase its share buyback program has reignited a long-running debate about how the tech company should use its enormous cash hoard and elicited comments from various analysts and commentators on both sides of the issue. Tech industry commentator Farhad Manjoo was the latest pundit to weigh in with an opinion on Icahn’s share repurchase scheme in a recent Wall Street Journal article.
Manjoo took a decidedly anti-Icahn position and urged anyone with any interest in Apple to “follow CEO Tim Cook’s example and adopt a pose of respectful deafness toward the gadfly investor’s ridiculous proposals for Apple’s cash.” Icahn recently released an open letter addressed to Cook that argued for a $150 billion share buyback with funds borrowed at 3 percent.
However, Manjoo didn’t just shoot down Icahn’s proposal, he also offered four alternative ways that Apple could better spend its estimated $147 billion cash hoard for its long-term benefit. Here are the tech commentator’s four ideas for Apple’s cash.
1. Copy Google
First, Manjoo suggested via the Wall Street Journal that Apple should use its cash to “build its own Google (NASDAQ:GOOG).” Specifically, he believes that Apple needs to invest in an online data analysis system similar to what Google uses for its own maps app and Google Now. He argued that the original Apple Maps fiasco and problems with Siri demonstrated that Apple is lacking in this regard.
2. Get a Carrier
Second, Manjoo recommended that Apple spend its money on purchasing or building a cellular carrier, reported the Wall Street Journal. He believes that this would give the iPhone maker more control over its primary cash cow. This would also allow Apple to improve the end user experience for its customers without a carrier middle man.
3. Improve Production Capabilities
Third, Manjoo suggested via the Wall Street Journal that Apple spend its cash reserves on improving its production capabilities, possibly by increasing the automation of its assembly process. This would help to resolve the inventory shortages that seem to plague every new Apple product launch.
On the other hand, Apple already has an amazingly efficient system for bring new products to market and increased inventory doesn’t always equal more profits. As Wells Fargo analyst Maynard Um recently pointed out in a note to investors, it is actually better to have too few iPhones in stock than it is to have excess unsold inventory.
4. Free Stuff/Lower Prices
Finally, Manjoo advised Apple to “give away media or storage. Or just cut prices” reported the Wall Street Journal. Although he admitted that this giveaway would initially lower Apple’s margins, he believes that the long-term benefit would outweigh the short-term profit loss.
This action would boost Apple’s standing with its customers and likely increase sales of its hardware. Although Apple isn’t currently handing out free cloud storage, the Cupertino-based company did recently announce that its OS X Mavericks desktop operating system upgrade would be offered at no cost to consumers.
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