Apple is in the Money. Time to Spend Some.

If you don't know, Apple released its quarterly earnings yesterday. The only word to describe it is blowout. 

Lets recap the highlights: 

2,164,000 Macs Sold (up 34% from the same quarter last year) 

10,200,000 iPods Sold (up 17% from the same quarter last year) 

1,119,000 iPhone sold (For a total to date of 1,389,000 phones sold. 

Remember that the iPhone started selling with a couple of days left in last quarter)

All this leads to: 

Revenue of $6.22 billion 

Net profit of $904 million (up 67% from the same quarter last year) 

Wow. If you have not followed Apple in the past, let me just tell you that these numbers are just staggering for a quarter. 

Consequently, Apple stock is up and is helping to drive the stock market to early gains today. Add into the fact that just 7 years ago Apple's future was seriously in doubt and you can see how far Apple has come. 

One of the things I like to track is how much cash Apple has on hand. Apple has always held alot of cash, although they never seem to spend it. A quick check of Apple's 4th quarter press release archive quickly turned up the following: 

2007: $15.4 billion in cash on hand 

2006: $10 billion in cash on hand 

2003: $4.3 billion in cash on hand 

So in four years they have tripled their nest egg. Thats alot of money. Remember (and this is a simplification) this is money Apple has just sitting in the bank. The question is what is Apple going to do with it? 

Now, modern companies like to keep alot of cash. For comparison, Apple's $15 billion cash on hand is about half of what Microsoft has on hand. However, Apple's market capitalization, which is now bigger than IBM's ($155 Billion), is only about one third of Microsoft's (Apple Market Cap = $161 billion, Microsoft Market Cap = $289 Billion). What this tells me is that it is time for Apple to spend some of this cash, either by buying back shares (probably unlikely) or by buying some smaller companies. 

But who? How about Universal Music and/or NBC (if General Electric and Vivendi were willing to sell. Back in 2003 there was a rumor Apple & Vivendi were in talks for Apple to buy Universal). An Apple purchase of one or both of these properties would help shore up the current challenge to Apple's iTunes business.

Of course, that kind of purchase would probably empty Apple's cash coffer as well as tax Apple's stock. 

How about something a bit smaller but still important to Apple's iTunes business? Akamai who Apple uses to help deliver iTunes content? Akamai could be bought by Apple and they would still have billions in cash left over. Or, how about Blockbuster Video or NetFlix? Apple could by one or even both of them for only a small portion of their cash reserves and energize Apple's stalled distribution of digital movies (as well as Apple TV).

I am not a stock analyst so I'm just throwing this up as food for thought. But I do think that it is high time Apple spend some of its money. They run a really tight ship financially at Apple, but I don't know why they would want this kind of cash on hand.