Apple cash vs. MS cash

Apple and Microsoft are on opposite trajectories in terms of their cash reserves, a new report remarks. Over three years ago, the former had a balance of $5.5 billion, while the latter had $64 billion. While Microsoft's reserves have fallen by more than half to reach $26.3 billion, Apple's have climbed to $19.4 billion. Microsoft was in fact arranging to borrow finances until its planned takeover of Yahoo collapsed over the weekend, in the short term saving approximately $44.6 billion.

The company's overall decline is attributed to deliberate investment decisions, namely continual stock buybacks and special dividend payments, such as a $32 billion plan announced in 2004. In the most recent quarter, Microsoft bought back more than $1 billion of its own stock, a strategy which is likely meant to enhance the company's EPS rating.

Apple's balance has grown largely on the back of Mac and iPod sales, but also the conservative philosophy of CEO Steve Jobs, comments analyst Andy Hargreaves of Pacific Crest Securities. "I think that Steve Jobs' experience with this company and the cycles that it's been through has taught him to be very, very conservative, and save for the rainy day."

There is a risk, however, that investors could become jaded at not reaping the rewards offered by similar tech stocks; similarly, one of the purposes of maintaining a large cash reserve is the purchase of smaller companies which can generate extra income. Apple does regularly buy other businesses, but typically only for technologies such as Cover Flow.

Apple's reserves are in fact so large at this stage that they surpass those of many major tech companies, including Google ($12.1 billion), IBM ($12 billion) and Intel ($10.9 billion).

by MacNN Staff