Apple's cash hoard: Begging for a 'windfall tax'?
It's almost a truism that while Microsoft struggles to do anything right (in the media's eyes), Apple can pretty much do no wrong.
This is as true of Apple's cash position, which BusinessWeek recently noted may soon surpass that of Microsoft's, as it is of Apple's product portfolio and business strategy.
It's the cash that I find particularly surprising. Apple is swimming in cash, more than $20 billion of it. The company adds more than $1 billion in cash to its stockpile each quarter. Today we give Apple a free pass on its iTunes/iPod lock-in, which delivers much of the Apple profits, because we can still happily apply such adjectives as "cool" and "innovative" to Apple.
The U.S. Congress is fixated on taxing the oil and gas companies for their "windfall profits" today, while Apple's profit margins as a percentage of sales are actually higher than Exxon's and those of the other bogeymen of Congress.
There was a time that we said similar things about Microsoft and happily bought into the lock-in that we'd eventually come to mistrust and seek to escape. Few are saying this now of Microsoft. And its cash hoard of roughly $23.7 billion has simultaneously become a cause for envy and concern: what will the convicted monopolist do with that pile of money? Can it possibly be in our interest?
I suspect that even ardent Apple fans like myself will someday be asking similar questions of Apple. As we buy our way deeper into the Apple ecosystem by adding various pieces of Apple hardware to our homes and offices, Apple will eventually accelerate our dependence on its technology by adding more software offerings (e.g., MobileMe) that make it easier for us to keep this sea of hardware connected and productive.
At that point, we'll start looking for a new savior and wonder when we allowed ourselves to become so dependent on Apple, just as we once asked of Microsoft. For the moment, I think the giddiness of having a real choice sends us from Microsoft to Apple, Google, and others.
It won't last. We're a fickle lot. I can't buy Apple's hardware fast enough today. I'm guessing I'll regret it tomorrow.
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Well, the big difference is that Apple makes its money by innovating and by reducing the cost of its products. Big oil has been anything but innovative and even makes record profits when the price of its raw materials go up...while doing nothing for global warming or the establishment of renewable energy.
First, there is no iTunes/iPod lock-in. iTunes music plays on any Windows or Mac computer, in addition to iPods, has DRM that can be easily removed, and the DRM was imposed upon Apple by the music cartels, not the other way around. iPod can play music in any digital source except Microsoft's proprietary sources and a few obscure ones.
Second, the government taxes profit, not assets. You don't pay taxes on the cash sitting in your own bank account. You paid taxes when you earned the money. Apple is the same.
I think you make a good point about profits, although i don't think anyone should be punished for making money.
Apple did innovate and continues to. But so do a lot of other companies. I agree with this post, as I continue to buy Apple products (they're so awesome) I get more and more weary of my addiction to the ecosystem everyday. I trust Google to do the right thing because of their dedication to open source. I don't trust Apple one bit.
Great post
Yes, but you don't need to buy iTunes, it is free. Also you don't need an iPod to use iTunes.
If I knew how little you need to know to write for CNET I would have become a writer along time ago.
In this country the majority of the people do not have access to mass transit, they need cars and cars need gas to go from point A to B. People need other basic essentials such as food, water and shelter. People do not need the iPods, computers, software, etc. that Apple sells in the marketplace, they do need those basics, which gasoline is one. So to compare the profits big oil is making vs. the big profits Apple is supposed to be making is ignorant.
Matt, have you ever written about the profits Microsoft has pulled in over the years?, the monopoly that they have?
Also the U.S. government is not providing the tax loopholes, subsidies, giveaways, etc. to Apple that they give to big oil.
Still, I'm not sure of the connection to Apple, which would be better lumped with luxury goods companies like LVMH than companies that refine raw materials into commodity products, no? Nobody goes after art dealers for "excessive profits," and I hardly think music let alone a particular delivery method has, yet, achieved the status of food, energy and atmosphere despite the fond hopes of local arts councils and those that would pander to them for votes.
The apple bashers are crawling out of the woodwork.
Any way, my point was that Apple's cash hoard is accumulated over time, and not a windfall profit.
Now poor MS only has about as much as Apple in the bank.
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by Perry_Clease
August 8, 2008 9:09 AM PDT
- "Actually, the Zune software is easier to use than iTunes and looks a whole lot better. Its weird and I didn't expect it either."
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