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Apple surpasses Saudi Aramco to become the most valuable company (cnbc.com)
212 points by Zaheer 49 days ago | hide | past | favorite | 210 comments

What I don't understand is not the value of Apple as a company, because I clearly see the value of their products directly as a customer for more than a decade, but WHY IN HELL they have so much actual cash piling up. I won't say they should split it with investors and blablabla but, really, why a company like that would have a cash stockpile so gigantic (around 200 billion USD) for so long without a long-term plan shared with stakeholders? It seems nearly impossible for them to use all that money with whatever comes up for half a century at least.

Look around at all the companies shaking taxpayers for loose change because they could not handle a moderate economic downturn. A responsible company needs a cash stockpile for the same reason a responsible person needs savings, to weather storms.

Sounds like a prudent idea. On the other hand I’d worry about the macro economic effects if every company held large amounts of unproductive capital.

If money is in a bank it is being redistributed throughout the economy at 1 / the fractional reserve ratio. So $200 billion in their bank account could end up creating $2 trillion in additional money supply in the economy, originating from loans.

And when the recipients of those $2 trillion put that money into bank accounts, we're creating another $20 trillion in additional money supply. I sure hope they end up in bank accounts as well, so we can create another $200 trillion.

Hey, see that? I created an infinite money machine! Now that's a good argument for those original $200 billion being super useful when "put to work" by storing them in bank accounts, right?

The formula to derive it is an infinite series that already takes that into account, so no, it's just $2 trillion total. This is not considered a controversial economic formula, but maybe you are on to something that could win you a Nobel Prize.

Anyway, since the parent implied that "hoarding cash" (a.k.a. saving) was somehow bad, I wanted to clear that up. They would only be reducing the money supply if they were literally hoarding physical bills in a private vault.

This is really interesting and cleared a lot of things up for me, thanks for that! I always thought that when people told me "Banks create money out of thin air in our monetary system" that would mean they get like $100 dollars from someone in a savings account, which then permits them to lend out a multiple of that, say $900, in "new money" to other people, as long as they can support the liquidity requirement of 10% in this example by having enough not-self-created cash for that at hand. I always wondered what would prevent people from taking those loans, sticking them into accounts at different banks, which then would be able to use that liquidity to again create a multiple of new money, effectively resulting in a system that constantly increases the total money supply. But then I took a look at what appears to be happening in recent history, found a constantly increasing money supply to actually exist in the real world and didn't wonder that much anymore, because of course that would happen in such a brain-dead let-banks-create-money-out-of-thin-air system, so I never happened to challenge my assumption as to how this money creation process actually works.

So the actual trick is not that banks lend out more money than they have previously gotten as deposits, but that the fraction they lend out is eventually stored at different banks, while the original deposits that allowed for these loans to be created still continue to exist at the first bank and thus the loans practically are a duplicate of these deposits, hence "money was created out of thin air". As long as the banks all manage to keep the fraction of reserves above the pre-set limit, this indeed guarantees a maximum total money supply not to be exceeded.

[text deleted because mathematical claim from memory was wrong]

Here's a better explanation: https://en.wikipedia.org/wiki/Money_multiplier


Banks are constrained by demand, they can create credit at will.

National banks can not commercial banks

The link there is about commercial banks.

The link above is about economic models for analyzing economic effects. For any actual commercial bank there are very real limits to how much credit they can extend. The models discussed simplify analysis and do not really represent anything particularly meaningful about operation of any particular real world bank.

"To avoid misunderstandings, while FMC models reflect the fact that banks face no technical limits to expanding their balance sheets instantaneously and by large amounts, they also reflect the fact that banks face economic limits. However, the latter do not include physical limits such as the availability of sufficient savings. Rather, the most important limits are their own and their customers’ potentially volatile expectations regarding future profitability and solvency"

Again it's a model to evaluate economic effects and does not represent how any particular commercial bank is operating. It does not account for actual legal frameworks banks are operating under. It's useful as a tool to study the system as a whole same way as some fluid dynamics model is not concerned with each individual molecule.

I could be wrong (I'm not a finance guy) but this isn't my understanding of how fractional reserve banking works.

If Apple deposits $200 billion and the ratio is 1/10, then the bank can loan out $180 billion of that 200; it must keep $20 billion in reserve - 1/10th.

In your scenario, the bank has negative $1.8 trillion in reserve.

You are right as far as you went, but it doesn't stop there. The 180 billion all but has to end up in a bank account somewhere and that bank will then lend out a further 9/10ths of the 180 billion. The limit of that action repeating over and over implies that 1/ratio dollars are created. As a rough theory.

But exactly how it all works out depends on a countries legal and financial implementation details.

Ah! Thanks for explaining, that makes sense.

OK so how it becomes 2 trillion? say the Reserve Requirement is 1% and 199 billion is loaned out

0.5% :) math and night time do not mix

Well if they spend or invest the $200 billion, it will end up in someone else’s bank account and will be redistributed throughout the economy from there too.

It’s not sitting under a mattress. It’s surely invested in something productive.

I think in this particular case, it’s cash, or at least the promise from a bank or fund or whatever the hell it is, that they can count on that money in cash whenever they one.

No - it’s the worlds largest hedge fund:


When they say "cash" they almost certainly mean CCE (Cash and Cash Equivalents), which is being put to productive use by third parties in exchange for nominal interest income.


I think that depends on what you mean by "large amounts." If we're talking about cash savings to whether economic downturns, pandemics, etc., presumably we should be looking at what is large relative to the operating costs of the company. In the same way that it's common advice for individuals to have some number of months of living expenses saved for emergencies, I think that also makes sense for companies, and I don't see that portion of savings being a threat to the economy.

While these cash stockpiles are private property of those corporations they provide great public benefit, at least to the tech public, as absence of big layoffs at big corporations during hard times makes for much better situation for everybody working in the tech. I.e. those stockpiles are the best guarantee we have against repeating of 2002/2003.

Disagree. How many fortune 500's will go under due to this pandemic. I'd say it's less than 5. When the evidence shows that you can survive an unprecedented downturn without any savings it is fiscally irresponsible to have any cash stockpiled.

A bunch would be gone already if it weren’t for the fed interventions.

I'd lean that it's up to the investors to keep the company afloat if it runs into hard times

> WHY IN HELL they have so much actual cash piling up

In 1997, Apple was on the verge of bankruptcy [1]. That experience deeply scarred the company's culture. Prior to that, Apple didn't hoard cash (relative to revenues). Afterwards, it did.

At this point, the instinct is overplayed. But cultures are difficult to change. So the obsession with runway remains.

[1] https://www.businessinsider.com/apple-comeback-story-2010-10...

I think you're off base. It's simply not runway at this point. That like 200 years of runway at their peak losses.

It's pretty simple why they have such a big cash pile. They literally don't have a better place to put it.

> It's simply not runway at this point

Not saying it is.

The last time Apple’s culture was re-forged, runway was an existential priority for Steve. It remained a priority for the rest of his life. As such, it remains one today. Call it a ritual, if you like; an act once practical, now maintained for being part of a culture.

The limitless alternative to amassing cash piles is returning it to shareholders. Apple does that, but it is averse to accelerating its pace.

Apple's operating expenses for the last year was around $200bn.

This a little misleading, as it's hard to imagine Apple making zero revenue well, ever. They could possibly be losing money, but there is no plausible scenario where they lose that much money. It's hard to imagine a scenario where they lose even an order of magnitude less money than that.

Just imagine the unlikely scenario that a pandemic shut down factories in China.....

That would probably also cut expenses. And if they got into a severe product shortage they could also turn off a lot of marketing.

What would they actually sell?

Services revenue is something they appear to be pushing hard and it seems to do well financially.

During a severe supply shortage they would sell nothing but they would also have lower expenses so the loss would be manageable.

Apple TV+, Apple Music, Apple Arcade, Apple News+, purchases of books, movies, TV shows, music their 30% cut of App Store revenues and subscriptions; the $99 developer fee for the App Store; Final Cut and Logic; Apple Card interest fees, iCloud subscriptions, probably other smaller scale things.

That’s less than 30% of their revenue. Right now, they can’t get new tv shows produced because of Covid.

> What would they actually sell?

iPhones produced in India, presumably.


Or in any other place.

Overpriced iCloud storage, for starters. Or their 30% cut from all the apps sold in the App Store.

Even if they sold zero iPhones next year, there's still a lot of iPhones in the world that need services and apps.

Apple charges less for iCloud storage than Dropbox.....

And a lot more than Google Drive or even the 1TB Office365 gives you along with all the apps you were actually paying for.

I don’t know if the pricing adjusts regionally but when I just checked for here, the google drive plans are exactly the same price as the iCloud plans, bar the bottom Google plan which is twice the price for twice the storage of the bottom iCloud plan.

How exactly is that “a lot more”?

Well all of the equivalent iWork apps are free....

Or worse than Scarface’s example - everything they have in China gets permanently appropriated by the government, and they have to rebuild all the supply chains somewhere else.

They of course can always do a buyback or dividend (unless of course there's some tax reason why it's beneficial to defer till later).

> That like 200 years of runway at their peak losses.

Perhaps they want to be prepared for losses much larger than their peak historical losses.

Yep, same problem Warren Buffett has.

Also in this era the tech industry was highly competitive and cutthroat and cash reserves were a war chest against attacks and for rapid expansion (acquisitions). MS and others had similar cash reserves as a strategic asset.

>In 1997, Apple was on the verge of bankruptcy [1] That experience deeply scarred the company's culture. Prior to that, Apple didn't hoard cash (relative to revenues). Afterwards, it did

In 1996, Apple's market cap was ~$3B and they had about $1.7B in cash and short term investments.[1] That's over half the value of the company. If they had proportional amounts of cash today they would have a trillion dollars.

I think the context of the talk about bankruptcy wasn't leverage like most companies have now, but simply that people might stop buying Macs and no revenue would be coming in.

The hoarding of cash I associate with Fred Anderson, who was CFO from 1996-2004.


> That's over half the value of the company

This is a sign of distress. The equity markets were attributing minimal value to the non-cash parts of the business.

In 1996, Apple had about one fifth of its net turnover in cash. Today, it’s close to four fifths. Operating-to-operating metrics are a better indicator of management’s preferences than operations-to-markets.

Well, they lost like $800 million in 1996, which is why the market value was low, but look at the preceding years. Going back to 1992, revenue was $7-11B and they had $1-1.5B in cash and short term investments.[1] So $1.7B was not that much different, and asserting they acquired the culture in '97 is plainly wrong. Having a lot of cash was a consistent theme.

[1]See "Item 6. Selected Financial Data"

> Going back to 1992, revenue was $7-11B and they had $1-1.5B in cash and short term investments

...which is closer to the 1996 ratio of cash to revenue than today’s.

Similar thing happened to _all_ of corporate japan. Bubble era left a strong desire to hoard cash. Thus Japan Inc has vast reserves of cash. Ironic, but such reserves have not help valuations even during this pandemic.

There is a lesson on corporate financing here, but I am not sure what it says.

> why a company like that would have a cash stockpile so gigantic (around 200 billion USD) for so long without a long-term plan shared with stakeholders?

In the past 10 years, Apple has bought back over $400B worth of Apple stock, mostly at under $200/ share. This has massively reduced the number of shares on the market and been hugely rewarding to shareholders. They have shared their plan with shareholders, pretty much every quarter they put updates on how it's going.

They have a good summary of how they are performing on their plan on their site: https://s2.q4cdn.com/470004039/files/doc_financials/2020/q3/...

I'm not sure what kind of plan you had in mind, but what Apple has done has been spectacularly good for shareholders.

They're holding out for a tax holiday.

Meanwhile they think it's better to hold the cash rather than pay tax on it. The shareholders own the money either way.

Not any more. Essentially all US corporate foreign cash was repatriated (as stock repurchases) under TCJA, and going forward leaving the money overseas doesn't avoid taxes any more.

Why didn’t they use the one provided by the tax cuts a few years back?

They'd still have to pay 21% on it. They're probably waiting for a tax holiday like the one in 2004 where companies could bring back cash at a 5.25% tax rate.

That is just sick. They should pay a tax rate at least as high as what the average worker pays if not higher

Why do you think companies should be taxed?

Most people who want to tax corporations actually just want to tax the super-villanous rich people. But here's an interesting idea: just tax rich people more.

By increasing costs for all companies, you are making products more expensive for all consumers. It's effectively a regressive tax.

You also need to remember that a majority of Americans are invested in the stock market[1]. A healthy economy is good for everyone.

I believe that money that gets paid out from a company to investors (dividends) should be taxed as regular income, but the income of the company itself should be untaxed. That way we avoid the distortionary effects of double-taxing money but we still tax the evil rich people you're so concerned about.


>By increasing costs for all companies, you are making products more expensive for all consumers. It's effectively a regressive tax.

Taxing profits has zero impact on costs. The most it would affect is the viability of companies that are on the border of profitable/not profitable because it would detract from their ability to attract capital.

Apple is quite possibly the furthest away from this scenario you could possibly imagine. Taxing their profits will have zero impact on apples costs.

>here's an interesting idea: just tax rich people more

The funny thing is that whenever you try to do that a coterie of economically illiterate paid-to-be-wrong journalists come out telling you how much you're ruining things for everybody else and how little the rich will really be affected.

You can almost measure the actual impact of a tax by the intensity of the screams in the popular press about how much the average joe will get screwed and how little the rich will be affected.

And, of course, taxes that really are like that get branded differently - they're "necessary evils" or simply just ignored.

It might work if we did tax the super rich more, but we don't, we often tax them less through capital gains. Taxless corporations would become vehicles for tax avoidance/evasion.

The stock market is not "the economy", "the economy" is not doing too well, but the stock market keeps steaming along while a lot of people struggle and congress does its handwringing over the cost of meager stimulus packages. Maybe some extra tax revenue would be useful.

Dividends can already get special tax treatment, and many corporations are averting taxation entirely. For a lot of situations we're already at your ideal scenario in a round about way, except we're failing to tax the super rich.

I'm not concerned about the "evil rich". Apparently you are though.

I'm more concerned about how that tax revenue could benefit society.

5.25% of $200 Billion is $10.5 Billion.

How much in taxes does the average worker pay over their lifetime?

Not to mention, this money was already taxed, just in another country where that money was earned. Seems like a good deal, to bring that money back into our economy and get it spent on goods and services domestically.

"We'll allow you to bring back $185 Billion and spend it here locally, helping the entire economy, but only if you pay us $10.5 Billion!"

I'd be OK with zero tax on this money. Get it flowing back into the economy where it can do real good things. The US Government isn't going to miss $10.5 Billion at the rate we're already giving it away to people.

The alternative is what we have already. Everyone loses; no one gets any piece of that money in the US.

"How much in taxes does the average worker pay over their lifetime?"

How much does the average worker make over their lifetime? Not fucking 200Bn

So the question becomes, do you want $200 Billion or zero?

Right now, we get zero, and I'm pretty sure we wouldn't be able to come up with some way to compel them to give us a sinlge penny of it.

Do you mean 10 Billion or zero?

If people can be ok getting a small piece, sure. But, from the looks of it, many are unhappy with that amount, let alone something like 20%.

$200B is the full amount. Not 20%. The OP said do you mean $10B because of it being 5% of $200B

Apple will spend the $200 Billion here domestically, if they can bring the money home.

I'm not, personally, very concerned with giving another $10 Billion to the US Government. It's a small amount in the scheme of things.

However, getting $200 Billion injected into the local economy would have a profound effect.

You're too optimistic that the money will be injected in the local economy. Apple clearly doesn't know what to do with all of it

Perhaps. The bigger point was, getting Apple to spend the money here in the US has far more benefits than holding out for an inconsequential amount of one-time tax revenue.

Cutting off your nose to spite your face, sort of thing.

Corporate taxes create a huge amount of deadweight loss and disproportionately effect workers. Taxing the income of the rich is a much more effective way to do what you want. There are many many econ papers on this, go ahead and google it.


The exact opposite is true. Taxing revenue and salaries affects workers and the overall health of the company. Taxing profits affects mainly just shareholders - especially for larger companies.

There are several papers on this.

Why? How about lowering taxes for the “average worker?”

I think we should only tax income over some number like $100k. If the money doesn't feed you then it's should be taxed higher. Nobody needs a nice car. People need food

Those certainly aren't mutually exclusive ideas.

Because cutting taxes will cut spending, and military spending is a sacred cow, so among the useful things the government provides, the average worker needs things like roads and a working school system, and healthcare when they get to Medicare age.

WHY IN HELL they have so much actual cash piling up

If nothing else, it can keep paying their all of their employees, not just the work-from-home IT crowd, during a pandemic shutdown.

Okay, so now what to do with the other $199 billion

Buy startups and competitors.

They started doing buybacks in 2012. They've bought back $338 billion so far.


You know how everyone jokes that we expect consumers to have 6 months of savings for emergencies, but big corporations start begging for bailout within days of the epidemic?

With $260bil revenue and $55bil net income, Apple’s monthly expenses are around $17bil. That means they need $102bil cash on hand for emergencies.

As someone else mentioned, they’ve experiences near bankruptcy before. Maybe they never wanna be there again.

I think a comment above pointed this out too, its a bt misleading to add up expenses with 0 revenue for 6 months, can think of all those subscriptions and services to be bringing in revenue even in times of a pandemic when factories get shut and phones and macs are on sold, its difficult to imagine apple bringing in 0 revenue. so $194 billion cash is just way too much, even for emergencies me thinks

I’m sure airlines thought the same. As did hotels and restaurants.

That’s the point of an emergency fund. It’s for when the unthinkable happens.

Croatia for example is a country with a GDP of $63bil. 20% of their whole economy is tourism.

This year tourism is down 90%+. Oops

Airlines, Hotels and Restaurants don't sell services that are necessary for operating the devices they already sold you.

Even if Apple sold zero iPhones next year, they would still collect a lot of revenue from all the App Store Sales and iCloud services.

It would probably take a decade of zero iOS updates and no new iDevices being released to make Apples revenue decline so dramatically.

Yeah maybe, I don’t know what goes on in Apple’s mind. I’m merely pointing out that emergency funds get ridiculously large when you’re a big corporation.

The risk an emergency fund has to guard against is of course offset by your level of diversification of revenue streams. And again, Apple knows better about their situation and risk tolerance than I would.

Emergency funds are designed just for that.


A lot of their cash is overseas, and so to bring it back into the US to either issue a dividend (which is suboptimal from a tax perspective) or to buyback their own stock, they need to pay US corporate tax on the income (this is on top of the tax charged in the foreign countries.)

Not just that US income tax needs to be paid, but also that cash needs to be converted into USD, which poses a problem in relation to fluctuating rates on currency conversion. Currency conversion rates is a running theme in Apple's SEC filings and was also mentioned in yesterday's call. In fact, there is an entire paragraph in last year's annual report that discusses how they built a model to not just optimize conversion to USD, but also predict the total cost so that they could also hedge against it. There's also a note which says their foreign tax obligations are still under review from 2016 forward, so they might be prevented from moving the money until that picture becomes more clear as to how much is owed.

What do you mean when you say that their cash is overseas? I assume Apple does not have stacks of green bills in giant vaults overseas. Is it in foreign banks?

Apple runs what may be the world's largest hedge fund, Braeburn Capital [0], that it uses to invest its cash reserves. But yes, I'm sure a fair amount of it is in foreign bank accounts.


A lot of Apple's non-US profits were/are in Bermuda. See https://en.wikipedia.org/wiki/Double_Irish_arrangement .

Indeed, some of it is in banks in tax havens such as Ireland and Singapore. They are also in the form of US treasury bills bought through their offshore entities in the same havens. So I guess at least some money does make it back to the US ;-)

The cash (or other short-term investments) could even be held in US bank accounts owned by non-US subsidiaries of Apple.

For sure! With this offshore thingy one could create a mind bending structure to trap tax authorities in an infinite loop trying to trace the origin.

I was completely ignorant about this menace until I started reading couple of books to educate myself —- Treasure Islands and Moneyland...recommend them both.

Since then I just use the term offshore to encompass any of those hundreds or so possible structures.

It's in bank accounts in Ireland.

Paying taxes in a country doesn't mean the realized income stays in that country.

Net cash is "only" 81 billion and long term plan is share buybacks, they already bought back around 200 bil iirc.

Deep wallets help with manufacturing negotiations. Apple's demand might require substantial commitments from manufacturers like Foxconn.

Not only can Apple finance those factory and process investments (if they chose to), having a letter of intent from a deep-pocketed customer like Apple helps Foxconn et al. procure loans and offset the risks.

I can think of a few ways to spend 200 billion very quickly to be honest. I think this is one of the smarter things that Apple does.

Imagine if they started engaging in pointless acquisitions in the idea that this cash should be put to use. You'd have another Nokia, another Sun..

Having a large cash hoard gives them a shield against external financial manipulation from Wall St.

I wonder how much game theory there is in having a super sized cash stockpile. Internally apple managers are unlikely to be pressured on R&D costs including salaries, long-term goals. They also are more likely to not be concerned with sunk costs, and can cut projects/features if they don't seem useful to users.

From an external standpoint, competitors have to be aware that "you can't manufacture like apple" and that they will always be forced to make compromises on features/packaging/price in comparison to an apple product.

I see only $100 billion of cash and short-term investments:


and $100 billion is only one year's worth of Apple's earnings:


As of March they had 100B USD. Is there a link for 200B?

Ah, finance sites claim 100B in cash. Rest is not cash, nor on hand, but 100B in securities awaiting maturation.

Looking at the responses I see a lot of possibilities. But one thing I remember reading elsewhere is something they wouldn’t admit - they have no good places to put that money, and inflation is low so hoarding it is not a bad option right now.

Maybe the company remembers when it almost went bankrupt.

Maybe the know what technology will break out, but is not ready yet (autonomous cars, AR), and waiting to invest when the time comes.

The cash hoard is for making powerful acquisitions that can rock industries. 200 billion might not even be enough to buy some really big players out there. Don’t sweat it.

Prediction: Apple leverages their capital to become to the US highway dept as Space X is to NASA.

A better angle would be for them to become the US Public Education system. Schools designed by Apple, curriculums for the next generation of thinkers and doers.

It's because of that cash stockpile apple is valued so much. Stock Buyback gives company the option to decide share price.

Aside from avoiding tax, that practically limitless cash holding gives them strategic leverage in supply chain.

I think a lot of it is offshore untaxed money and Apple is waiting for a repatriation holiday.

Building a money bin, and Tim Cook is gonna swim in the money

Because there is not enough they want to buy strategically.

Even banks don't have 200B in cash?

I dont care how much they amass, I wonder wtf they can’t be bothered to throw $50M into OSX fixes.

They do stock buybacks, which return cash to investors in the form of higher share price.

Buybacks return cash to investors mostly in the form of “investors selling their shares back to the company get dollars in exchange.”

I thought that buybacks reduced the amount of shares in total, increasing the value of the remaining shares?

The value of the shares is not increased when the buyback is made. The total value of the shares goes down, as they would have if a dividend was paid. The total value of the shares will go up in the future, as it would if a dividend was paid. The value per share will grow more than in the dividends case, as there will be less shares, but of course an investor who kept all their shares won’t have received any cash (unlike in the dividends case).

Well, in corporate tech America management thinks that it is their money, they just haven't figured out a way to remove it from the company yet.

Because they don't pay taxes.

Apple designs an iPhone, has it produced in China, sold to Apple HK, then sold to Germany.

Profit margin in China by Foxcon? Small Profit margin in the offshore jurisdiction (e.g. Hongkong). Big. Taxes in HK for this transaction: Zero

This transaction also does not show up in the US trade balance. ("Black matter in accounting")

Apple is the worlds biggest tax payer in terms of $ paid out.

For example: Between 2014 and 2017 Apple paid $35 billion in taxes.

While you can argue they should pay more in taxes, the fact is they pay vastly more than their peers. Amazon in particular is notoriously good at keeping their tax bills low.

I don't know what is fair in terms of taxes and I'm not suggesting Apple is a perfect tax citizen, but they do pay a good chunk of cash out to keep the White House lights on.

"Between 2003 and 2014, the European Commission found, Apple had lowered its effective corporate tax rate from 1% to just 0.005%."


1. I don't know why I get downvoted

2. I would not say a corporate tax rate of 0.005% is high.

Didn't down vote you, but you are quoting a biased source. Maybe Apple pays 0.005% in the EU, but since 2011, Apple's paid over $10b/ year every single year (and many years it's been higher).

This is on public record: https://www.macrotrends.net/stocks/charts/AAPL/apple/total-p...

> I would not say a corporate tax rate of 0.005% is high.

I'm not sure what that number comes from so I can't say, but since they paid $10b/ year for the past 9+ years, they'd have to have 2 trillion dollars in profit in a single year for that rate to be accurate.

Because it is a public company. Public companies are under strict fiduciary duties. If it were private, it would just go to the owners and investors in large dividends. Dealing with so much money requires considerable deliberation.

This doesn't make sense to me. Apple absolutely could return most of this to shareholders via a dividend if they chose to (less taxes if they bring from offshore, etc.) It's not at all clear the best exercise of the boards fiduciary duty is to hold cash.

Among all the big tech, I think Apple is probably the most resilient. The sort of brand loyalty and image they have, any company would love to have it. It makes even the less polished products from their stable escape the sort of ire and financial impact that most other companies face.

Take the example of maps, it was clearly a way inferior product to the best in market Google Maps, still a lot of users(my physical and social media circle at least) persisted with it. This gives them immense power to grow out products that can become really strong platforms in the future.

Also, their ecosystem lock in is really strong. I think in due time it is really going to stifle competition. For example, it would be really interesting to see how the headphone industry adapts to this where incumbent brands like Bose, Sennheiser with their own brand power have seen their market share erode very fast. Apple has already sold 100+ million airpods.

> any company would love to have it.

But few companies would love to do what it takes to get it.

Things like protecting customer privacy and taking security seriously.

I once saw a 1 hour presentation on the cryptography design of the iPhone compared to an Android phone. The IOS design used layers of fine-grained encryption and was obviously carefully thought out to protect the consumer from: device theft, misbehaving apps, illegal searches by law enforcement, and even nation-state levels of spying.

The Android phone had a feature that basically said "Encrypted: Yes".

That's the difference. I see that difference everywhere, with every organisation. The right attitude gets rabidly loyal customers, the wrong attitude relegates you to the low-cost section of the store.

> I once saw a 1 hour presentation on the cryptography design of the iPhone compared to an Android phone. The IOS design used layers of fine-grained encryption and was obviously carefully thought out to protect the consumer from: device theft, misbehaving apps, illegal searches by law enforcement, and even nation-state levels of spying.

When was this? Do you have a link? Was this like the usual grandiose presentations that Apple usually does? Cause I don't think this how it is for last few years.

Disc: Google but nowhere close to Android other than using an Android phone.

It was some developer conference years ago that I watched on YouTube.

Speaking of which, YouTube is another one of those Google properties that clearly doesn't care about the user. Things like: For me, YouTube streams from the wrong city because of a bad Geo IP database somewhere in Google, and so 4K streams stutter even on a gigabit fibre internet connection. Google makes it very clear that there is nothing anyone outside of Google can do about this. Not me, not my ISP, not anybody. (PS: I pay $15 monthly for YouTube Premium, about the same amount I pay for Netflix. Netflix streams flawlessly, and they have a support service I can contact to solve streaming issues if it doesn't work as expected.)

Similarly, YouTube's UI is very slow on Firefox for no good reason other than: "Google doesn't care about anything but Chrome".

These all have reasons for why they are the way the are. I get it. Geo IP databases are inaccurate and a hassle to update. Firefox is not the biggest browser, and Google focuses on their own products first. I get it.

But as a user, these kind of things erodes my trust in Google, and makes me realise that I'm the "product", not the customer. My interests are not Google's interests. My interests are Apple's interests, however, which is why I have an iPhone and will never buy an Android phone under any circumstances.

I think Google is a victim of its promotion culture which over values new shiny things over well built super reliable things that do one thing really well.

Netflix takes streaming seriously. It’s always really smooth even on low powered devices. The Amazon app on our 5 year old Vizio TV still crashes after some use, so does the YouTube app. Netflix however is always responsive and doesn’t require restart.

GP is right, very few companies have the discipline to not chase after shiny things.

I believe this is what OP is talking about: https://youtu.be/BLGFriOKz6U

I can agree they have the perception of protecting privacy and taking security seriously.

Then I see issues like this. https://www.theguardian.com/technology/2017/nov/29/macos-hig...

I see major privacy design violations like this.


That privacy violation is ridiculously terrible design which leads me to believe it's mostly marketing gimicks over business priorities.

I use Apple Maps for turn-by-turn navigation because Google Maps confirms the need to turn at exactly the moment I already need to be turning, which is not helpful, especially on the highway where "next exit" is a little ambiguous (to me, anyway; I think "next" is the one after "this" exit). Apple Maps confirms the need to turn some 500 ft ahead of any turn. No need to ask myself "have I gone 1.2 miles yet?".

It was even worse driving in the UK. Google Maps told me "at the roundabout take the 3rd exit on St. George St.". Well, does the driveway-looking exit, or the store entrance count as #1 or do I ignore that one? Also, their street names may be precisely correct, but streets on the roundabout are not labelled by their names, but by the city/town that the road goes to next. Apple Maps, by contrast says "exit the roundabout at the 3rd exit going towards Canterbury" (or something like that). I can't remember if they said the exit number or not, but all you had to do was confirm that the exit with the sign saying "Canterbury" was more or less the 3rd exit and good to go.

Then there is the problem where I'm not using navigation and looking for a street name. Google Maps used to label major streets, but now they do nothing of the sort. You might get the major highway if you're lucky, and there will be a minor street with a label somewhere, but the major street off the freeway exit? You can't find the name until you zoom in until the street is the only thing visible, and then I guess Google Maps decides that they might as well display that useless street name, since there's nothing else that can be displayed. Mind you, Apple Maps is only marginally better for that, but still.

Google Maps is better for finding things, but I fired it for navigation.

More than any of the others, Apple at least tries to have values. Not everyone agrees with them. But I challenge anyone to identify a positive value mainstream America would associate with Microsoft, Google or Facebook.

Microsoft cares deeply about backwards compatibility, providing platform stability to large enterprises, which value such things very highly. IBM is similarly popular with big business for the same reason.

Google -- for a while at least -- cared deeply about web user experience and performance. The Google start page ushered in an era of minimalist UIs that load fast and don't bombard the user with fifty irrelevant things. They came up with the trick to send more than the 4 initial packets after the TCP connect so that they could send the entire front-page content in the minimum feasible number of round trips. They're still working on protocols like HTTP/3 and QUIC with similar goals.

Facebook... umm... let met think... err... I got nothing.

The Google home page is horrible on mobile without an ad blocker. Don’t get me started with AMP pages.

Yes but look at google now. Full of ads

Google itself is still far from "Full of ads". Where do you see?

Really depends on the search. But looking for any type of product you get more ads then organic quality results

I think for some search terms, SEO and AMP support make a difference on how high your website ranks against other search results. I think it encourages a certain kind of website (referral links, modest length article with buzzwords, lists with not a lot of depth).

These aren't advertisements, but I think they feel a lot like an advertisement in terms of what Google encourages others to post on their website.

No I'm talking about google results that explicitly say "Ad"

I think a lot of us view that as merely marketing. I don't think apple's values are any more concrete or "real" than the other companies you mentioned.

How do you distinguish between "mentioning your values in your marketing" and "your values are merely marketing"? Apple's stated value of customer privacy is pretty difficult to explain as "merely marketing." They clearly put a lot of work into it and in some cases even accept the product feature limitations that come with a privacy-first approach.

A "privacy-first company" wouldn't remove the VPN apps from the Chinese apple store, leaving their users with a device even Orwell didn't foresee.

Should they not follow the laws of the country?

Wasn’t it just found in the large ElasticSearch hack that a number of no-logging VPN providers were in fact logging?

I honestly didn’t either until I worked there. It’s actually for real. They take their values and culture really seriously, which was refreshing and very cool.

Their commitment to accessibility certainly is much deeper than just marketing, and I’m very skeptical that the resources they invest in it are repaid in full.

Have a look at some of these[1]. Some of them are vacuous, but I would definitely not call a lot of them positive values mainstream America would associate with.

At the end of the day they are a corporation whose job is to make profit not possibly die by being idealistic. I would even argue that the privacy thing, while commendable is a selling point more than an ideal they hold dear.

[1] https://en.m.wikipedia.org/wiki/Criticism_of_Apple_Inc.

> a selling point more than an ideal they hold dear

I agree. Note that I didn’t mention privacy. We both understood that implicitly. That’s partly marketing. But it’s underwritten by some truth, if not a comprehensive truth.

Values, in my view, are meaningful if strived for. They don’t need to be perfectly attained to be valid. Apple has made tradeoffs and incurred costs to strive towards protecting privacy, and it’s been consistent in that aim over its history.

Even to this imperfect standard, I struggle to come up with analogs for the others.

I think that's a luxury Apple can afford though and an outcome of their approach to devices.

Take the example of Maps, for anyone to create a good maps experience they need a lot of money, A $1000 phone with about $200-300 actual component costs has enough margin for other things, even software. So the price is kind of included in the phone. Even if we just give $10 of this to Maps as it is a core experience, that is $2-3 billion per year.

For other companies trying to compete, it is either ads or subscription. So even if you charge $20 per year, you need 100 million paying users. Apple also incurs the cost of running it but it gets hidden the price of the phone, others don't have this luxury. Though, I think certainly a company like Samsung which has significant device revenue can try this approach.

Also, in case of ideals if I have to give an example of a company that tries to uphold one ideal very well would be, Google's efforts to improve diversity. https://diversity.google

Or you know, other phone manufacturers could make a product that users were actually willing to pay a premium cut.

I am definitely an Apple fan - I have an iPhone, iPad, Watch, Pencil, AppleTV, AirPods Pro and a work MacBook. But, Apple does a lot of things that are not consumer friendly.

- 5GB of free iCloud storage in 2020. I can imagine the countless number of people who have lost photos that weren’t backed up because they didn’t upgrade their iCloud storage plan. 50Gb should be the minimum when you buy a new phone.

- subscription apps not at least being able to say something vague like “go to our website to create an account”.

- not being able to change the default mail, browser, calendar, maps, music app. Some of that will be correctly in iOS 14.

Apple’s pro-privacy stance in merely a strategy credit. That’s not their business model.

Just like FB can say with a straight face that they won’t put data on servers in non democratic countries - they aren’t allowed there anyway.

Cook also kissed Trump’s golden ring and let him tell lies about Apple’s US manufacturing plans during a photo op.

Facebook: free place for baby pictures

It's also one of the most toxic and unhealthy for the industry. As you pointed out, they are proponents of extreme lock-in and anti-competitive behavior. And it's not good when such toxic company also has such pools of money. They can do too much damage.

I am not sure of what can be done though in hardware at least. Software, certainly there can be regulation to keep the playing field open so companies like Spotify can survive on their own merit.

Hardware, maybe by enforcing APIs to be accessible to all hardware manufacturers. But at the end of the day, if they build a new successful product either inhouse/acquisition, should it be stopped just because they have money/brand loyalty. I don't agree with that.

They did a number lock-in driven things that clearly have global damaging effect. Like they refused to support Vulkan, they were the main force behind sabotaging using SPIR-V for WebGPU, they also were quite harmful for DASH and a number of other Web related standardization efforts, just because they wanted to cement their lock-in control.

Same applies to their ban on competing browsers in their application store which should have been simply forbidden by anti-trust a long time ago.

When a company so consistently behaves in such nasty manner, I'd say they don't deserve any respect, let alone loyalty.

Ah, they certainly don't have my loyalty, or any company for that matter. I try to diversify the devices/services I use so that one company doesn't have power over my daily life and I can switch over easily if I want.

You know Spotify also charges the music industry the same 30% to be on their platform that Apple charges?

Can I pay a $99 one time fee and bypass Spotify’s 30% and get my share of all of Spotify’s users subscription fee? Like Spotify does with respect to Apple?

I remember when I sold all my Apple stock back at $250 (pre-previous-split) thinking “at this point they’d have to become the most valuable company on EARTH to go up much more!”

I have the iPhone XR for almost 2 years and the uncased exposed metal rim is virtually flawless. It's details like this that make me love the iPhone and is part of why I'm a longtime investor.

I love Apple but I’m frustrated for a few reasons.

1. I’m sick of charging everything constantly. I feel like my phone, AirPods, laptop and watch batteries are always needing too much attention. I would prefer larger devices with bigger batteries.

2. The screens for these devices are too fragile. The devices are beautiful, but require ugly cases or regular, expensive repairs.

3. There are too many missing devices in Apple’s ecosystem. A pro computer under $3k. A TV. A smart speaker that isn’t crippled. Smart home devices that don’t suck. Apple should stop trying to compete (poorly) with Netflix and should focus on their ecosystem of devices and services.

Agreed, and that’s the issue I have with the cash pile. They should be trying and failing quickly at a number of things, big things, including the small items you raised. Take a guy like Elon, give him a 500bn in cash and see what happens. The world would change in a big way.

Capital should be either sunk hugely into the R&D to change the world or should be returned to shareholders to better allocate it.

That said, These guys aren’t playing the game 1 qtr at a time. Not even a year at a time. They play the 100+ year game and likely they don’t see this money as “big”.

> They should be trying and failing quickly at a number of things, big things, including the small items you raised.

That seems very antithetical to Apple's fundamental approach to product design. Sure, they have some first-generation stinkers, but I think it's fair to say Apple tends to err on the side of waiting until they can release something to their standards.

Apple does seem to have a massive "hidden" set of R&D projects. I bet all the items the GP mentioned are in some phase of development. Famously the iPad was actually in development before the iphone! I suspect their culture of secrecy prevents internal accountability unless the particular project has internal visibility with execs.

I'd love to see Apple do some serious work on the battery side. If anyone's equipped to do it, it is (though I'm less certain of this after the "sapphire" debacle). You wouldn't believe how hard it is to actually get new battery tech to market: I've probably seen a dozen start-ups pitch technologies that could substantially improve capacity, longevity, safety, size, weight, manufacturing cost, or a combination of the above. None have yet succeeded at scale.

Just because you don’t see it doesn’t mean it isn’t happening.

For your second point, there was a recent article about Corning's next generation Gorilla Glass Victus. Survives more drops and drops from higher distances. Corning is the supplier for the Apple for glass and so this could be improving in the next generation.


I just wish it wasn't such a smudge/finger print magnet.

I resisted getting an iPhone for a long time. But I bought my first one last month. I have to say I like it a lot. Very polished.

The 2020 iPhone SE is my first iPhone. I bought it when it first came out, and I’m very happy with it so far. Especially since I have a MacBook Pro laptop. Being able to text from my laptop is such a huge improvement.

The cross-device copy paste thing is also very useful (between iPhone and Mac).

Agreed! As someone who has to use a bunch of different computers/devices throughout the day I have been looking for a way to do this with computers I'm not logged into. Right now I use pastebin, but I'm thinking of building a pastebin web app that will take the text, convert it to a QR code and then you scan the code to get the text into your phone's clipboard.

I was scratching my head as to why Mac and iPad sales would’ve shot up 30% YoY.

Then saw that two weeks before end of quarter they started a “back to school” promotion (in June?) that throws in a free pair of AirPods with a Mac or iPad purchase. Details here: https://www.apple.com/promo/pdf/EN_US_BTS_FY20_TandCs.pdf

With a $479 iPad Air that’s 33% of the price of your purchase.

New Apple products can easily be sold on Amazon or Ebay for close to face value, so this is a extremely easy and generous retail arbitrage opportunity.

My point is I didn’t see any language around this promotion in their earnings report but suspect because it is so generous that both legitimate customers and resellers are taking advantage of this deal, thus disproportionately lifting sales for Macs and iPads vs other categories like iPhones which was essentially flat YoY.

Their surprise beat was then in part influenced by this big promotion and not necessarily totally organic demand...

Edit: They do something like this every year but this one started in Q2 unlike last year in Q3 and includes much cheaper iPads, and is for Airpods for the first time (a much more desirable freebie over Beats)

This promotion happens every year before schools starts. I received a free pair of beats headphones with my iPad purchase in 2018.

I checked 2019. That promotion started mid July (so after Q2 ended), and was for Beats only with a mac or iMac which start at > $1000.

my point is this started before Q2 ended and includes much cheaper iPads. Again, this gift is 33% of the cost of entry level iPad Air. Also Airpods are much more broadly desirable than over the head Beats.

2019 promotion: https://www.apple.com/newsroom/2019/07/macbook-air-and-macbo...

It's because of Covid. Millions of kids needed something to call into their Zoom classes and iPads for one are perfect for that at their price point. I'm not surprised at all.

yeah that could be part of it too. i have no insight into how families with young kids decide on computer purchases for families to be frank. and i don’t know if public schools provide laptops for home use either, but if everyone is at home then you’re going to need a device for every kid in school if not otherwise provided.

> i don’t know if public schools provide laptops for home use either

In my area of Maryland they do, and anecdotally I think they also have in at least one part of Utah. But in my area they emphasized that they were for those with the greatest need, not everyone.

Where do you see the 30% YoY increase? This statistic is pretty useless if it is on a per units sold basis.

But AirPods have to be close to free for Apple to manufacture. Functionally equivalent clones retail for under $10 on AliExpress.

This is wrong in two ways. First, the 10 dollar clones are ass, if you've ever tried one.

Second, what the material cost is doesn't matter, at least on its own--a gifted airpod is one that's not sold. The opportunity cost is real, even if the material cost is low.

I agree, but that doesn't make my actual point -- that manufacturing AirPods is cheap -- wrong.

FWIW, I did buy a $10 clone. The hardware was actually astonishingly polished for the price point, but the software to control it was indeed "ass".

Ok - that doesn’t change my point? It just means they can offer a very generous promotion without incurring a big promotional expense that cuts into profit margins.

Right, which makes your comment pointless.

Apple’s raison d'etre is to make money.

what? I was trying to understand why Mac and iPad sales surged YoY compared to other products and I’m just saying I think it was in part due to this promotion, which started earlier than in past years and included Airpods for the first time.

I don’t understand why it’s a pointless exercise to theorize why sales went up when no one expected it otherwise

Wow, it's up over 10% since yesterday. At 1.84T, it's not that far away from 2T.

Though Saudi Aramco was the first company ever to hit 2T (back in December), so Apple wouldn't be the first, if it makes it.

Something like 30-40 years for the first trillion, and maybe only a few more years for the next trillion.

Is this an artifact of under-priced dollar debasement? The Fed is now actively purchasing bonds for FANG companies, these companies could in principal simply buy back their own stock with this money at 0% interest.

This sounds an awful lot like the the situation where the imperial palace was worth more than California.


Just addressing the title a bit - Saudi Aramco isn't as valuable as is claimed. Back when the crown prince wanted to float it he wanted to get it on a real stock exchange and give up a real portion of it. However, this failed because they couldn't get the valuation they wanted and wouldn't give the transparency needed. As a result, it floated on the Saudi's own stock exchange, floated only 1.5%, and according to some reports signficant pressure was put on prominent people to buy shares. It was all very much a matter of marking your own homework. Aramco would absolutely not be trading at that level on the Nasdaq.

I’ll be curious how the growth exceeding expectations impacts Q4. Today I looked at ordering an iPad Pro, both the 1 TB and the 512 Gig and could not get either one until early September.

While I’m celebrating the great quarter, how much will blowing out Q3 impact Q4 by way of not having the equipment people want? They also announced a several week delay and in delivery of the next gen iPhone. Might be negligible?

And all without constant long term SDC/Quantum/Space? hype.

Use the cash to make global iphone only internet after buying spacex

Technology more valuable than sand mud?

Just goes to show capitalism is all about screwing your suppliers (developers), your customers, and using the government to enforce intellectual property.

Although I'd contend that the later is not capitalism.

Amazon, Google will soon follow. I see amazon being worth $10-30 trillion eventually,,, bigger than apple.

Just for reference, $35T is the total market cap of the US stock market.

Wait, apple makes up 5% of the entire US stock market? That feels... weird.

ROFL paulpauper

$10-30 trillion is probably not a valuation that should be or will be allowed by regulators. The business would have to be split up.

At the point of $10-30T market cap you probably own, even if not literally, but figuratively, whatever regulators there are.

Barring massive inflation in a short period

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