Apple’s War Chest

Chunka Mui provides his reasons for Apple to say no to using some of its $100 billion cash as a one-time dividend for shareholders. As a shareholder myself and one that’s been handsomely rewarded by Apple’s focus on the experience, I agree.

He gives six reasons why Apple shouldn’t declare a special or ongoing dividend. There are two in particular that I agree with.

  1. Apple’s “closed” ecosystem has lost in the past. I don’t agree necessarily that the Apple experience is closed, but the point is that they have had the lead in personal computing in the past and lost that to Wintel. Apple has the lead in tablet computing, but with the amount of focus on that market, Apple will have to invest heavily to keep delivering the user experience that will maintain that lead.
  2. The telecommunications link. Every time Apple has put themselves in direct contact with the end user and controlled the experience, they win. Apple retail stores (which I was an early nay-sayer about, for full disclosure), iTunes, the App store and more are all examples of how Apple provides a superior and preferred experience. Now, with content continuing the move to the cloud, Apple’s devices and services are reached through communication networks that they don’t control. And by “control” I mean the experience–the speeds, quality of service, pricing, user interface. Apple will have to do something about that. Further, I think their main competition in this area is Google which has the same requirement of controlling the experience at the network level.  And they’ve got lots of cash too.

Taken together, I believe Apple is going to have to pour more into R&D in maintaining their lead in tablets. Apple will eventually do something about the communications link and will get more control over that experience. Building out a direct-to-end user telecommunications link is going to be the real consumer of dollars.

Will Apple eventually own a communications network of some kind? Or at least “control” the experience? I believe that’s one of the challenges they’ll need the $100 billion for. I don’t have a clear idea of exactly what that will mean for them or the current telecommunications companies. I do believe that Apple will do something in the next couple of years. I believe they must.

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