How Apple has made use of its cash balance

Market Realist

Must-know: Why Apple forged a partnership with IBM (Part 4 of 5)

(Continued from Part 3)

Apple continues to aggressively operate its capital return program

Apple’s (AAPL) cash and cash equivalent balance has continued to go up. As the chart below shows, Apple’s cash and cash equivalent balance has increased from $137 billion in the fiscal first quarter of 2013 to $164 billion in the latest fiscal third quarter of 2014. Interestingly, Apple has already taken action on $74 billion of the $130 billion capital return program, including $51 billion in share repurchases. This program will be completed in another six quarters.

During the last quarter, Apple repurchased 59 million of Apple shares in the open market for $5 billion. The company also paid $2.9 billion in dividends.

How the capital return program started

Apple’s investors wanted the company’s ever increasing cash balance to be returned to shareholders in the form of share repurchases or dividends. Earlier this year, activist investor Carl Icahn tweeted on Twitter (TWTR) that Apple wasn’t doing enough when it came to its share buyback program. Icahn has about $4 billion invested in Apple and is considered a high-profile investor. He also has a large stake in Netflix (NFLX), an Internet video service provider, and Hologic, a medical device and diagnostics manufacturer. Apple relented to investors demands by starting the capital return program.

Apple is making smaller acquisitions 

Apple made a comparatively big acquisition in the last quarter—Beats Electronics and Beats Music for $3 billion. In fact, this was the largest acquisition in Apple’s history, easily beating the $400 million acquisition of NeXT Software in 1997. Besides Beats, Apple made 29 acquisitions since the beginning of the 2013 fiscal year, including five acquisitions in the last quarter. However, these were smaller acquisitions, which aren’t hurting Apple’s cash balance.

Apple continues to make strategic acquisitions. These acquisitions should help exchange-traded funds (or ETFs) like the  iShares Dow Jones U.S. Technology ETF (IYW) and  the Technology Select Sector SPDR ETF (XLK) ,  which have high exposure to Apple.

Continue to Part 5

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