Technically, it is being invested. The money isn't kept in a big pile under a giant iMattress in Cupertino. Whatever holdings Apple keeps the money in is earning some interest, dividends, or whatever. "Cash" here only means something like "readily convertible."

But, "hoarding" here means that Apple is neither directing investment directly, nor returning the money as dividends to its stockholders, right? I'm guessing the reason is because Apple is investigating future business opportunities which may require deep pockets. In other words, it's possible Apple is involved in exploring some future, highly speculative investment in a new industry, so that they can be "the next Apple" in some economic venture other than phones, tablets, and desktops.

Just to take one example: developing, producing, and marketing a self-driving car will cost a bundle. And, who really knows what Apple is up to? It's fair to say they may have many pokers in the first right now.

If they could reasonably put that investment to use, that would be a fine thing to do. But Apple doesn't really have the same philosophy as Larry/Sergey and Zuckerberg do towards throwing money at any idea that has the slightest bit of potential. They want to see a legitimate and probable chance of success in their investments in addition to a synergy with Apple would enhance the investment or Apple itself. It just so happens that there aren't really hundreds of billions of dollars worth of such investments out there. So, instead, Apple tries to return that money to its investors. Unfortunately for that plan, if Apple were to give that money back to investors, it would incur a massive repatriation tax, so it instead sits overseas, "waiting" for a tax holiday.

Industrial capacity utilization is currently less than 76%, which is historically low. So about a quarter of invested capital is sitting idle currently ( https://fraser.stlouisfed.org/scribd/?toc_id=296052&filepath... ) ( https://www.federalreserve.gov/releases/g17/revisions/Curren... ). Why tie up money in new capital expenditures when about a quarter of existing capital is sitting idle?

Ben Bernanke referred in 2005 to a "global savings glut". The conditions which led to that haven't changed much over the past 12 years.

Gross domestic private investment, fixed nonresidential investment increased 2.8% between 2004 and 2014 (I exclude investment in fixed residential structures as that plummeted by 4.9% in that time frame). Computers and software was the sub-field where investment increased the most, by 6.1% a year ( https://www.bls.gov/emp/ep_table_405.htm ).

Whereas from 1994 to 2004, gross private domestic investment increased at a rate of 5.5% a year. Computers and software investment increased at an average rate of 26.5% a year between 1994 and 2004 (ref: same link).

You have to measure investment against GDP and profit rates as well.

In short, Apple is doing what a lot of people with liquid capital are doing, holding onto it.

Reinvest in what exactly and in a way that would return money back?

Apple has suffered through the tough times in the 90s where they almost went out of business. Having that much money means Apple can take greater risks and still suffer through multiple failures.

The biggest problem is most of that cash came from iPhone revenue and if you remove that, Apple doesn't have much breathing room to take the same amount of risks.

Apple is currently placing a bid for Tosibia's memory business that could cost up to $30 billion dollars.

Truth is, this kind of money is already being "reinvested" by the treasury function. What isn't clear is what on Earth Apple could do that would cost that much money and generate Apple-like returns.

The obvious solution to this is to cut out the middle-man and just return a good chunk of the cash to shareholders. But that never happens because reasons.

Only if you know how. Burning cash in a bonfire won't do Apple good. Shareholders and the market in general would not approve of money-losing follies.

But I think if they really get serious about building cars, they can make good use of some of that money in order to quickly scale up. Where Tesla has to raise billion after billion to ensure they are not running dry, Apple could just use up reserves.

1998...2008...201...See the trend? Always have cash and assets on hand.

The 'financialization' of our society has turned a lot of companies that you still associate with producing goods or services into de facto investment and speculation firms.

The article implies that Apple would take too big of a tax hit by doing so, to the point where it's better to wait until the laws change to make it more profitable for Apple to do so.

I've read somewhere that this is somewhat unprecedented in the history of economics. Traditionally hoarding cash was frowned upon by investors and the stock prices of companies with large cash reserves traded at a discount. That negative discount by the stock market appears to have vanished but nobody is sure why. Maybe it's regarded as an insurance against technological disruptions. In such a case companies like Apple could quickly acquire new competitors.

>would it not be more useful to reinvest it

Or return it to shareholders via dividend or share buy-back.

Well, it is.

Most of this money is stored on things like multi billion factories manufacturing exclusively for Apple. For my company we went to some of them, and you get the impression of being on a huge manufacturing Catedral. Apple has a scale nobody in the world has, and I am used to see lots of factories, from cars' to refrigerators's manufacturing places.

If this money figures as cash it must be only for fiscal or "not telling your competitors how you do things" reasons, but this scale exerts an enormous pressure over suppliers.

There isn't a 'point' exactly. Typically companies hold cash or cash equivalents to write checks against when they are either expanding or buying material that will later be sold. So if you're a company building widgets you need parts for the widgets to build them before you have sold them to get the money. Some companies will use a line of credit for that, others will use cash.

An interesting comparison here is IBM. Like Apple, IBM's operations generated a huge amount of cash in the early days. Way more than they needed to run the business. As a result IBM bought real estate. They bought up large parcels near cities and transportation hubs and office buildings etc. In the Bay Area you can see their Almaden Research center, an example of some property they bought in the 60's. When IBM lost their way in the 90's and it was looking like they were toast, they survived by selling off a lot of that property and living off the proceeds. Apple could conceivably operate for 15 to 20[1] years off just their cash on hand.

That said, given today's market rates for cash (under 2% and sometimes even negative), almost anything that wasn't completely stupid would likely give them a better return. And that is something of a conundrum for economists who are wondering why all these companies are sitting on so much cash. It really depresses an economy when there isn't enough cash running around in it to operate it.

Then 'what should they invest in'? Is a solid question. I felt they should build a web crawler/search engine, dump the last dependencies on Google for their destiny. But clearly they are looking at self driving cars (see the story about getting a permit to test in California) they are developing CPUs (they could create an actual semiconductor subsidiary if they wanted). And then there is the challenge of 'where' the money is.

First and foremost a number of people would argue that the 'cash hoard' consists in no small amount of unpaid taxes, which is to say taxes that have been avoided through a variety of legal schemes from being paid to the governments of the territories where they do business. And that argument is bolstered by the fact that Apple doesn't move cash around in order to avoid taxes on it (the whole repatriation thing). On the one hand if the governments give up their claim on any taxes owed, then Apple is free to collect the money into the jurisdiction where it can be invested most profitably, on the other hand there are civil servants who would really like to get their hands one some of that cash[2].

Bottom line is that there isn't a point, but various conditions have made holding cash the default choice.

[1] Their cost to operate would go up as they were non-profitable but their headcount could go down if they weren't in product production.

[2] And in many cases the governments believe it to be 'owed' even if there is no legal statute that states that.