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Comment by microtherion | Hacker News Reader

I don't recall whether this was ever stated explicitly, but I always had the impression that this is one of the elements of Apple's strategy that is still driven by the tribal memory of the late 1990s turmoil. Both Steve Jobs and Tim Cook were there at the time, and especially the former (who also had witnessed a 1980s bust) was determined to never be in this position again.

So as a consequence:

* Apple is hoarding cash to an extent that business analysts dislike (although Tim has reduced this to some extent)

* Teams are being run leaner than they'd like to be (not nearly as much so as in the pre-iOS times, admittedly)

* Conversely, since the company builds good reserves and not too much bloat in good times, it can and will avoid overreacting to bad times.

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This is all true, but

> not nearly as much so as in the pre-iOS times, admittedly

deserves better than a parenthetical. Zoom out, and Apple's been on a serious hiring binge for the last decade, from 72,800 employees in 2012 to 164,000 in 2022.

(Both numbers include retail; in 2012, 58% were retail, and they don't seem to break it down anymore in 2022.)

The market cap has grown by ~10x in that time and the number of products that the company makes/maintains has also increased a lot in that time (both number of products and total unit volume). Doubling the staff does not seem unreasonable given the obvious increase business.

So their staffing has increased by a factor of about 2.25 while their revenue has increased by a factor of 2.5 - doesn’t sound so much like a binge as the company steadily scaling up.

On the other hand, Facebook went from about 4,000 employees to over 70,000 in the same time period, so given how much Apple's business has grown in the last decade (when they released the iPhone 5) it seems pretty impressive that they grew only ~2x.

How many are retail employees? I’ve seen 3 Apple stores open in my large city alone and we already had 3.

The pile of cash just reminds me of Carl Icahn and others. It's "fortunate" that Apple is so highly valued that a corporate raider can't purchase a controlling interest and pay out to investors.

[1] https://en.wikipedia.org/wiki/Asset_stripping

Carl Icahn has actually been a quite prominent investor in apple at times and has been quite vocal about what apple does below the line.

So essentially the basics of building any resilient system. Sad that our market economy punishes this approach in the general case.

Punishes? Apple is the most highly valued company of all.

They’re also an outlier and a lot of what they do would be judged more harshly by analysts and activist shareholders if they weren’t so profitable. The question should be how we get more companies like Apple.

I wouldn’t want to invest my money, my retirement funds in companies that don’t strive to be highly profitable. Do you?

The answer to that depends on the timeframe and your risk tolerance: a lot of cryptocurrency people said FTX was profitable, too, right up until it wasn't. When you're talking about retirement funds, the timeframe is long enough that you have to think about how stable something is and whether the profits you're seeing will continue. There isn't a recipe for “highly profitable” and you need to consider both the quality of the leadership and whether they share the same goals you have: there are many companies which were bought by a private equity firm who “improved efficiency” by slashing costs and milking the existing customers for as much revenue as possible. If you're the PE guy who cashes out early in that process, this is highly profitable. If you're the retail investor with some shares in your retirement account, you likely had the opposite experience.

Of course you need to take other things into account as well besides current profitability, such as your trust in management’s ability to steer, for long term product/service foothold, etc.

I was juts making the point that all else being equal, you wouldn’t invest in a company that doesn’t try to make handsome profit, which was the suggestion. And Apple makes handsome profit, and then some.

Right, and they are absolutely an exception.

The general expectation for any company is to milk the daylights out of every quarter they can. Either put your money back into growth or hand it back to investors - cash reserves bad even though they obviously allow you to weather things (like we’re discussing here).

Apple is a real company. Amazon, Twitter, even Microsoft to some extent are not.

Apple makes things. The software side works with it, but it's a hardware company. They aren't entirely dependent on conjuring up value out of thin air, they have supply chains and manufacturing and whatnot.

Even Amazon, which deals with physical objects, doesn't really make anything.

I get what you’re saying, but I think what you’re describing as the “realness” of a company is just the sustainability of its competitive advantage. Which is a good metric to understand their long term financial position and susceptibility to market changes and layoffs. Others are pointing out that yes MS and Amazon make physical things, but we all know those aren’t their core business - that’s beside the point.

Tech companies are largely “interface” providers - they simplify the interface between a human and some other thing. Twitter simplifies the interface between one human and all other humans on Twitter. Microsoft enhances the interface between one human and other humans within a company. Amazon simplifies the interface between humans and retail goods, and AWS simplifies the interface between humans and scalable compute and storage.

Apple simplifies the interface between humans and personal compute, which is the entry point to all of the above (although the relationship with Microsoft is obviously more complex than that). So Apple is just further up the tech value chain, where transient effects are softened and delayed, and where competitive advantage is less easily displaced. Twitter is really only protected by network effects. Microsoft is protected by lots of UI/UX implementation moat and strong vendor lock in. Amazon is protected by others’ ability to scale physical logistics, AWS by backend and interface development and also lock-in. Apple is protected by all of the above plus hardware engineering, and the hardware is an especially difficult one to catch up with or copy.

I believe you are undervaluing the demand for cloud, e.g. AWS and azure. Companies that "make things" use these services extensively. AWS and Azure are the quintessential shovels during the gold rush.

But even by your flawed definition of "making things" Amazon counts, because of Kuiper, Fire Devices, and Echo alone.

I would grant that Amazon's Graviton is an actual thing, but that's pretty new. I would put the Fire and Echo devices in the same bin as their branded USB cables, i.e. "we put our logo on some stuff out of Shenzen."

I get that AWS services are a real thing made possible by other real things, but it's also essentially a branded software layer on top of a lot of open source stuff. Over-simplification, sure, but there are enough third-party services that ape enough of the AWS API that I think of it more like a Dell than an Apple.

Maybe I am missing a point, but both Amazon and Microsoft have devices that they manufacture and distribute. While they may not be profitable at the price they are sold they provide value to customers that isn't conjured from air. Additionally they also sell access to data services, while the data may not by physical, the data centers are physical objects that are designed and built by both AWS and Microsoft.

> Even Amazon, which deals with physical objects, doesn't really make anything.

Echo, Kindle, Blink and Fire TV product lines would beg to disagree.

And there's presumably some amount of liasing/branding/QA/etc. that goes on with suppliers of AmazonBasics, Amazon Commercial, and other house lines.

And anyway surely warehousing & distribution is just as much a 'real' (=traditional? physical?) company activity as running a factory?

By that logic Amazon is a vastly superior company because they make more products than Apple. Amazon makes its own hardware and products: Alexa, Kindle, Ring, etc. They have ground and air fleets. Amazon holds majority marketshare with online web services...

I don't think this 'real' sentiment is best used to describe Amazon.

I had a moment of enstartlement (note to auto-correct: I made up the word, okay?) the other day. I get a lot of vintage/retro computing videos in my YouTube feed — I realized how odd it was that Apple was one of the few (only?) 8-bit computer companies still around. And around in an impossible-to-ignore kind of way.

But only just barely missed going under back in the late 1990's.

What a strange timeline.

It is ridiculous to say that you’re not a real company if you don’t make physical things.

I can’t imagine you seriously believe that.

Why does apple hoard cash instead of buy back their stock? 5 years ago they had 90 billion cash in hand. If they put that into their stock then, It would be up at least 260% by now even with the losses last year, then if they need cash they could just take a loan against the stock.

Looks like they spent a lot more than that on buybacks in the past decade:

> Since 2012, Apple has been buying back its own shares at an extraordinary rate -- Apple is known for spending more on share repurchases than similar tech giants like Meta or Alphabet. Apple's total share repurchases have totaled $274.5 billion, with just $20.4 billion in the December quarter.

> Apple spent $85.5 billion to repurchase shares in 2021, and issued $14.5 billion in dividends.

https://appleinsider.com/articles/22/04/28/apple-extends-sha...

Apple's buyback program probably has no equal, it's a sight to behold which demonstrates the power of sustained share repurchases. Sure, there are the Teledyne stories, but to do it at this scale is something else.

https://www.macrotrends.net/stocks/charts/AAPL/apple/shares-...

Agreed, but that chart is misleading: the number at the bottom should be 0, not 14.

The reduction in outstanding shares is from 26.5 to 16, which is still impressive, but perhaps less than the chart might make you believe at first sight.

Well yes you have to read the axis, it's not any less impressive that a >$2T company shrunk outstanding shares by 40% this late in it's history.

They actually have done massive stock buybacks. The company is just an incredible money printer.

As is often said, 'Toyota volume with Ferrari margins'.

Setting aside the fact (pointed out by several siblings) that they do buy back stock...

Why should they? Who does it benefit? Not their customers. Not their products. Not their future prospects. Not their employees, for the most part.

...Oh, the shareholders? You mean they should throw massive amounts of money—their hedge against future problems—into enriching people who are, for the most part, already vastly wealthy?

I'm not super enthusiastic about stock buybacks, but to my knowledge, pretty much 100% of Apple employees are eligible for the discounted Employee Stock Purchase Program (which is a no-lose proposition, if you can afford to defer part of your salary for 6 months), and at least in some years, all Apple employees got some outright stock grants, so the interests of "employees" and "shareholders" may be more aligned than you make them out to me.

What else should they do with it? Just hold it so that they can hedge against future problems? How much do they need for a hedge? 1 year of expenses? 2 years? 5 years?

What should they do once they reach your hedge number? Just keep hoarding?

What do you do with your salary? Do you just put it in your bank account or do you invest it? If I’m Apple, do I really want to become a company with an investment arm? If I’m an Apple shareholder, do I really want Apple buying a broad market index fund and then paying corporate taxes on that and then spitting off dividends to me rather than just giving me the opportunity to invest in a broad market fund myself?

Thank you for saying this.

Massive stock buyback programs are a symptom of and contributor to a disconnected market.

> then if they need cash they could just take a loan against the stock.

When companies buy back stock, they typically cancel it. That's why the price goes up so much of the remaining stock held by shareholders.

So they wouldn't be able to "just take a loan against the stock". It no longer existed. All they'd be able to do is to ask ask their investers for more money.

are they earning 4% on their cash?

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