Companies' Cash Holdings: The Winners and Losers

Having too much cash is something of a luxury problem these days: the worst that can happen is that you find yourself subject to the occasional snarky column telling you to up your dividend. Meanwhile, the opportunities presented by having a large cash pile have never been greater. So I asked the friendly people at Gridstone Research to help me put together a list of the companies with the most cash. The very smart Sandeep Shroff came up with two spectacular spreadsheets: this one, which looks at net cash and cash flow from operations, and this one, giving the sector averages.

In case you're not an Excel jockey, however, I've broken out the highlights. Here's the top of the table, showing the companies with the most cash; it features most of the world's triple-A companies. Apple, the one company everybody associates with the phrase "cash-rich", is indeed high up the list; what's even more impressive is the amount by which its cash holdings increased over the past year -- almost $7 billion.

Ticker	Company	Net Cash ($millions)	Year-on-year increase
F	FordMotorCo.	41,801	1270
XOM	ExxonMobilCorp.	35,553	3436
CSCO	Cisco Systems Inc.	25,735	3469
MSFT	Microsoft Corp.	23,662	251
AAPL	Apple Computer Inc.	22,111	6725
GOOG	Google Inc.	15,846	1627
PFE	Pfizer, Inc.	14,411	(5239)
WYE	Wyeth	13,632	496
PC	Panasonic Corp.	11,773	443
INTC	Intel Corp.	11,741	(3480)
SNE	SonyCorp.	11,603	1415
TOT	TotalS.A.	11,057	9049
CVX	ChevronCorp.	10,151	3219
ORCL	Oracle Corp.	10,042	4380
JNJ	Johnson & Johnson	9,077	2225
ERIC	Ericsson	8,815	791
AMGN	Amgen Inc.	8,552	3401
BMY	Bristol-Myers Squibb	8,111	7777

Meanwhile, here's the bottom of the table:

CAT	Caterpillar, Inc.	(11,259)	(1781)
T	AT&T	(12,327)	(7437)
HMC	HondaMotorCo.Ltd.	(15,479)	(5876)
DAI	DaimlerChryslerAG	(24,296)	(13390)
NSANY	NissanMotorCo.Ltd.	(33,607)	3427
TM	ToyotaMotorCorp.	(39,268)	(9474)
GE	General Electric	(104,062)	30031

This possibly helps explain why General Electric stock has done so badly of late, and also why GE is not like all those other triple-A companies. But it doesn't shed much light on things like car companies: I don't think the fact that Ford has lots of cash and rising necessarily makes it a more solid automaker than Toyota, which has a negative cash position and falling.

But those cash-rich companies certainly have a very broad and attractive opportunity set facing them right now. They can return their cash to shareholders, in the form of buybacks or dividends; they can buy back their own debt at a discount; they can try to acquire a competitor, make fill-in acquisitions, or expand into a new area of business; they can up spending on R&D; they can expand headcount; or they can just continue to do what they've done until now, which is happily sit back on their cash pile and simply wait for the perfect opportunity to arise.

The one thing I'm sure of is that none of these companies are in any hurry to spend their cash. I'm sure they all have a steady stream of underemployed M&A bankers showing them ideas every week; they've got to be used to saying no by now.

On the other hand, there are risks to holding cash -- credit risks, counterparty risks, currency risks, and many other risks which a good CFO can try to minimize, but which never really go away. Maybe it really is better just to buy back your own debt, if you can do so at less than the price at which you issued it.

Comments

[Zoltan L. K...:]

The most important thing about cash is that it should keep coming in. As long as the reserves help enhance the chances of gemerating even more cash, they should be fine. The current crises generates lots of options for companies like Apple, with enough liquidity. These options might have a positive net value. This is how Berkshire got big.

Mar 24 04:29 AM

[Timeline St...:]

Apple did not always have this cash 'problem'. If one looks back at their 2005 cash position, it's interesting to note that they had only a little more cash then than they have managed to generate in FY 2008 alone.

What's the difference? iPhone! Not only is it a magnificent way to generate annual sales of 10+ million units at a revenue per unit level equal to the Mac Mini (iPhone subsidized price that carriers pay is $600+), but the subscription revenue model also means that the cash is recognized immediately while the revenue comes in slower.

In short, this line extension will so much increase Apple's cash position that it funds anything that they choose to do. Thus far, that has not been something as dramatic as a big acquisition or a share buyback. However, I would argue that using cash to make supply agreements such as what they entered into with LG, is a very good use for their cash. At a time when global demand is soft, their money can buy a preferential supply position that should theoretically ensure a years-long lead with new technology like OLED.

Furthermore, Apple wanted to play it somewhat safe with this cash position should there be a year-long and deep recession. Layoffs crush the culture at innovative companies, and should be avoided like the plague. The cash guarantees that layoffs don't need to happen. Leave those for Microsoft.

Finally, people seem to itch for Apple to spend its cash, but who shouldn't underestimate how difficult it is to pull off a successful acquisition. Even the best acquisitions are a years-long diversion for big portions of a business. The business world is littered with unsuccessful acquisitions, or acquisitions that could be considered modestly successful, but that had an opportunity cost that was too high. Apple has been wildly successful without big acquisitions. It's just not their style.

Mar 24 04:57 AM

[Zobby:]

I notice that you have Apple net cash at 23 billion.

Apple CFO Oppenheimer said during Q1 financial report on Jan 2009 said that Apple had over 28 billion in cash and no debt. The quarter before that Apple had over 25 billion.

venturebeat.com/2009/0.../

Am I reading the reading the financials wrong? Perhaps i am but I just wanted to point it out.

Mar 24 10:55 AM

[ArtfulDodger:]

In my view, it's still a time to buy cash and free cash flow and sell negative cash flow and debt.

There are a few claw marks on the wall at the bottom of the hole we're in, but we're not out of this one yet.

Thus, companies that still have positive real earnings and plenty of cash are better able to survive and potentially thrive.

Thanks for the heavy-on-cash report.

Mar 24 01:38 PM

[zagrebzagreb:]

Apple's comment that 'they have no debt', is a bit misleading...
Just take a few minutes in the notes sections of any of these 'zero debt' companies reports and you will find about $10 zillion owed to other businesses or organizations. They just call them something else, and then they get ignored.

Take for example lease agreements, which are not entered as debts.

But do you still owe money on something? Do you write a monthly check to use a piece of equipment, etc? Yes, of course you do.

So - yeah - technically no debt. Realistically? Not a chance.

Mar 24 04:43 PM