tribbda's  Instablog

I consider myself a pretty hip guy. Well, at least technologically. I stream video via Netflix. I have wireless network at home. I have DirecTV in 6 rooms. I have 2 Sirius/XM satellite radios. And, most importantly, I have an iPhone. The latter should put me in the techno-hipster class alone. 

Yet, I am still a little bit of a curmudgeon when it comes to my iPhone. I hate the camera and still carry around a point and shoot when on vacation. And I have yet to sync a single song to my iPhone. Don’t get me wrong, I love music. I just haven’t embraced the idea of having ear buds in my skull every waking moment. I listen in my car or at home but never at the gym, walking about, or at work. Aside from my listening habits, I just don’t want to futz around with playlists, ripping, or downloading. And ear buds suck. They’re uncomfortable and I haven’t found any that reproduce sound quality as well as some big honkin’ woofer.

However, I love my iPhone. Maybe I just love smartphones in general, but I do not plan to stray away from the iPhone anytime soon. This makes me wonder why I have to pay up for all that expensive flash memory in my iPhone when I barely use any of it. I also think that I’m probably not the only person that holds this belief. 

I have heard on many occasions from other techno-grumpypants that they “just want a phone” to carry around. “I don’t use all of that crap” is what they often say. They haven’t embraced the smart phone revolution yet. But, they will. Once they get email on the fly, look at the local radar, use the GPS, or pull up some sports scores in real time, they’ll be hooked. They, like me, just want a phone but will like the idea of data connectivity. I posit the following theory: voice and data is the killer app combo of the smart phone revolution. 

Apple began this venture with the iPod. They added telephony since people were tired of “carrying around all this crap” and wanted hardware convergence. Apple recognized this and now they are the powerhouse of the industry. However, given the path that led them to this point, they still hold on to the belief that we all want iPods. We don’t. And we don’t want to pay for it.

I see an opportunity for Apple to fill a niche and further open up their products to an untapped market. They should build a cheaper smart phone that fits the “I just want a phone” set and doesn’t cost as much as the flash-memory-laden iPhone of today. Here me out on this. Cut out a bunch of the memory and camera components and replace it with a larger battery using the same size/shape footprint as the current phones. This will reduce the cost per unit and create an iPhone Lite or Nano or whatever that meets the needs of the cheapskate curmudgeons of the world. The phone could still use many of the same components, software, cases, etc. and would need to be charged as often. It might actually function for 48 hours without needing a charge. WOW! Remember those days? Sorry, my inner gumpy old man just surfaced.

Filling this niche with a stripped down product has one other benefit. Can you say China Mobile? A lower cost option would open the door to hundreds of millions of smart phone wannabes, emerging market customers, and pre-paid customers in today’s market place.   I’ll make you a deal, Steve, give me an iPhone Nano and I promise to not wear black socks with khaki shorts when I mow the lawn.

  

Apple recently released their quarterly earnings to much fanfare as they, once again, blew away the estimates pushing the stock price to almost $400/share. But, what happened with all of these millions and billions of dollars that the company is raking in quarter after quarter? They are basically stuffing it under Steve Jobs mattress.

The company has a market cap of almost 358 billion dollars as of this writing. That makes it the second largest company in the world behind Exxon Mobile. Included in this 358 billion figure is the enormous pile of cash that Apple has in its bank account: 76 Billion dollars. I’ll say it again only this time with my pinky finger tucked into the corner of my mouth using my best Dr. Evil voice, SEVENTY-SIX BILLION DOLLARS! Bwahahahah! 

So what is Apple to do with this money? So far, it’s just sitting there, collecting dust in Steve back yard. I hear he keeps it there in banded stacks of 100 dollar bills. He’s actually stacked them like bricks and formed them into a guest quarters. Is Apple buying back stock? No. Are they increasing their dividend? Oh, that’s right, they don’t even pay a dividend. So, then, they must be saving it to buy up other companies. After all, they've got to use that money for something. 

So, given the notion that Apple will use the money for strategic acquisition, I’ve been looking at the market caps of other companies that they could purchase with the extra cash on hand. I repeat, EXTRA CASH on hand.

They could start by protecting that pile of $100’s in Steve's back yard by purchasing Honeywell and Brinks. That would leave them with about 30 billion left over to put in the brinks trucks. Or maybe they would want to go another route and just use the money to become a bank. They could purchase Goldman Sachs with their extra cash. Repeat after me, EXTRA CASH!

But maybe Steve would like some help buying the money-house, guest quarters in his back yard. He could open his wallet, pull out his 76 billion and purchase Home Depot. 

Or possibly, he wants to have Tim Cook over for coffee and a snack to discuss the next generation iPhone. What? Steve forgot to go shopping and the cupboard is bare? He could just buy Starbucks, Heinz, and Fed Ex to have them overnight over some Bagel Bites and a latte. Yes, 76 billion will buy all three companies. 

In fact, 76 billion could buy any of the combinations of companies below assuming you just paid the market cap and no premium:

Of course, if you are going on a shopping spree, why not buy tech companies that might provide synergies or remove competition? With 76 billion, Apple could buy Motorola, Sprint, Netflix, RIMM, and DISH network simultaneously and have enough left over to pay for parking.

 

How about vertical integration? Buy your supply chain! They could buy ARM Holdings and Samsung. If they waited another month, they could probably also bank enough jack to throw in Micron and Skyworks too!

 

Well, I guess you get my point. That being, Apple is sitting on crapload of cash and there is more rolling in everyday.  Nobody knows what they plan to do with it. We can only dream. Ah, the dreams! I love to shop and shopping like Steve Jobs would be my ultimate dream. Well, almost my ultimate dream. There is one recurring dream that I have that tops that one. Maybe you’ve had it too. It’s the one where earnings are released and at the conference call Tim Cook announces that Apple is instituting a dividend.