Here’s What Apple Inc. (AAPL) Should Do With All Its Cash

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There’s plenty of speculation regarding what Apple Inc. (NASDAQ:AAPL) will do with a cash stash of about $255 billion. Of course, the first problem is Apple actually being able to do something with the cash domestically.

Here's What Apple Inc. (AAPL) Should Do With All Its Cash

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As it is, most of it is lodged overseas. Apple doesn’t want to repatriate it and get hit with a 35% corporate tax.

Should Congress offer a repatriation holiday or lower corporate taxes to 15%, then you can bet Apple will rush that money back into the country.

What If Trump’s Repatriation Tax Break Happens?

So let’s assume for the moment that this occurs, and AAPL stock ends up wit about $220 billion of cash on hand. Many people think AAPL stock could attract a whole new group of investors by increasing its dividend. It’s not a bad idea at all, since Apple’s yield is pretty darn low.

To get it to where it truly attracts fixed income investors, however, it would have to push that yield up toward 4%. That’s not insanely expensive as a proposition. It would cost about $17 billion annually. That’s doable.

I don’t like the idea of a stock buyback at current levels, though. If AAPL stock were back near $100, that would be a different story. AAPL stock debt isn’t terribly expensive, so paying that off seems like a poor use of cash.

That leaves acquisitions. I think, given the present environment, that Apple is in the catbird seat. It could go on an acquisition binge and gobble up anything that has the potential to become a blockbuster business, much in the way Amazon.com, Inc. (NASDAQ:AMZN) has been buying and incubating its own set of businesses.

Now, I’m not a tech guy, so I couldn’t tell you possible targets in that area. What Apple needs is to get its product into more hands, so anything from a tech standpoint that enhances a product to make it indispensible would be something I approve of.

More than anything, however, I think the play for Apple to make is in content. Here’s a snippet of what I wrote about Microsoft Corporation (NASDAQ:MSFT) in regards to its 52 million Xbox Live consumers:

“What I’m seeing out here in Los Angeles is frustration with the VR content that is being produced, while immersive theater is doing some wild and wonderful things. There is enormous potential for immersive theater to influence VR, and when combined with gaming elements, for gaming to take on an entirely new dimension.”

There is tremendous potential for Apple to integrate all forms of content and distribution into existing products, and make new ones.

In discussing VR and immersive content with numerous creators out here (of which I am one), the potential isn’t just truly immersive gaming, but immersive movie experiences, immersive dramatic VR worlds and the ability to use VR for all kinds of training.

Creating VR content that trains people in the field of medicine, military, aerospace, defense, engineering … anything and everything can work. Imagine learning to become an auto mechanic through VR content.

Apple could become a leader in the medical device field, for all we know. But the starting point for all of this is content.

Does that mean Walt Disney Co (NYSE:DIS)? Perhaps. DIS is a $166 billion company that would never be let go for less than $200 billion. AAPL could buy it for cash outright, or via cash and stock, and probably not need to take on more debt.

Certainly the opportunity to scoop up a vertically integrated content company with global reach and solid fundamentals is a nice place to start.

However, Apple could just as easily explode onto the content scene by creating its own studio and dropping $15 billion into it. VR and associated content production is in its infancy and AAPL could probably develop it all itself. So I don’t see this as a likely tie-up.

Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance. As of this writing, he owns DIS. He has 22 years’ experience in the stock market, and has written more than 1,600 articles on investing. He also is the Manager of the forthcoming Liberty Portfolio. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.


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