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FORREST GUMP
POSTED BY EIZ ON THURSDAY, 19 JANUARY, 2012, 7:14 AM
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THE best movie share tip was in Forrest Gump - where Tom Hanks' character invested in Apple,
which he described as ''some fruit company''. And the guileless Gump might be puzzled about the
company today. After you take over the world, after you hold ...
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FORREST GUMP
POSTED BY EIZ ON THURSDAY, 19 JANUARY, 2012, 7:14 AM
And the guileless Gump might be puzzled
about the company today. After you take
over the world, after you hold all the
money, then what?
This week Apple announced yet another
record profit, numbers so large as to
become rather meaningless: gross
revenue of $US46 billion ($A43.3 billion),
cashflow of $US17.5 billion, a net profit of
$US13.6 billion, more than double last
year's result. And these figures are just for
the December quarter, a mere three
month's worth of i-gadgets.
Apple's profit margin was 28 per cent - what Ken Henry would describe as a ''super profit'' and
therefore deserving of an extra tax, not that the financially strained American government is capable
of thinking along those lines. What's even more astounding is that Apple is sitting on cash
reserves of $US97.6 billion. With sales for this quarter conservatively forecast to be $US32.5
billion, the spare change will tip it over the neat $US100 billion mark well before March 31.
The thing is that Apple is typical of a class of (mainly) American companies that aren't interested in
old-fashioned capitalism in the sense of investing money, making a profit, reinvesting some in the
business and rewarding investors with the rest via dividends. Apple pays no dividend at all, the
profits just keep going under the corporate mattress, mainly outside the US, building up those
massive reserves - for what? Are they going to buy a country somewhere?
The possibility of Apple paying dividends has generated speculation for years, but it's yet to
happen. The CFO, Peter Oppenheimer, last week only said the company was ''actively discussing''
how to use its mountain of cash, uses which ''could'' include supply chain investments,
acquisitions or ''other investments''.
Like Microsoft and others before it, Apple's growth will eventually bring anti-trust restraints, limiting
its ability to use the cash for major takeovers. (And mentioning Microsoft, the company now pays a
little dividend but still has reserves of around $US60 billion after reporting a $US6.6 billion
December quarter profit on sales of $US20.9 billion - a 32 per cent profit margin, even better than
Apple's.)