Apple Inc and its Wonderful Cash Problem (NASDAQ:AAPL)

What to do with all that money?  Apple Inc. (NASDAQ:AAPL) cash and investments rose to about $42 billion as of March 31, nearly three-quarters of the tech company's total assets.

In six months' time that figure could approach $50 billion, given Barclays Capital analyst Ben Reitzes's estimate that Apple will generate $14.6 billion in free cash flow this fiscal year.

Cash rules everything around Steve Jobs, CREASJ, dollar, dollar bill y'all.

(WSJ.com) As a banker, though, Apple Chief Executive Steve Jobs is no James Dimon. Invested heavily in government and corporate securities and commercial paper, based on past disclosures, the money earned an average yield of 0.75% in the December quarter. Apple hasn't disclosed the March-quarter yield.

And yet Apple doesn't appear to have any particular plans for the money. Chief Financial Officer Peter Oppenheimer said Tuesday the "investment priority for the cash continues to be preservation of capital." Admittedly, tech companies focused on growth usually keep plenty of cash on their balance sheets. Mr. Jobs can be forgiven for being extra cautious, given the financial travails Apple endured before he returned in 1997.

But Apple can't justify this degree of hoarding. While it buys businesses occasionally, they tend to be small. What's more, the company's capital-expenditure needs and research-and-development costs are easily covered with cash generated by the business.

Of course, once the Fed starts to raise rates, Apple's cash will generate a better return. But investors don't buy Apple as a play on monetary policy. Mr. Jobs should either use a big chunk of the money or return it to shareholders.

SOURCE:  http://online.wsj.com/article/SB2000142405274870413380457519835064405568...