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What Apple Could Do with $40 Billion

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After every quarterly earnings call, when Apple reveals just how much cash the company has on hand, that number continues to climb. At the end of Apple’s first fiscal quarter of 2010 in January, the company reported $39.8 billion in cash and securities, an increase of $5.8 billion over the previous quarter (see “Apple Reports Record Sales and Profits for Q1 2010,” 25 January 2010). By now, it seems entirely likely that Apple has surpassed $40 billion, which is an astonishing amount of money.

So what could Apple buy with $40 billion? For the moment, the company seems content to sit on the cash, using it as security against a downturn and to pick up the occasional small company for a few hundred million dollars. Commentators have suggested that Apple could buy Sony or Adobe, but that’s silly – Apple wants to make Apple products, not the kinds of things that Adobe and Sony make. Similarly, Apple could buy a content company or a cellular carrier, but why bother when Apple can play them off against one another for lower prices?

If we’re going to contemplate silly things Apple could do with its $40 billion in cash, our thinking shouldn’t be so constrained. Here then, are our top seven ideas for how Apple could spend its money.

Design the Mac’s Next CPU — Apple is happy to let commodity suppliers gouge each other for market share, but Steve Jobs doesn’t like being beholden to any one company, Intel included. AMD’s chips are a possibility, but our bet is that Apple could take the lessons it learned from designing the iPad’s A4 processor and make the Mac’s next CPU. An article in the New York Times claims that it can cost as much as $1 billion to create the CPU for a smartphone from scratch, so let’s assume that a CPU for the Mac would be a few more billion dollars. It would still be cheap at twice the price if it means Apple can set its own processor future independent of Intel.

Build More Data Centers — Although Apple has been happy to rely on content delivery networks like Akamai and Limelight Networks, the company clearly wants to control its own data centers as well, presumably in a push into more cloud computing services. According to an article in Data Center Knowledge, Apple’s in-progress data center in North Carolina will cost a cool $1 billion, but you have to assume that Apple would want data centers distributed throughout the world to keep performance of future cloud-based services high. Some of that $40 billion is undoubtedly marked for more data centers in Europe,
Asia, and elsewhere.

Create the iCar — You wanted the iPod, you lusted after the iPhone, and you’re waiting on tenterhooks for the iPad. But all of that would pale before the iCar. Wired claimed in 2002 that it costs a major car company nearly a billion dollars to bring a car to market, and prices have skyrocketed since then, but Apple has more than enough cash to buy the engineering and design talent necessary to bring the company’s legendary attention to detail to the automotive world. GM’s AUTOnomy fuel-cell car hasn’t yet appeared in 2010, as predicted in that 2002 Wired article, but the company is on the ropes, whereas Apple is flying high and
isn’t afraid to ignore conventional wisdom to do it right. Please?

Buy Dell — If buying Sony doesn’t make sense, why would Apple buy Dell? Remember back in 1997 when Michael Dell said what he’d do to fix Apple? “What would I do? I’d shut it down and give the money back to the shareholders.” Dell’s market cap is only about $29 billion, so Apple could buy Dell, shut it down, and still have $11 billion left to play with. Do you think Steve Jobs holds a grudge?

Aesthetic Improvement — Steve Jobs has long believed in creating working environments that encourage creativity, and what could encourage more creativity than the world’s most expensive paintings? Convincing their current owners to part with them might require turning up the Reality Distortion Field, but for a mere $3 billion, Apple could decorate its campus (which already boasts impressive security) with Pollack, de Kooning, Klimt, van Gogh, Renoir, Picasso, and more.

Bigger than Bill Gates — The Apple/Microsoft competition is the rivalry between Steve Jobs and Bill Gates writ large. But Gates changed the game by resigning his CEO post at Microsoft to spend more time on the Bill & Melinda Gates Foundation’s charitable work. Apple’s market cap has nearly equalled Microsoft’s; will Steve Jobs retain his desire to create new and better iProducts once Apple passes Microsoft? If not, Apple could change the world with a $40 billion investment in the Steve Jobs Foundation, giving it an endowment that’s some $6 billion larger than the Bill & Melinda Gates Foundation’s $33.5 billion endowment. And
just imagine what the world would be like with those two competing to outdo one another in philanthropic works!

Half of a Private Island — A basic tenet of business is to sell high and buy low, and nothing is lower than Haiti right now following its devastating earthquake. The country has requested $11.5 billion to rebuild the country’s infrastructure, which is well within Apple’s budget. But Apple wouldn’t just rebuild Haiti out of the kindness of Steve’s heart; Haiti could become the world’s largest company town, enabling Apple to pull out of awkward Chinese manufacturing contracts. Sure, Apple would have to build a chip fab ($3 billion) and some manufacturing plants (a few more billion, undoubtedly), but labor will be cheap for some time to come. Heck, for another $1.5 billion, Apple could build a world-class sports stadium, and although it might not be a good idea in an earthquake zone, a contender for the world’s tallest skyscraper in Port-au-Prince would cost only another $2 billion.

Space, the Final Frontier — A Space Shuttle costs about $1.7 billion to build, and although the costs of building the International Space Station have been much higher than Apple could have covered so far (making it perhaps the most expensive object ever constructed), it’s possible the partner countries would be happy to unload it for $20 or $30 billion. Why would Apple spend so much? Steve Jobs has gone to extensive lengths to procure a liver transplant; what if a zero-gravity environment were to prove necessary to maintain the prescient CEO’s health
through another round or two of technology paradigm shifts? Sure, it sounds nuts, but with 900 million shares of Apple stock in circulation, avoiding even a small drop in stock price could justify a massive expense to keep Jobs, well, on the job.

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