The history is that apple had a crazy cash position partly because of the need to keep cash overseas to avoid tax on repatriation. What they did was borrow against that overseas cash to get US based on dollars.

Cash neutral doesn't relate to growth, if you grew you'd need to increase cash to cover working capital needs generally (ie, Apple first has to pay for parts, inventory, factories, staff for them etc before it gets revenue from sales).

Excess cash above this - it can be argued is not useful for apple to hold. Ie, investors can earn as much on cash as apple AND might want to invest it in things that theoretically could earn more - especially now with low interest rates. They can get to cash neutral a couple of ways. Because gross net income is going down, share buybacks one option - they've already been doing lots of that. Dividends is another. Pushing a bit on R&D might be another. No rush on that change.

Not only is excess cash not very useful, I'd argue that it can be actively harmful, as it makes the company a target for a leveraged buyout.

Though maybe this does not apply to Apple, as a potential buyout would have to be about 30x as large as the largest leveraged buyout in history.

What is impressive in some ways is their spending discipline with this mountain of cash. Many business have tried to buy their way to growth with horrible results in my view.

Yeah, lots of cash leaves you vulnerable to greenmail, but when you have the most cash, you’re probably ok.

Well, they should have repatriated it. The only reason they're not is because they're hoping to get a one-time tax cut from a Republican administration, and with the amount of money involved it was worth it to wait out Obama, who wouldn't have any of it.

The way they handled it was to borrow funds using the cash as collateral.

They could put $1B in Bank X, then would borrow $1B from Bank X, using their cash in Bank X as security. If you squint it might almost look like they were borrowing their own money :).

I'm not that onto the details here so this might be totally wrong - but I didn't wonder why Apple had so much debt one time and this is what I think I was looking at.

One risk if they didn't repay and the bank took collateral would be that they would then have had to pay the taxes (it would have counted as a repatriation). They must have thought the risk was reasonably low.

As the owner of a company (a shareholder) it is desirable because if your company isn't in the business of capital allocation then excess cash accumulation is reducing their ROE and your ROI.

And yes, the company still has to grow. But as a company executive you are viewing existing and new business opportunities through their net present value. If you don't have business opportunities that meet the thresholds you have in place for a project, then extra cash serves no purpose.

This ignores a whole bunch of complicated other stuff (stress testing capital requirements and what sort of balance sheet has great enough margins of safey, long term capital allocation given market dislocations, etc). But that's why being net neutral on cash is in general a good thing.

Why do you say the company has to grow?

At a least keep up with inflation in order to have future value?

I'm almost didn't write this because I didn't want to deal with the "why do we have to grow" responses.

If you are a single proprietorship then go nuts. Do what you want. If you take investor money you are an investment, and you are legally obligated (at top levels, via fiduciary obligations) to operate things to generate return. That's also why you have other corporate structures like B/public interest corps, mutuals, credit unions out there that don't obligate growth.

Apple has to grow because it's public Delaware C corp. Or they have to return cash so owners can invest it elsewhere. Or the owners will fire the executives, or shareholder groups might vote for takeovers that offer greater returns. I'm not defending it, but explaining it.

> Or the owners will fire the executives, or shareholder groups might vote for takeovers that offer greater returns.

It's worth emphasizing this point because it's a common misconception. Companies don't have a legal obligation to grow - they have a legal obligation to do what their investors want. But being publicly traded virtually gaurentees that your company is owned by people who want it grow or will be owned by people who want it to grow.

strictly speaking, a company doesn't have to grow (no, there's no law nor even fiduciary duty to grow), but it's certainly incentivized as such, because valuations are most sensitive to growth rate.

They have to provide a risk-weighted return similar to the current average stock, otherwise they should be revalued to the point at which they would provide that.

Perhaps it’s the P/E ratio in valuation. If a company isn’t growing the premium portion of its stock price reduces and the stock price drops.

TLDR; stock price includes a portion reflecting increased future growth

This is the real reason why CEOs are on a never-ending quest to grow even if it's detrimental. They are measured and compensated on share price. And share price is mostly driven by growth prospects. This is the real reason why Apple needs things like 3 camera lenses (just like Gillette needs 3 blades) and thin isn't thin enough. If you're a private company, you can do things like Hacker News and Craigslist where you don't change for the sake of change.

EDIT: to show the impact of growth prospects: Right now, Apple's P/E ratio is 20x with share price of $243. But in 2016, P/E was 11x with share price of $100. That is a 143% increase. If you look at revenues, 2019:$259B compared to 2016:$216B - which is only a 20% increase. Look at the article[0] from 2016, it says stuff like:

Apple shares are tanking this week because of a report in Japan's Nikkei newspaper that Apple plans to slash its output of iPhone 6S and iPhone 6S Plus by 30%.

That comes on the heels of an Accenture report warning that demand for smartphones is waning. People don't believe the newer models are all that much better than what they currently have, so they don't want to pay for an upgrade.

[0] https://money.cnn.com/2016/01/08/investing/apple-stock-100/i...

One benefit is that people will stop writing dumb posts about what companies you should buy

The advantage has been explained well by the sibling comments. They are not promising such a big dividend that they can’t invest cash into increased operations and R&D.

A company that is primarily valued for its dividend is one that has promised such a big dividend that it risks cutting the dividend when it has to grow or fix problems (like GE.) Maestri is not going to let that happen, which is why they are approaching net cash zero carefully over time and majorly using buybacks, which do not set the same expectation for investors as dividends.

They have cash that they don’t use neither for operations nor for investments. It is inefficient. Reaching net cash neutral position would mean that all assets are used in the most productive way.