Apple Now Debt Free, Says Internal Memo

An anonymous reader writes "99mac.se publishes an internal memo from Steve Jobs to Apple employees today. According to the Memo, Jobs states that "Today is a historic day of sorts for our company." Apple used $300 million in cash to pay off the rest of their debt, and is now a debt-free company. A big turnaround from over $1 billion in debt in mid-1997. Also noted in the memo is that Apple has $4.8 billion in the bank at this time." (Since this is not coming straight from Apple, confirmation -- or debunking -- would be helpful.)

Comments

want confirmation?

[Anonymous Coward]

when's their next SEC filing deadline?

Re:want confirmation?

[mal3]

I doubt it's true. That bastard Jobs still owes me $5 from high school.

Re:want confirmation?

[phil reed]

From their latest 10-Q statement, dated Feb 10, 2004:

Debt

The Company currently has debt outstanding in the form of $300 million of aggregate principal amount 6.5% unsecured notes that were originally issued in 1994. The notes, which pay interest semiannually, were sold at 99.925% of par, for an effective yield to maturity of 6.51%. The notes, along with approximately $1.5 million of unamortized deferred gains on closed interest rate swaps, are due in February of 2004 and therefore have been classified as current debt as of December 27, 2003. The Company currently anticipates utilizing its existing cash balances to settle these notes when due.

Since they've got way more than $300 million in the bank, they would be able to cover these notes in cash, which is apparently what they did.

Re:want confirmation?

[sam1am]

And just in time for Fred Anderson's Retirement from the position of Apple's CFO on June 1.

HUMANS do it better

Re:want confirmation?

[IanBevan]

Am I the only person here that has absolutely no idea what any of that means ? It kind of lost me after '$300 million...'.

Re:want confirmation?

[glitch!]

I doubt it's true. That bastard Jobs still owes me $5 from high school.
Dude, Lemonade Stand was just a game. A game :-) (Even if you did discover that you could raise the price to $1 million on a hot day and still sell one...)

Re:want confirmation?

[Gogo Dodo]

Lets see if I can translate that...

Apple sold debt in 1994 that was due in February 2004 (10 year debt). For examples sake (and easy math), Apple said to bond holders: "Loan me $100,000 and I'll pay you 6.5% interest. On February 2004, I'll pay you back $100,000. However, instead of giving me $100,000, I'll let you give me $99,925 today (99.925% of par), but still give you back $100,000 in February 2004." The bond holder make the 6.5% interest and an extra $75. The "effective yield" is that 6.5% plus the $75.

The interest rate swaps are a little harder to explain. Essentially, Apple is covering themselves in case of large interest rate swings.

If you would like to read up on bond things, you might want to look at the Bond Market Association Publication list. Click the PDF links. The prices listed are for if you want a hard copy.

Re:want confirmation?

[BlaisePascal]

Sure.

A very common way of borrowing money in the corporate setting is by selling promissory notes ("notes"), or loan contracts. Like private loans, every note has associated with it a principle amount (how much was borrowed), an interest rate (how much extra the lender gets per annum for lending the money), and sometimes a security (what the lender gets if the borrower fails to live up to the terms of the notes).

Most notes are standardized in their particulars: The principle is usually $1000, the payment plan is usually interest payed quarterly or semiannually and the principle payed off in full at the end of a pre-defined period. The only variables of import are the length of the loan and the interest rate.

In this case, the notes in question have a lifetime of 10 years, and pay 6.50% interest semiannually. If you owned one of these notes you would get two checks a year of $32.50 each until now, when you would get a check for $1000. If you had bought it when originally sold by Apple, you would have paid $999.25 for it instead of $1000.

So what Apple is saying is that there were $300Mil of these notes (or 300,000 of them) still outstanding in February, and they planned to pay them off with cash on hand.

Re:want confirmation?

[Aqua OS X]

Jobs probably used that $5 to buy his first black T-shirt at Mervyn's in 1972.

Re:want confirmation?

[Greedo]

Math lesson:

prime = 4% = 4/100 = 0.04 ... which is < 1

But thanks for the links to the historical data.

Re:want confirmation?

[Moofie]

Nonsense! I happen to know that you had to be able to spell "Internet" in order to get the VC millions.

Silly monkey.

Re:want confirmation?

[glitch!]

You played Lemonade Stand in high school?

Actually, yes :-)

Don't you know all the cool kids were playing Oregon Trail.

D'oh! At my school, the hot game was Three Mile Island. We never got the good games! :-)

Re:want confirmation?

[newbrier]

Apple has had zero long term debt for over a year now, and in the course of normal business it is impossible for a company to elimintate short-term debt or at least in theory for a company of Apple's size since the company incurs short term debt by having a phone bill. Hence the reason at the end of last quarter Apple had almost 1.1 billion in accounts payable. In the end a company seeks to find its optimal capital strucure of debt and equity that will return the maximum shareholder value. Apple has choosen to reduce its risk of market highs and lows by eliminating the long term debt exposure of the company. Futher more, while I love Apple, being debt free is not a reason to buy its stock or believe that it is a healthier company. It simply implies that the shareholders will not be bullied by bond holders seeking more control of the company.

Because..

[LilGuy]

They didn't make a game console that doesn't make money.

Re:Because..

[homeobocks]

Nor did they make a chat client and protocol that loses money. In my opinion, Microsoft is just doing this to take over the market, so they can up the prices when there are no competetors. The bread and butter of a monopoly.

Re:Because..

[sydsavage]

You've obviously never heard of Pippin.

Re:Because..

[Kenja]

Yes they did. It was called the Pippin and was relased by Bandai. It did very bad in the US and Japanese markets. It booted MacOS 7 off of a CD (no internal storage) so, while it could run any Macintosh game, the game had to be built with an OS image on the CD.

Re:Because..

[perdelucena]

"Apple [...] is now a debt-free company."

One more prof that Apple is still dying...

Re:Because..

[incast]

That's a half-truth. Long term debt (loans, bonds, preferred shares) bares a fixed cost every year, where common shares do not. There are many ratios that attempt to describe the mix of debt and equity, as well as their fit of the mix to the company.

For example, with more debt you incur more yearly interest and your times interest earned ratio (net profits / interest costs) decreases, which can bring about questions of solvency.

Tech companies especially need to have very conservative ratios to show their financial viability. A lot of cash and not a lot of debt seems to be the rule of thumb when you look at the NASDAQ.

Re:Because..

[Wyatt Earp]

"The game had to be built with an OS image on the CD."

That would be easy, I used to have a 7.5.5 boot CD and if I remember right, that stripped down System Folder took up all of about 30 MB with full network functionality.

Once we made a System 7.1 boot floppy with Appletalk and I don't remember what else so that we could dasiy-chain Performa 5xx series machines with the old LocalTalk boxes and phone cords and reformated 14 of them at a time from my G3 AIO.

I

Re:Because..

[visgoth]

An interesting idea, actually. I had once semi-jokingly said to a friend that a stripped down linux on a disc could be used as a basis for games. In theory it would work pretty well, only the necessary stuff is loaded up. However, there would be no way to know what sort of hardware the machine booting the disc would have installed. I guess this is basically the idea behind those ill fated linux based consoles?

Re:Because..

[Mod Me God]

any finance prof worth his salt will tell you that there's no difference in how you finance your company (ie, debt, equity)

Any incompetant finance prof, that is. The Modigliani-Miller theorem has that premise, but it can be broken down because of tax differences, risk preferences, and of course efficient capital markets. In theory, different types of firm have different optimal capital structures (and in practice there are differences between different types of firm).

If you're interested in the theory then check out the paper Miller wrote in retrospect.

Re:Because..

[edgar_is_good]

And, of course, this misses the point that having no debt and lots of cash allows tremendous flexibility in acquiring other assets, like software companies. If you're already debt-laden this is much more difficult.

Re:Because..

[noewun]

Letting someone else build the guts of OSX was the smartest thing they ever did.

You, sir, are an idiot.

NeXTStep, the basis of OS X, was developed at NeXT while it was owned and run by Steve Jobs. "Someone else" didn't build the guts -Jobs oversaw it's deveoplment. When he moved back to Apple, Apple acquired NeXT, bring both his children together.

Re:Because..

[tyrione]

Someone with a bent for Truth. Thank you.

And I'd like to add that Apple Engineering enhances or completely refactors bits and pieces of the NetBSD, OpenBSD, FreeBSD code, and give back accordingly per any licensing agreements.

This reminds me of when people give Adobe the credits to developing Display Postcript and NeXT just licensed it. DUH! Without NeXT it wouldn't have come about, let alone Display PDF, etc. Let's give credit for ideas and code where they are due.

Re:Because..

[isaac]

This reminds me of when people give Adobe the credits to developing Display Postcript and NeXT just licensed it. DUH! Without NeXT it wouldn't have come about, let alone Display PDF, etc. Let's give credit for ideas and code where they are due.

Then you should credit Sun. Their NeWS client-server windowing system (which began development in 1985) used PostScript to describe objects on the screen, but predated NeXT and Adobe's Display PostScript. See http://www.postscript.org/FAQs/language/node73.htm l and http://en.wikipedia.org/wiki/NeWS for corroboration.

NeWS eventually was absorbed into Sun's OpenLook environment. To this day, Sun's X server supports Display PostScript, as anyone who uses a Sun workstation knows. (A logo to this effect is displayed when the X server starts.)

I don't mean to belittle NeXT here - I've been a NeXT user for a decade and still have a working NeXTStation TurboColor and NeXTLaser Printer. Display PostScript wasn't really a NeXT innovation, however. (Objective-C on the other hand, was all NeXT)

-Isaac

Re:Because..

[rixstep]

For someone interested in accuracy, you seem to get way off from the truth a lot.

1. Whatever the relationship with Sun, it is a fact that Adobe and NeXT worked together on the standard used on the latter's boxes.

2. NeXT did not develop Objective-C. Brad Cox did. NeXT licenced Objective-C from Brad's company Stepstone until 1995, when they bought the rights outright.

Et voila.

How does this compare with other companies?

[Raleel]

Particularly other hardware and software firms?

Re:How does this compare with other companies?

[krog]

How does this compare? Favorably.

Re:How does this compare with other companies?

[justanyone]

So, it seems Apple, like White Castle, among other companies, is debt free.

However, being debt free is not necessarily a good thing. I was informed by an accounting / MBA friend that having corporate debt can be a very, very good thing when it comes to tax time. Apparently, it's useful to mortgage certain properties (including real estate, physical plant, etc.). This lets you write down things or depreciate them differently I think.

I'm sure there's accountants out there (though how many of them read Slashdot is an open question). Can anyone explain this? Or Refute it?

-- Kevin J. Rice, programmer (not accountant!), Chicago area.

Re:How does this compare with other companies?

[MadCow42]

Also, debt reduces the cost of capital for a company (i.e. the return expected on money used).

If I were to invest $10 in a new research effort, if it were "borrowed" money the cost of capital would be only the interest on that $10 until I expected the research to pay back $10.

However, if that $10 came from my debt-free bank account, my shareholders would expect a certain rate of return on that investment which is typically much higher than interest rates are right now (which is why people invest in stocks in the first place, they're higher risk, but they expect higher returns).

Typically, cost of capital can be 15%, 20%, or more depending on the industry and stock performance. Borrowed money is cheap.

MadCow.

Re:How does this compare with other companies?

[The Slashdotted]

While not an accountant, I've taken Managerial Accounting a few times. :)

One of the indicators investors and managers look at is cash flow. By closing lines of credit, the company has less liquidity should a downturn happen. The bankers may be willing to re-open accounts, and resell bonds, but there is a cost involved.

In a high interest-rate enviroment, this would be financially wise thing to do.
Then again, the PR value of this news shouldn't be underestimated.

Re:How does this compare with other companies?

[nelsonal]

Most technology firms are not in debt, or carry a token amount. There are three major reasons for this. First, successful technology firms generally mint money. Dell, Intel, MS, Oracle, and a whole host of others generated well over 1 billion in cash last year (and the year before, and before, etc), so they can fund expansion projects with retained cash. Second equity buyers have been happy to give them money with no expectation for a dividend for an increasingly small part of the company. Effectivly share increases mean that investors are willing to accept a smaller part of the company for the same amount of money. Finally, the rating agencies (the companies that issue opinions about how risky debt is, which are used by lenders to establish the rate at which they will loan money for) treat technology firms like late paying poor people. My personal rule of thumb is that technology firms will have a rating at least 3 notches or one full grade below a company with the same credit statistics in any other industry. Credit agencies look at a host of ratios for the basis of a rating. Two examples are Apple and Oracle both have well more than 10 times more cash than debt, and both have a long history of generating relativly stable operating cash, (more important to lenders than profits). If they operated in any other industry they would be at least AA (credit ratings go down from AAA, AA, A, BBB, BB, B, CCC, CC, C with + and - modifers on each rating, and D is a special rating for in default, ie not paying even the interest on the debt and no modifers). BB is the beginning of junk bonds. Apple's credit rating was BB and Oracle's was A-, to give you an some comparisons Qwest is B (they were touch and go on bankruptcy for the better part of 2002 and 2003). MS would likely not get a AAA rating with almost 60 billion in cash, and a two decade history of positive cash flows. Generally the rating agencies perceive a ton of operational risk in all firms that are involved in technology.

Re:How does this compare with other companies?

[Dukael_Mikakis]

Yes, debt does reduce the cost of capital because every $1 of new equity will cost you an expected value of $1 (if it were higher, people would bid up the stock price; if it were lower, nobody would buy the stock). Every $1 of debt will cost you interest (typically less than 100%, so maybe $0.05). The reason why people ever issue equity over debt is that you can typically raise much more money more more easily in the stock market than at a bank. Put yourself on the market and millions of people might contribute equity, looking to get some of the profits, and they'll do it (essentially) no questions asked, as long as you pad their wallets. If you get some debt, you'll have to deal with restrictions, you'll have to keep some amount of cash in the bank, the bank could liquidate your assets and shut you down .... In short, with equity, if you screw up (within the law) nothing bad will happen to you beyond that -- shareholders lose money, sell their stock, oh well. With debt, if you screw up it's a big hassle, banks can sell your stuff, assume management, etc. Risk of bankruptcy is the only reason why equity is ever issued.

So if Apple's not at risk of bankruptcy (they're not), they should have no problem finding cheap debt to invest. In this case, I think it's foolish for Apple to pay it's debt off.

Plus, the interest you pay on debt is tax deductible itself (as an expense) and that's just an extra bonus to load up on debt (assuming you can afford it, and aren't at risk of failing).

Re:How does this compare with other companies?

[spleck]

Did anyone else notice that one of the posts said their debt was DUE in February 2004. They didn't just go and pay off a loan. They met their contractual obligations to repay debt.

It's up to the finance guys to say, "Hey, we can borrow another $300 mill for 5% while we're making 6% on our investments." If they can't say that, then they won't borrow more money unless they need it.

Re:How does this compare with other companies?

[Bendebecker]

You also have to look at stock value. If this gets their stock to go up, it might be overall a good thing to pay it off just so you can say you did and then immediately go back into debt (by dumping cash in something.)

Re:How does this compare with other companies?

[nelsonal]

Debt is leverage, it amplifies your returns to owners. This is great if you do well, but it is bad if you do poorly. Most people experience this when with mortgages (because of a ton of very favorable laws and a reasonably good housing market since wwII lenders will give an amazing amount of leverage on a house). Which is why they thing real estate is such a good investment, houses have actually been out performed by most other asset classes, but nothing else allows the same measure of leverage.
For a simple example lets look at buying stock on margin. Take Microsoft, let's say Bill and Steve each have $1000 to invest in MS and the current share price is $25. Bill chooses to buy 40 shares for $1000 (ignoring commissions), while steve listened to his MBA friend and bought 80 shares, taking a loan for $1000 and puting up his own $1000. The next day MS comes out better than expected earnings and the price pops to $30 per share. Both sell their stock. Bill gets $1200 (40x$30) while Steve gets $1400 (80x30-1000) I'm rounding off the $0.11 in interest expenses.
Now if the news had been bad, and the stock fell to $20, the opposite would have happened, Bill would have $800 (40x$20), while Steve would have $600 (80x$20-1000), again ignoring the $0.11 in daily interest.
With debt financing you multiply the regular returns by the inverse of the percentage you put up. (If you put up one fifth of the intial capital you will recieve five times the return on the asset (before interest expenses), if it returns 10% annually the owner will get more like 50% annually, if it returns -5% annually, the owner will get -25% annually (again before interest expenses). In our examples above the asset returned 20% but due to the differences in financing the investors got very different returns.
Armed with this knowledge the optimal situation would be nearly no owner investment and almost all debt financing, assuming an investment is likely to produce returns. However, lenders will require a higher interest rate to projects that have less owner investment decreasing the returns (the asset must return more than the interst rate for this to work, it becomes increasingly difficult to find investments that will do this. In the stock market there are regulations limiting you to debt equal to your starting capital, and if you start to loose money the broker will issue a call requireing either additonal investments or he will sell your asset to bring it back in line with the rules. With a big successful company lenders stop at about 3/4 of total investment (3:1 leverage). Houses allow a ton of leverage (the old rules were for 20% (5:1 leverage) down but I know of people who put less than 10% down (10:1 leverage). Feel free to ask any further questions, this format is not ideal for math topics

Re:How does this compare with other companies?

[afidel]

Not necessarily, it makes Apple a potential takeover target as a low debt to equity ratio can make a company a good choice for a stock leveraged purchase. Of course I don't see anyone going for Apple right now but who knows *shrug*

Re:How does this compare with other companies?

[santos_douglas]

Wow, some informed financial discussion on /. - astounding!

These are all good points. In general, a debt free or even low debt corporation is a bad sign, unless there is an industry specific reason for it to be that way. At best it means the management is far too conservative and is not creating growth opportunities, or simply has run out of growth opportunities to pursue. At worst it means the firms managment is not serving the interest of the shareholder, which is all the more suspicious in a firm that pays no dividends. In a frim like Apple with a good credit rating, this will become a value destroying position in the long term.

However I suspect that they will just as quickly take on new financing, or face the consequences from their shareholders.

Re:How does this compare with other companies?

[mcwop]

They copied Apple.

Re:How does this compare with other companies?

[nelsonal]

Short answer yes, leverage can really burn you. Long answer the great depression was triggered by a market crash, that toppled a few banks who issued too many loans to speculators who lost their shirts and the losses were quick and large enough to cause the loans to not be repaid. (I didn't mention that banks run at about 20:1 leverage ratios) so the banks began to fail, which caused a run on banks that wouldn't have failed, but didn't have enough liquidity (banks never do, in a true run). However, it was also exacerbated by a Fed decision to cut liquidity and raise interest rates at the start of this. Ultimately the depression was people sitting on currency because of fear, rather than spending or saving it. Macroeconomics is a lot like the weather, there are a ton of very complex variables that lead to effects.
Oddly enough risky investments are sometimes ok to borrow against, it's a matter of the level of risk tolerance you are comfortable with. Real Estate is ultimately a risky asset, but most of us are comfortable borrowing and lending against it, as there are considerable forces absorbing and reducing that risk. Oh, and the only risk free investment are government treasury bonds (The US seems to be the gold standard, although I'm be comfortable with Euro zone and Japanese bonds, too especially last year with the nice currency boost) banks are only as good as the government that insures them. Ultimately governments can print money so they will always pay their debts, although the currency might not be worth much, as a bunch of pensioners are learning about Argentina's bonds. Finally, it's very hard to find people who will loan money to a startup, if you do you have a very good friend.

Re:How does this compare with other companies?

[mhoward736]

Debt is a very useful thing to have if you need extensive capital investment in material things or you need a pool of money to fund the development of an idea.

If you have no need to do capital investments in things like plant and equipment or buying another company then debt is a BAD thing because you're paying interest and usually more than you'd get investing in a similar risk item.

Americans seem to have an idea that being in debt is a good thing. For some things like a House which will normally be a long term asset whose value will be more than the total cost of the debt this is an OK idea. For cars and such its usually not a great idea as the asset depreciates very quickly, for computers its even worse. Unless of course you use that asset for something useful like running your business (one of the reasons Graphics people don't care about the cost of a new Mac is that it pays for itself very quickly).

So lets look at Apple. Their major assets are their people and ideas. If they have enough revenue to continue to pay those people they shouldn't borrow for it. R&D is normally expensive but most of what Apple does is consumer design, software development and (some) assembly. CPU's, Disks etc are all developed by others - sometimes with input from Apple. For these things they don't need extensive physical assets like factories and machinery. They need enough space for everyone to work, and they can get someone else to build/assemble their designs at very little risk to themselves usually.

This is one of the reasons why tech companies usually have very little debt.

In Apples case debt would only be good if they needed to acquire another company and believed they could run the acquisition better than the current management or they needed to invest significantly in something else that required a large chunk of change up front.

Low debt may make a company a takeover target but in Apples case you'd 1. Have to pay a significant premium over the value of their cash assests and 2. be really sure you could run the company better than Steve and his key people. Otherwise you'd be buying a declining asset or looking to put a competitor out of business. Microsoft might like to try but the Anti-trust brigade would have a field day.

As long as Apple stays profitable and can fund its own R&D internally it doesn't need more debt.

Re:How does this compare with other companies?

[santos_douglas]

Depends on the particular flavor of religion, some think all debt is evil, some merely believe charging interest is a sin.

I'm not sure what mean by 'on paper', there has never been an instance where debt did not exist in the real world. The fact that it is recorded by people and companies is just a matter of accounting.

Having debt does not necessarily incur negative consequences. It has precisley the consequenses you agree to when you take it on. If you can afford it, then it is positive. Quite the contrary, debt greatly expands an individuals and a companies choices. Home and auto ownership are made possible by debt. Emergency/variable funds are made quickly and easily available to anyone with a credit card. If your car breaks down in the middle of nowhere, and you have no cash, trust me, having the ability to take on debt greatly expands our choices.

Debt financing works whenever it is cheaper relative to the cost of equity capital. The nominal rate is irrelevant, it could be 1% or 50%.

A sharp rise in interest rates would affect profitability only if the rate was floating, or if new debt was needed. And even if these cases were true, even a modestly sophisticated company now can effectively hedge against such interest rate risk.

The bottom line is, debt properly used by a firm, will maximize its total return to the shareholder. The relative requirements of debt and equity holders are what determine its appropriateness. Qualitative beliefs such as debt averseness are irrational, and ultimately destroy shareholder value. A firm can operate just fine on no debt - in fact there are several surprisingly large firms that grew through much of their histroy debt free - UPS and Dominos come to mind. Still, they would likely have grown faster and generated greater returns through the proper use of debt.

The aim of finance is to optimize returns. The residual asset claim is effectively the same for both, so the only question for the firm is, which is cheaper.

Re:How does this compare with other companies?

[lhbtubajon]

What you say is true, all else being equal.

However, you fail to consider the intangible benefits of being able to show investers that you went from $1 billion in debt to no debt whatsoever.

In 1997 Apple was in very bad shape, and investors and consumers were distancing themselves from the potential for losses and orphaned technology.

There is now a great reassurance to people who might buy Apple products that the company is recovered fully, will exist indefinitely, and can be safely counted upon.

Jobs likely expects the benefits to outweigh any loss of financial opportunity here.

Re:How does this compare with other companies?

[johnnyb]

"If you can afford it, then it is positive."

I was specifically talking about uncollateralized debt, in which case, you can never know for sure if you can afford it.

There is no such thing as offset. Here is a true story (I forget the actual numbers, but the gist is true):

A man had an account into which he had put $90,000. He took out a loan for $50,000 from the same bank and put it into the account. This seems safe, right? Well, very soon afterwards the bank closed. His FDIC paid him $10,000 for the money in the account. However, he still owed the bank $50,000. There's no such thing as offset. The fact that he had more in the bank than he owed made no difference when they were settling accounts, and all of a sudden he went from having +$90,000 to -$40,000. Had he not borrowed, the worst he would have gone was $10,000.

The fact is, uncollateralized borrowing puts you into a different game - one which many win, in fact. However, it is always a burden, and it is always a controlling burden.

Re:How does this compare with other companies?

[santos_douglas]

Well, comparing personal borrowing to corporate borrowing is a bad idea, and I probably shouldn't have even started down that road. Since your average person doesn't borrow to invest, only to spend, its tough to compare. Although since homes do appreciate in value, as long as your annual gain outpaces or at least equals your interest, you've made out. Saving up for a house? Nice idea, but not bloody likely. You can't just think about the interest you'll save, you do have to live somewhere - and that probably means rent, and lots of it.

Another important point - 200k (est) in interst is a nominal figure. You have to do a present value adjustment, which would make it quite small in todays (real) dollars. Given the competiveness of the mortgage industry, the relatively low risk of houses as assets, and the current interest situation, buying a home on debt is a pretty good deal.

Anyway, back to the business side of things, Apple seems to be in line with the industry - Dell, MS, all have virtually no debt. HP is the exception, which is probably merger related. So this looks like the expectation for this indsutry, and therefore a good thing. But in other industries it is completely different, and a debt heavy capital structure is quite common.

Re:How does this compare with other companies?

[swillden]

Long term it can cost you more than if you had just waited and saved.

Only if your interest (not mortgage) payments exceed what you'd pay in rent. You still have to have a place to live while you're saving for your house. Keep in mind also that while the portion of your house payment that goes to interest decreases during the course of the mortgage, your rent will go up. The appreciation on the value of your home also tends to offset the money lost to interest.

Let's look at some numbers. Suppose that you purchase a home for $200,000, on a 30-year loan at 6% interest. Suppose that renting the same house would cost $800 per month. Suppose that inflation is at 2% per year for the duration and that both rent and home values increase accordingly. Finally, suppose that you pay about 20% in net taxes, and that you can itemize and deduct your interest payments.

Your monthly mortgage payment is $1,199.10, which means that your total payoff cost will be $431,676.38, which means you'll pay a total of $231,676.38 in interest. That sucks, right? Sure it does, but not as much as it might appear. First of all, that interest is tax deductible, which basically means that you'll get 20% of that back, so it's really only $185,341.10. Still a big chunk of change, certainly.

However, look at the rent side of it: Even if we assumed your rent never went up, you'd pay out $288,000 during those 30 years. Assuming an annual 2% increase in rent prices, that's $389,453.56 over 30 years. That sucks much worse than the $185K in interest.

Now let's look at what you have at the end of the 30 years in each scenario. Assuming you rented and banked the difference between your rent payment and the mortgage payment you opted not to take, you'd accumulate somewhere in the neighborhood of $100K (I'm too lazy to figure that one out exactly; it's around $55K plus some accumulated interest, which I'm assuming is at 5%) over the first 20 years at which point your rent payments exceed what your mortgage payments would have been, so you have to start dipping into the savings account to pay your rent which means that your savings grows more slowly. I estimate that your final balance will reach about $150K -- not even the original purchase price of the house, and nowhere near its present value.

On the other hand, if you borrowed and bought, at the end of 30 years, you own a home worth around $350K.

At the end, borrowing money and paying interest saves you $200,000 over renting and saving for a home that you may never actually get to buy. In practice, there are some costs to owning a home that renters don't incur, which will eat away some of the difference, but you're still much better off.

There's a whole lot of guesswork and estimation in the above numbers, but I think they're pretty realistic. If anything, they're slanted a bit in favor of renting -- the cost of rent tends to be closer to the cost of a mortgage payment, and in some cases exceeds it. Many people also have higher net tax rates than 20%, which means they get proportionally more benefit from the tax deduction.

I'm not a big fan of debt, but some debt does make sense for individuals. Corporations are an entirely different can of worms of course, since their debt can usually generate revenues and profits that far outweigh the cost of financing.

First to say - Well Done

[IamGarageGuy 2]

Any company in this day and age that can consider itself solvent has to be doing something right. You may not agree with the tactics but the end result of being debt free is quite an accomplishment. Now if only the rest of us could say the same !!!!

Re:First to say - Well Done

[be-fan]

Debt isn't an inherently bad thing. Without maintaining some debt, its hard to become economically successful. One of the key reasons why Britain is so rich, for example, is because it was willing to carry a debt in the process of expanding, while other countries were not.

They key is to manage the debt carefully, and make sure that the interest payments do not get so large that they start eating away at your profits.

Re:First to say - Well Done

[Lev13than]

Umm... Debt != Insolvent. Apple has always been solvent.

Solvency is the ability to cover current debts (loans due in less than 1 year) with current assets (cash, inventory, short-term paper etc...). As others have pointed out, carrying debt can have a number of advantages, including tax treatments, treasury management, leverage etc...

For example, loans increase the usable cash for a company, which allow you to make more money than you could with just equity. And, since someone else has loaned you the money your return on equity (ROE) is higher. Since high ROE is a good thing, debt is an important part of the equation.

Re:First to say - Well Done

[Misch]

They key is to manage the debt carefully, and make sure that the interest payments do not get so large that they start eating away at your profits.

Would you like to run for Congress? ;-)

Re:First to say - Well Done

[Silverhammer]

Blockquoth the poster:

Any company in this day and age that can consider itself solvent has to be doing something right.

Small correction: to be solvent, you merely need to have more assets than debts. Most companies are solvent by this definition, and in corporations, the difference is considered "stockholder equity": the cash that would be divided amongst the stockholders if/when the company was liquidated.

On the other hand, for a corporation to be completely debt-free is a rare achievement.

Re:First to say - Well Done

[TopShelf]

Actually, the Democrats are traditionally known as "tax and spend", which means they pay as they go, whereas the current administration has chosen to borrow and spend...

Re:First to say - Well Done

[be-fan]

We're "tax and spend" liberals, not "borrow and spend" conservatives!

Three words: $500 billion deficit.

Re:First to say - Well Done

[Saint Mitchell]

The borrow and spend method, also known as the "tax cuts for us and spend our grandchildren's money" method. May the fleas of a thousand dogs come to nest in the genitalia of those responsible.

Re:First to say - Well Done

[Shisha]

Of course, it doesn't hurt to colonize numerous less powerfull nations, systematically remove all profit and natural resources, then "benevolently" grant said colonies their independence when everything of value is gone and they're no longer profitable to the empire. Just ask the Indians and north Africans . . .

This still compares favourably with countries like France and Spain that did the same thing and didn't become sucessful :-) Not to mention the Germans who didn't even manage to colonise anyone at the time.

Re:First to say - Well Done

[Hi, I'm Troy McClure]

Ah.. but if you already have more cash than you can use, which I believe sounds like the case here, then having more cash from a loan does not increase your ROE.

If I remember correctly:

ROE = net income/shareholder equity

If cash from a loan will not increase your net income, it won't affect ROE

Re:First to say - Well Done

[corbettw]

Of course, it doesn't hurt to colonize numerous less powerfull nations, systematically remove all profit and natural resources, then "benevolently" grant said colonies their independence when everything of value is gone and they're no longer profitable to the empire.

Hmm, maybe that's why the dollar is so weak compared to the pound....

Re:First to say - Well Done

[InfiniteWisdom]

Ah so the US must be doing REALLY great then! The federal government owes $7 TRILLION in debt!

Re:First to say - Well Done

[madpierre]

The real advantage of the "borrow and spend" scenario is if you *don't* get re-elected. The opposition then gets to pick up the tab. The borrowed debt millstone hanging over them like the sword of Damocles. Its whats known as a win win situation, even if you lose. :)

Re:First to say - Well Done

[tassii]

I don't believe anyone was griping about tax cuts. It was cutting taxes and increasing spending that people have problems with.

As far as I know, that's a direct violation of the Balanced Budget Amendment. Even Republicans like Sen. John McCain have major problems with the Bush Administration's spending spree.

Re:First to say - Well Done

[mjpaci]

The interest on that $7,000,000,000,000 in debt is going to hard working Japanese people who find the returns on T-Bills to be a lot higher than what they could get at their local bank.

Re:First to say - Well Done

[4of12]

...Spain that did the same thing and didn't become sucessful

Incorrect.

Spain was quite successful in the 1500's, otherwise known as the Siglo de Oro, or century of gold built up from their, uh, ventures in the New World.

At the time they were considered a pre-eminent world power. The British were quite nervous about the might of the Spanish Armada when they attacked in 1588, but were fortunate in that the Spanish fleet had to contend with a series of bad weather at inopportune times.

$4.8 billion

[UberChuckie]

Is that cash reserves or for daily operation? Huge difference.

Re:$4.8 billion

[tyrione]

Get serious. It's cash reserves, collecting Bank interest.

Daily operations of $4.8 Billion would make zero sense due to the fact it takes them 6 months to generate that much in gross sales alone.

It would be quite difficult to claim zero debt now wouldn't it?

is that a good thing?

[Nathan Brazil]

With interest rates as low as they are right now, shouldn't they be borrowing and investing more in the future, or some such economic technobabble like that? Cash in the bank can't be giving them as much growth as investment would...

Though cash in the bank is very safe, at least.

Re:is that a good thing?

[Ranger96]

Even more to the point, if the interest Apple was paying on the debt was lower than the return they could make investing the $300M, then (everything else being equal), this wasn't the best use of their cash.

However, there are too many variables for a non-insider to really know. Most companies have finance people who are at least competent enough to make these kinds of decisions. This is Finance 101 stuff.

Chris

Re:is that a good thing?

[OwnedByTwoCats]

Borrowing to "invest in the future" makes sense if you know how to spend the money now in ways that will guarentee a return in the future.

A lot of companies have borrowed money, and spent it, and failed on the ??? step, so they didn't have the profits, so they're bankrupt.

Interest on borrowed money is an expense that Apple has eliminated. Good for them!

Lets see...

[FortKnox]

The crashing success of iTunes, and iPods? Along with OS X and the resurgence of the iMacs? I don't think its that hard to accept that they are now in the black.

Re:Lets see...

[SpamJunkie]

This isn't being in the black. Being in the back means being profitable and they've been profitable long before now. This isn't a sign of business strength either, since many companies keep some debt around just so they have some flexibility when it comes to reporting their financials.

This is more of a business decision to run a debt-free company. With 4.8 billion cash on hand they could have been debt free before now.

Re:Lets see...

[ryanw]

Actually... as long apple stays in business, I could careless what their market share is. I know between my house and my inlaws house's it's in the upper 70% ratio of macs to pcs. Ever since I got a mac I have convinced them to go the same way. This has reduced the "friendly inlaw house calls" down to about 1 every 6 months instead of one every few weeks.

Seriously! You ever get stuck making house calls to fix friend's computers? Ever since I've convinced people to go mac they've been more functional (making dvd's, photo albums, burning CD's, No Email viruses) and I get almost no calls from friends asking for help. They don't have the same issues as with Windows or even worse would be linux.

Re:Lets see...

[11223]

You know, I keep hearing this crap about iTunes and the RIAA, and it's time that somebody put a stop to it.

I just bought five albums on iTunes. Not one of them was on an RIAA label. One of the labels I bought from is owned by the artist himself (Pete Namlook's FAX label). The others were similar independent labels (Ninja Tune and Tresor). There is non-RIAA music on iTunes in spades, and I will continue to buy from them.

Re:Lets see...

[claygate]

"There is non-RIAA music on iTunes in spades, and I will continue to buy from them".

I don't know if you are most qualified to answer for me but doesn't the RIAA still get money from each sale? My assumption that they do might be wrong but the assumption that they would have signed a contract with Apple without a blanket percentage scheme sounds unlikely. Anyone have an answer to this?

Re:Lets see...

[shawnce]

The RIAA cannot get money from an artist or company that is not member. The RIAA is NOT a record company but a trade group whose main goal is to represent the U.S. recording industry (the record companies, artists, distributors, etc.). Its mission is to protect the right of artists, etc.

I believe membership fees for the RIAA are based on gross revenues... ahh this outlines it.

In some ways the RIAA is like the ACLU, almost everyone hates it at some point until it is defending a constitutional right that they care about.

-Shawn

Witness...

[crushinghellhammer]

the birth of the next corporate monster...now totally unfettered by the chains of debt

Re:Witness...

[MuckSavage]

As an elitist, snobbish, cult-of-Jobs follower, I am offended by your statements.

Re:Witness...

[Gherald]

Mac OS X for x86 would suck. Unless they put a lot of money into driver support or emulation of Win32 drivers, which is risky and inelegant.

The reason why OSX "just works" on Apple computers is because Apple has complete control over the hardware.

The x86 world is so heterogeneous that if an OSX for x86 was released, it would have so many compatibility problems that Windows XP would look elegant by comparison.

And before you say "If Linux can run well on the desktop OSX should be able to as well", the answer is NO, Linux does not work well as a desktop platform yet precisely because of all the unsupported hardware and software.

And before you say "OSX has a fairly large number of commercial software availeable that could give it an edge over Linux as an alternative x86 desktop", the answer is NO, all that software would have to be redesigned, recompiled and retested for x86 which would take a very LONG time.

You OSX-for-x86 folks are so naive, it ceased to be funny a long time ago.

Apple's current business model of making their own hardware _AND_ software is working very well. It is the only way they can stay alive in a Redmond dominated world, and still compete with free (libre) alternatives like Linux.

Re:Witness...

[Bendebecker]

Actually from what I understand, trying to break into the x86 market woudl be a disaster for apple since they supposedly make most of their money not ont eh oS but on the hardware. Plus, with only apple certified devices (namely apple computers) to keep in mind, Mac OS is a lot more stable than say releasing it to the intel family of chips. By keeping Mac OSX limited to proprietary hardware, they don't have to deal with a lot of the satbility issues that plague windows. In other words, the systems greatest benefits come from a stability granted by limiting the computers it can run on and not having to worry about hardware form 3rd party vendors.

Re:Witness...

[GlassHeart]

"The reason why OSX 'just works' on Apple computers is because Apple has complete control over the hardware." [...] is something Apple people say and it makes them feel good, because implied in it is the presumption that Apple's hardware is actually better than what the unwashed masses buy at Fry's.

No, it's something you say to point out that Apple has a much smaller of hardware combinations to support.

to revolutionize the industry, it isn't necessary to support all hardware. You could support only ECS K7VTA3 boards, with an ATI video card. And that tiny slice of the PC world would still DOUBLE YOUR MARKET SHARE.

It would also put Apple directly in the crosshairs of Microsoft. There's no way Microsoft would overlook this challenge. It's not a matter of losing a few percent over years, but a real danger of mass exodus. Remember also that this is a Microsoft that just basically got off with a slap on the wrist with its anti-trust case. Can you imagine another Attorney General taking them on again soon?

your protestations that a huge amount of work would have to be done to port everything over to x86 simply betray that you haven't written code to compile cleanly on multiple systems.

Compile cleanly? You're not seriously suggesting that something that compiles cleanly is good enough to ship? Different hardware platforms and compilers will make bugs show up. You'll also need to increase QA capacity dramatically.

It's not very hard to port code to a different platform and get it to an alpha level. To get it ready to ship is another story entirely.

Also, while Adobe might port Photoshop to x86 OS X, do you imagine Microsoft would port Office to it?

All the applications that Apple depends on were originally written for the real computer market -- MS Office, Adobe, etc, and ported only as a way of squeezing a few more sales out of them.

Excel was originally developed on the Mac in 1985. Word was also developed on the Mac before there was a Windows version (a DOS version that doesn't really act like either predates the Mac version). The original version of Photoshop was written on a Mac Plus. So what are you talking about?

Why are Jobs & Followers limiting their potential market in this way ? The only answer is that they are afraid of being precisely the type of computer revolutionaries that they pretend to be in Super Bowl Ads.

I have a much simpler explanation: they are afraid of Microsoft. Why do you find that hard to believe?

Where did the money come from

[SuDZ]

Now that they are out of debt I wonder what the percentages of the income were. For example was the new OS's able to give 20% of that, the iPod good for 40% etc. What about iTunes? I know I just picked those %'s out of the air and have no way of guessing what they might be but what do you guys think helped them get into the clear?

SuDZ

why wait so long?

[MrDigital]

I don't understand why a company with $4.8 billion (or $5.1 billion pre-$300mill hit) would wait this long to pay off the $300 million owed. Obviously the money is coming in hand over fist, so they would probably want to pay it off as soon as possible to please investors. Not much is more enticing than a company with billions of dollars in the bank and no debt as it means the company is being run in a 'correct' way.

Re:why wait so long?

[katre]

I don't understand why a company with $4.8 billion (or $5.1 billion pre-$300mill hit) would wait this long to pay off the $300 million owed.

When they say $4.8 billion in the bank, they don't mean $4.8 billion sitting there doing nothing. They mean $4.8 billion, part of which is earmarked for salaries in the next quarter, part of which is for office space, maintainance, etc, part of which is for production of new units, part of which is for research and development, and maybe a very tiny bit that's actually not earmarked for anything. And it's that tiny bit not earmarked for anything that they can use to pay off the debts. Remember: $4.8 billion is a lot of cash, but Apple is a huge company these days, and it takes a lot of cash to keep that going.

Re:why wait so long?

[CrazyTalk]

According to the article , the debt just matured - I'm only guessing, but if they paid it off early there may have been large monetary penalties.

Re:why wait so long?

[Don Negro]

I don't understand why a company with $4.8 billion (or $5.1 billion pre-$300mill hit) would wait this long to pay off the $300 million owed.

If the $300M was comprised of corporate bonds, (and the phrase 'which we decided to hold to maturity' indicates that it was) then paying them off earlier would have meant giving the bond holders back their capital. Since those bond holders would have had to reinvest at last year's lower interest rates, Apple would have been doing them a dis-service. By holding them to maturity they make those bond holders more likely to purchase Apple corporate debt in the future, which could lower their total borrowing costs down the line

Re:why wait so long?

[Dukael_Mikakis]

Pleasing investors has nothing to do with being debt-free. If you have a friend that will loan you money at 1% interest, and you can turn and loan that money to somebody else at 2% interest, you'd want as much debt as possible, and your investors (in this case, you) would be thrilled that you have so much debt.

In fact, in successful companies, investors might actually prefer debt. If you and a friend have a project that will cost $1200 but will net you $1800 in a year, you each stand to gain $900 minus your investment. But you only have $800 total. If you get another friend in on it, all three of you will only net $200 apiece ($600 - $400). If you get $400 debt at 5%, then the two of you will make $1800 - $420 (debt + interest) = $1380 / 2 = $690 - $400 = $290.

So the current investors end up making more by taking debt. Of course new investors would love an opportunity at profiting from this project, but companies tend to look out for current shareholders more than anything else.

Re:why wait so long?

[Dukael_Mikakis]

Since those bond holders would have had to reinvest at last year's lower interest rates, Apple would have been doing them a dis-service.

Not really. Unless there are specific covenants on the bond (typically not), Apple wouldn't have given them the capital back, but sold the debt for its market value (on the Bond market) or whatever.

If the bond-holders were sitting on bonds that were paying a higher rate than the market rate, then Apple would have had to give them more than just the principal to pay off the debt.

Bond prices fluctuate with the interest rates as well, so paying off early would have netted bond-holders a premium and the opportunity to reinvest. If things were as you say they were, Apple could quite easily commit arbitrage by getting $1000 of cheap debt and paying off $1000 of expensive debt. But what would have happened is they could have bought $1000 of cheap debt but would have had to pay, say, $1100 to clear their $1000 of expensive debt (for the projected interest).

Re:why wait so long?

[larry bagina]

According to the SEC filings, the debt was callable -- ie, they could buy it back at any time without penalty.

debunk

[fjordboy]

I can debunk it right now - Steve Jobs owes me thousands of dollars for the mental anguish I've experienced when trying to use the imac's original "hockey puck" mouse.

Re:debunk

[GoofyBoy]

Do you know how much they've saved with not having to produce or do R&D for a second mouse button?

Re:debunk

[SuperBanana]

Steve Jobs owes me thousands of dollars for the mental anguish I've experienced when trying to use the imac's original "hockey puck" mouse

Yeah, and your mother owes you millions for dropping you as a child, since those of us who weren't dropped, went to the store and bought a $40 optical scroll-wheel mouse ;-)

(Sorry, pet peeve for those who complain about the fact that a computer, designed+marketed to be EASY TO USE, comes out of the box with only one mouse button but is perfectly capable of using a fancier one if your heart desires).

Re:debunk

[yardbird]

He wasn't complaining about the one-buttonness. He was complaining about the "I'm a perfect circle so you can't tell which way is up"-ness. However, your point about buying a replacement mouse is, of course, still valid.

Re:debunk

[Awptimus Prime]

I think he was kidding around about it.

In all reality, there is little reason for PCs to ship with multi-button mice. I did technical support for 3 years and you would not believe the odd silence, tantarums, and general ignorance exposed when asking someone (who's had their computer for two years) to 'right click' on an icon. I would say a solid third of the people I dealt with had never used that mouse button and confused by it.

I use a Apple keyboard on my PC, so I can't blame a Apple user using a PC mouse. Thank god for USB, eh? ;-)

Re:debunk

[prockcore]

(Sorry, pet peeve for those who complain about the fact that a computer, designed+marketed to be EASY TO USE, comes out of the box with only one mouse button but is perfectly capable of using a fancier one if your heart desires).

The hockey puck wasn't hated because it only had one mouse button. It was hated because it wasn't easy to use. It will go down in history as the worst designed mouse ever.

Re:debunk

[MoneyT]

That's when you go get the mouse drivers that turn teh physical button into a right click, and the pad itself into a left click. Problem solved.

Did I mention teh driver also adds scroll zones to the sides of the trackpad?

Re:debunk

[Andy_R]

1) If your hand is able to reach the touchpad, it is less than 1 inch away from the keyboard where there about 100 buttons. Are you really too lazy to reach them?

2) You should take a look at the folllowing list of Mac software that requires a 2nd button:

If you don't intend using any of those, you should be ok.

About Time

[dbesade]

Since 1997, eliminating that much debt in 7 years is a real accomplishment. At least we now know, finally that Apple isn't going out of business or declare bankruptcy. (Like it was going to happen anyway)

Bad?

[Ymiris]

Isn't this a bad thing? I thought if you were out a debt you were in danger of being bought..or am I completly off here?

Re:Bad?

[yroJJory]

Also, keep in mind the concept of a poison pill.

If you as a business consultant, they'll tell you the best thing you can do for a home business is pay off your house, but exercise a line of equity. You don't have to actually USE the equity line, and no one can tell how much you HAVE used.

So, someone who slips and falls on your property and considers suing you simply to take your house will think twice, as you may have borrowed a huge amount on it and it would cost them more to repay it.

I'm sure corporations exercise similar concepts. Being out-of-debt is always a good thing. Ensuring that you don't look like a good target requires creative ways of _appearing_ in debt.

Re:Bad?

[yroJJory]

Indeed you are slightly mistaken here. Since Apple is now a debt free company, it makes it a more attractive buy for someone else since they do not have to take more debt, it makes it more attractive.

Oh. I see. Instead, we'll have to endure the "Apple is going to be bought by Disney" rumors again. Lucky us.

Lesson Learned...

[fetus]

Sometimes overcharging does pay off...

Re:Lesson Learned...

[jasonhamilton]

They only had to sell 2 dozen ipods :)

its about time

[steak]

I gave jobs three blintz to paint my fence back in '01, maybe now he can get around to doing it.

Yay...

[Anonymous Coward]

Now they can afford to cut the price of the ipod mini damn it...

Good for everyone

[AvantLegion]

A healthy Apple is important for the computer industry. Even if you don't use Apples, you benefit from the PC industry's price undercutting of Apple's products. Apple is only "expensive" in the sense that everyone else endeavors to be cheaper.

Choice is good - including platform choice.

Re:Good for everyone

[Anonymous Coward]

I don't see that as necessarily true. Even if we were to loose Apple, for all intensive purposes their'd be alot of competition, Dell vs HP for example. Apple has rediculous prices because of it's exclusive machines whereas Dell and HP are selling commodities. About the only thing Apple help's is keeping the MPAA of our backs with it's iTunes thing.

Sorry, I just wanted to annoy you.

Re:Good for everyone

[reso]

for all intents and purposes HP and Dell run the same OS

...now for intensive purposes i likes me sum vasoleeeeeen

Re:Good for everyone

[Jeff DeMaagd]

I agree, I think we do need Apple, or at least we did.

They kickstarted the horribly lagging USB device market. A lot of windows GUI elements seem to come from Apple. Zen seems to be heavily iPod inspired, for all I know, maybe we'd be stuck with ugly Nomads and Nomad clones.

Before Jobs took over, the PC market looked like a bunch of ugly square beige boxes, since, we now get a bunch of ugly multi-colored varying swoop-shaped windowed boxes. I haven't checked to see if there are any G5 inspired PC cases yet.

Market share isn't everything!

[SoTuA]

If found true, this tidbit of information goes to show that market share isn't everything... unless you do business in commodity goods. Apple computers have been always marketed at a niche of people who are aware of the fact that quality & luxury costs a little more. You can be a successful company with only 5% of the market.

Who needs the market share when you've got a cool 4 billion bucks in the bank, and the mind share - apple equals style and coolness, like it or not.

Now back to my beige box... :(

Re:Market share isn't everything!

[dasmegabyte]

FUD CHECK:

market share decreases, their price would go UP
Check 1. Apple's market share HAS decreased since the mid 1990s, and yet their price points, even when not adjusted for inflation, have gone down. The cheapest apple laptops used to be in the $2500 range. Now they're at $1100.

expensive computers to maintain
Check 2. Not in my experience. I have spent less money maintaing the apple computers in my house than the PCS. In fact, going back to my still running Mac Classic, the only problems I've ever had have been with power supplies and hard drives. The power supplies were always replaced for under $100.

with no applications to run
Check 3. The mac currently has an analog for every major PC application. It runs nearly every open source application. And even if Apple dissipated, there would still be development. There is still development for the Amiga.

cannot comunicate easily with others computers
Check 4. My macs communicate fine with Linux, fine with Windows. Office suites use the same formats. Internet apps work the same. They all use Samba file and printer sharing. But maybe you use mostly IBM mainframes. I hope so, because the mac works with them too.

It's good to see FUD is alive and well in the PC community. I'd hate to think you guys learned nothing from Microsoft.

It's true!

[stephenb]

Apple's stock is up $.07, it must be true! ;-)

How about me?

[blackmonday]

An iPod, a 15 inch PowerBook, iLife '04, Panther... if only I could get debt free. Apple has me hooked, I can't believe how much cash I spend on their products. Well worth it though.

Cool! That puts them in a great position

[kfg]

. . .to borrow capital.

KFG

Interesting for a public company

[oliverk]

Debt is very good for public companies (in fact it raises the valuation, mainly because of the tax ramifications on debt versus equity issuance). [note: I'm a first year MBA at Georgia Tech...so I'm speaking strictly academically].

It makes me wonder about Jobs' (or the CFO's) motivations. Strictly speaking, this would be the smartest move if Apple were to pursue a Leverage BuyOut (LBO), which is basically a reverse IPO. I can't see them doing this, but would give them a chance to radically reposition the company without requiring stockholder approval.

Just thinking out loud...

.

Re:Interesting for a public company

[Chiron Taltos]

Also thinking out loud ... could they be positioning themselves for new debt. Debt incurred from acquiring, or merging with, another company?

Re:Interesting for a public company

[gmhowell]

Jobs tends to make odd business decisions work.

I mean, seriously, *home* computers?

that sounds right

[theMerovingian]

according to their last sec filing, they had 300 million in debt and about 5 billion cash.

see this for details.

Isn't this a bad thing?

[Mr. McGibby]

From what little I know about finance, isn't this a bad thing? If their business ideas are good, then shouldn't they be taking out loans to expand their business? Debt-free may be good for normal folks, but for businesses, it isn't such a great thing.

Re:Isn't this a bad thing?

[kalidasa]

Not if they have enough capital on hand to expand as they wish. Remember debt means interest expense. If you can "borrow" the money from your own reserves, your only expense is loss on anticipated interest revenues, which is usually insignificant.

MS long gone...

[NotClever]

I believe that the money bought MS stock in Apple, which was sold pretty promptly.

Addicted to OS X

[MarkWatson]

Since I am basically addicted to OS X, this is good news :-)

Apple has always had pricey, but cool stuff. I paid a premium for my Apple II (serial number 79 !! - I used it to write the free Chess program that was on the demo cassette for the Apple II).

I paid a premium for my first Mac in 1984.

Sometimes, more expensive products are just worth it.

-Mark

Buy SCO?

[clmensch]

Apple should buy SCO, and then drop all lawsuits. They'll "own" Unix (whatever that means), and they can help continue their commitment to the Open Source community.

Re:Buy SCO?

[EricWright]

No. No. A thousand times no. Buying out SCO would just put more money into Darl's hands and the hands of his cronies. Is that what you really want? Personally, I want to see Darl McBride broke, homeless, and begging on the streets.

According to their last 10-Q

[timbob_com]

Here is their last 10-Q they had a total of $2.6 Billion listed as liabilities and about $7 Billion in Assets (with almost $4.8 B being cash or short term investments) So this is definately possible.

I remember back to something Steve Jobs said back in 97 or 98 when asked how he was going to grow desktop market share. His response was something along the lines of 'We have 6% of the desktop market, Mercedes has 6% of the automobile market. Why aren't you predicting the end of Mercedes?'

iMac, iPod and iTunes really helped them accumulate some iCash.

Re:According to their last 10-Q

[zach_smith]

We have 6% of the desktop market, Mercedes has 6% of the automobile market. Why aren't you predicting the end of Mercedes?

Because the largest share of any automobile maker is <30%, whereas the market share of Microsoft in the OS market is >90%.

Plausible based on last quarterly report

[delphin42]

http://finance.yahoo.com/q/bs?s=aapl

According to their balance sheet, they had $3.7B in cash as of Dec 27, 2003. At that time they also had a little over $300M in debt. The numbers add up with what is reported in the story, so I wouldn't say there is any reason to believe it isn't true. I would think that something like this would make a press release, but maybe they are waiting for the market close?

Re:want confirmation? - SEC filling just happened

[Lord Haha]

The latest Filling was Feburary 10th, summmarized full My educated geuss since most filling as trimesterly about May 10th will be the next major SEC filling.

Debt isn't necessarily bad...

[zymurgy_cat]

Something to keep in mind is that debt isn't necessarily bad. Many companies use a combination of equity and debt to finance their operations. Sometimes no debt with lots of cash can actually be dangerous, particularly with the ongoing rise in leveraged buyouts. Granted, Apple is probably protected against this since there is very little to be gained by "breaking up" Apple. (I'd wager it's not even possible.)

It's how a company uses its debt and the amount of debt relative to things like cash flow, equity, etc., that's important.

Seems reasonable

[Dukael_Mikakis]

According to recent financial statements they did have about $302M in debt, and they had plenty ($3B) of "Cash" (or equivalents, which presumedly includes very liquid financial assets), so it seems reasonable that they would have paid it off. To be absolutely sure, I feel that we'd need to wait for the next batch of statements (March).

What they don't mention is that (of course) they have plenty of accounts payable. Not explicitly debt, they are still liabilities that are owed. No big deal, though, every company's got that.

I don't understand, though, why they're so eager to get rid of their debt. $300M isn't that much money (when they've got $3B cash, i.e.) and there's nothing wrong with a moderately leveraged firm (debt is of course usable capital, and they've effectively just lost $300M of "project money"), and I don't think that Apple was at any risk of defaulting.

If this debt was raised long ago (when rates were high), then I figure it's reasonable, but if this debt is recent, then it doesn't explicitly make sense to me (IANACFO), because that's cheap money for ... well, whatever Apple does.

To me, this seems to be an indication that Apple's going to be a bit more conservative and slow down new projects and products and such. When a company pays off debt, this must mean that interest rates cost more than the returns of the projects this money could finance.

This ranks Apple right up with Microsoft (since Microsoft started dividends a while back) as cash cow companies. I would be careful about buying.

Just my thoughts.br.

Tell-tale signs

[fembots]

Seeing Pixar (Steve is the boss) just left Disney, and the steadiness (i.e. hardly any price drops) in Apple's product lines, it's obvious they're very confident, and most of the time, more money = more confidence.

Confirmation - WSJ

[blorg]

The Wall Street Journal (right arm & shirt off back required) reported last month that Apple were planning to pay off the rest of their debt when it was due on Feb 16. So I'd be surprised if it wasn't true. MacMinute have a summary.

In other words

[Anonymous Coward]

They developed a game console that didn't make money, but they weren't stupid enough to make it.

As opposed to Red Ink Republicans?

[DrMorpheus]

Since the Bush Administration and the Republican dominated Congress has managed to outspend every liberal administration/Congress since the beginning of the twentieth century.

But you go right ahead and keep the faith. Obviously reality isn't bothering you enough to change your thinking.

Re:As opposed to Red Ink Republicans?

[be-fan]

Numbers:

US Budget Summary since 1789
Inflation calculator.

Okay, the largest budget deficit of the 1930's (Great Depression, New Deal) was about $3bn in 1939. That's about $31bn in 2002 dollars.

The largest budget deficit of the 1940's (WWII) was $55bn in 1943. That's about $585bn in 2002 dollars.

The largest deficit of the 1960's (Soviet Union, Space Race) was $25bn in 1968. That's $130bn in 2002 dollars.

The largest deficit in the 1980's (Soviet Union) was $221bn in 1986. That's $354bn in 2002 dollars.

The largest deficit of the 1990's (Iraq war?) was $290bn in 1992, which is $370bn in 2002 dollars.

The 2004 budget deficit is officially $521bn. However, that does not count the costs of war, which are $84bn in Iraq alone. All told, the current deficit is well over $600bn. Depending on the cost model, that equates to about $580bn 2002 dollars.

So in any case, the current US budget deficit is not larger than at least the one FDR carried, but its skirting damn close.

Re:From the iPod Propels Apple Department

[coldnight]

*why* would Microsoft make thier VoIP offering compatable with anyone else? They're the platform lock in vendor, remember? Soon there will be telephony, VoIP and XboxPhone... I fear.

This is good news for all computer users.

[newdamage]

Regardless of your choice of architecture or OS, this news is great for consumers and technology users. I may not use a Mac, but as long as Apple is out there, out of debt, and profitable I don't have to worry about Microsoft having free reign over the direction of the computer industry. XP Pro works fine for me right now when I need to get real work done (sidenote: please, Linux, work completely on laptops soon!), but if Gates & Co. decide to slide farther down some restrictive draconian path of DRM I know that I can switch in a heartbeat.

We all saw what happened when AMD became a viable competitor for Intel, processor speeds dramatically increased and prices dropped.

Without Apple continuing to innovate and capture user mindshare we'd all probably be stuck using something along the lines of Windows ME.

Re:This is good news for all computer users.

[GrahamCox]

Without Apple continuing to innovate and capture user mindshare we'd all probably be stuck using something along the lines of Windows ME.

No, without Apple continuing to innovate we'd all probably be stuck with the C:/ prompt, text displays (with maybe a graphics mode you could switch to for the odd spreadsheet graph), and an internet based on Lynx. I bet M$ would never have even thought of the GUI without Apple showing how it could be done.

good insights from Feb 3 article

[octalgirl]

The article

"Let's do the math: According to its latest earnings report, Apple averaged $349 in revenue per iPod sold. If prices remain stable, 3 million iPods would generate more than $1 billion in revenue. Four million units could produce $1.4 billion in sales. Apple sold $345 million in iPods during fiscal 2003.

Turning the dial to iTunes, Apple says that more than 30 million songs have been sold to date, with 17 million of those coming during the Christmas quarter. The Pepsi promotion should dramatically increase iTunes traffic. Add in the help from HP and paid downloads could pass 100 million during 2004. At that level, Apple should make a few pennies per song, up from zero now."

Re: good insights from Feb 3 article

[AaronD12]

...Apple averaged $349 in revenue per iPod sold.

That's particularly impressive since the iPod sells for $299 (15GB), $399 (20GB), and $499 (40GB). Even if Apple only sold the 40GB iPods, the $349 per unit revenue would be more than a 200% markup over cost. If that's true, why haven't other manufacturers been able to undercut Apple more significantly?

Being that the median price of the iPod (not sales-weighted) is $399, I can't believe it only costs $50 to make an iPod.

They still owe me!

[Perl-Pusher]

One ibook logic board! When I get my ibook back only then will the debt be paid!

The Wonders Of Spam

[Ilan Volow]

Steve Jobs must have replied to one of those anonymous e-mails titled "GET OUT OF DEBT NOW".

Re:The Wonders Of Spam

[bruthasj]

It was actually an influx of cash via a Swiss bank account held by the nephew of the late king of Nigeria. Steve finally alleviated them of their financial burden.

Get out of debt!

[markov_chain]

If companies with $4B in cash are responding to spam, we don't have a chance... Allman is right!

InternalMemos.com has the real memo

[smart.id]

If in fact it is the real memo, InternalMemos.com (from the same people who brought you FuckedCompany) has it. It just looks kind of suspicious because of how short it is, but that very well may be it.

Re:Bad - Enterpise Value

[MerlynEmrys67]

So lets figure out how this works...

Lets assume I want to buy Apple - all of it

First I buy all of the shares

Now I get access to their bank account - if the company has net debt (see Disney) I have to pay that off (either through loan payments, or through other means)

If the company has net cash (see Microsoft) I can take that money and do whatever I want with it

So Enterprise value of a company is

The cost of all of the shares of stock

Plus the debt of the company

Minus the cash/etc. of the company

End result is paying debt off from cash is a net wash on enterprise value because the cash is smaller, but the debt is as well.

End result is I prefer companies with smaller debt loads - it is easier to predict their earnings (every penny they make goes to profit, not debt service) however companies with large debt loads can have huge swings in earnings because the first 10 bucks they make go to debt service, and every penny beyond that goes to profit - so a small change in profits look a lot bigger (compare 10.02 to 10.01 dollars vs. 0.02 vs 0.01 as a percentage)

Re:want confirmation? - SEC filling just happened

[RazzleFrog]

Most filing is quarterly not trimesterly. Their second quarter reports have historically been published in the middle of April.

CFO Fred Anderson is Retiring in June

[good soldier svejk]

I guess Fred feels his work is done now, because he is calling it quits on June 1. Anderson has been instrumental in solving Apple's financial problems from the day Gil Amelio hired him in 1996. He created the company's large cash reserves by liquidating unnecessary capital investments (plant), issuing a convertible debenture and selling some of their valuable ARM holdings. Then he managed the investment of those funds astutely enough to make the conversion of those outstanding notes to common stock a huge win for both the company and creditors. That 1999 conversion alone eliminated about two thirds of Apple's long term debt (conversely that means the issue had assumed most of Apple's debt). Really, this guy has done an outstanding job. You can thank him for their sound financials.

ok, so...

[pb]

Apple's got like $5 billion in cash lying around, Microsoft has $50 billion or so last I heard... Just to put this into perspective, $50 billion dollars is about $166.67 from every man, woman, and child in the US, or about enough for them each to buy a copy of Windows retail (or almost two upgrade editions or full OEM editions). It's almost equal to the GDP of Iraq in 2002. You could hire a million people full-time with that money and pay them $25/hr for a year. It's a lot of money.

The profit margin on software is about as high as a profit margin can be, and even when you consider that they spend money on R&D, salaries, advertising, buildings, manufacturing, computers, etc., etc. -- that's still an enormous mark-up from the market value of their products. (They both sell hardware too, and in Apple's case, there's a hefty mark-up on that as well, especially RAM--but not nearly as much as there is on software.)

So it'll be interesting to see what happens, as Microsoft slashes prices on core offerings to compete with Linux, and newer desktop environments and toolkits are developed across the board to compete with Apple. Still--I don't know about TCO, but there should be no doubt in your mind that these companies are overcharging. :)

Re:ok, so...

[prockcore]

Apple's got like $5 billion in cash lying around, Microsoft has $50 billion or so last I heard

A little more perspective: Nintendo has $10 billion in cash.

debt = leverage

[Anonymous Coward]

Debt can be a good thing, for reasons other than taxes.

Debt is the basis of leverage. Example: I have 1 million dollars. I buy a house for 1 million dollars. The house appreciates 10% in a year, and now I just made $100,000 off my investment. However, lets say you put down $100k on the 1 million dollar house, and the house still appreciates 10%. You just made 100k w/ 100k for a 100% return on your investment. Had you done that w/ ten other houses, you doubled your net worth. Of course, there would be a cost associated with borrowing that kind of money. Youre ahead as long as your cost of borrowing does not exceed your rate return. It gets alot trickier, and generally tilts the balance in favor of taking on alot of debt when you bring tax benefits into the picture. In the case of a house, the mortgage interest is deductible, so money is essentially 30-40% cheaper to borrow than whatever interest rate you are paying. Also, inflation eats away at your debt costs.

Of course your risk is alot higher. During good times, you can make a killing. But if the values of your assets start falling, you can quickly lose your shirt, and then some. in the 100k down on 10 houses scenario, a 20% drop in asset value would put you in the hole about 1 million (thats a net value of -1 million) as opposed to the opposite scenario where you are still worth 800k.

Re:This is a bad thing

[Ill_Omen]

Just because interest rates are low now doesn't mean they were low when Apple took out the loan that they paid off, does it?

I can imagine (read: I have no real idea) that the interest rates charged to a struggling company that many people have given up for dead (ie Apple before the iMac) are quite high.

Correction

[I8TheWorm]

Just a quick correction (not a Troll... I'm glad they're doing well)...

Also noted in the memo is that Apple has $4.8 billion in the bank at this time.
and
Apple has $4.8 billion in total assets

Are not synonymous. Assets include buildings, machinery, office equipment, which I'm sure Apple has laying around somewhere...

Re:Interesting for a public company.. HA HA

[acomj]

I work for a company with huge debt (100s of millions$$). We're in the pay it back stage vs the borrow and grow stage. Its not good. It takes a huge chunk of our profits and some of the purchases didn't work out as well as expected. It hasn't helped our valuation...

Actually Corporate debt is not a Bad Thing

[D-Fly]

You have to be careful about conventional wisdom when it comes to economics.

Here's a pretty good case study from the Motley Fool on why taking on corporate debt is often better than trading away shares to make acquisitions. Basically, in this case, taking on a lot of debt is fine if it increases cash flow.

In general, if a company's risk rating is good, you could say that it is in fact wasting money by NOT taking on some debt in order to build infrastructure or make acquisitions.

As the Economist points out in an article called Debt is Good For You," "dividends are paid out of companies' net-of-tax income,and are then taxed again in the hands of the recipients. Interest payments on debt, on the other hand, are tax-deductible."

"This means that a firm's overall value should increase as it substitutes debt for equity."

Re:All this means...

[kannibal_klown]

You'r thinking of Dell. I have literally always said that my 2 Dell laptops felt like they were manufactured by Fisher-Price. They were made of cheap, flimy pastic; worse than cheaper brands of notebooks.

Allps products are usually built like tanks. The iBooks (though cheap in price) are sturdy little buggers, and the powerbooks are elegant and sturdy.

While they may LOOK odd, at least their made of sturer stuff.

Fantastic!

[Karl Cocknozzle]

Apple Now Debt Free, Says Internal Memo

How about lets celebrate with Dual-G5s all around?

It was me

[billstr78]

I bought an iBook on Friday for around $1300 without tax. That must have been the sale that pushed them over the edge.

Re:want confirmation? - SEC filling just happened

[stilwebm]

Actually the filings are quarterly and Apple has scheduled their next filing for April 14. However, that is for SEC 10-Q statements. Major debt stucture changes could warrant a non-scheduled 8-K filing.

Apple merges with Pixar

[wheatking]

maybe cleaing up balance sheets and business entanglements to merge Pixar and Apple?

Oh Boy.. Bad IDEA.

[demonic-halo]

If interest rates now are as low as ever,

It should have just refinanced it debt at the lower interest rates then just used all it's free cash to expand operations, and also invest in some solid dividend paying stocks to provide a scource of income incase things don't work out.

By paying off the debt, it has reduced the amount of free cash, and when it need to take out lone to expand operations in the future, it will be at a much higher interest rate.

Apple has had several billions in cash for years

[chriss]

Maybe you remember the MacExpo keynote from 1997, where Steve Jobs announced that a) Microsoft had aquired shares of Apple worth $US 150 million and b) guaranteed that they would continue to offer MS Office for MacOS for at least another five years. Today this is still recalled by a lot of PC fans as the day Microsoft saved Apple by buying stock. But what most people did not see was that at that time Apple already had several billions in reserve (I think it were four) and the stock Microsoft bought was basically symbolic, the major news was the Office deal. (http://antibogon.org/Stepwise/TheHolyGrail.html mentiones that Apple was worth $US 7 billion at that time.)

So if Apple now claims to be debt free this does not mean at all that they finally earned enought to pay back their debt. They could have done that years ago. It just means that they decided (for some strange fiscal reasons) to pay back everything in 2004 (remember, debt is positive from a tax point of view) and that, as usual, Steve Jobs takes this non-news and transforms it into holy water for the mac users.

Posted from my blessed iBook

Re:The big question

[JHromadka]

Will Apple use a bit of additional money to pay back the money Microsoft invested in them back... oh, was it 5, 6, 7 years ago? That might revive the old OS wars, and make a lot of Mac fans (including myself) quite happy...

Bah. See my sig. MS sold their shares of Apple a long time ago.

Re:is that a good thing? NO! and YES!

[gosand]

With interest rates as low as they are right now, shouldn't they be borrowing and investing more in the future, or some such economic technobabble like that? Cash in the bank can't be giving them as much growth as investment would...

Well, what are you referring to? Is it good that they are out of debt? Yes. Is having no debt necessarily good for a company? No. Can Apple now borrow a ton of money and go back into debt? Yes.

What we didn't see was the second memo that went around saying "So now we can borrow our asses off!" :-)

All this is saying is that they are out of debt. If they are like most people, the second they get out of debt, they usually go right back into it somehow. Maybe they paid off their higher interest debt, and will be able to get a big chunk of R&D money at lower rates. Hell, maybe this was just a PR thing to get them in the news. Seems to have worked...

Not relative to GDP.

[iceperson]

To use numbers without regard to inflation or their relation to GDP makes no sense. But then again the adjusted numbers don't validate your percieved "reality" so you choose to ignore them.

Thanks to Spam, to boot!

[Anonymous Coward]

All it took was for Jobs to respond to an email informing him that m0rttgage rattes are at an ALLL T1ME L0W, refnance now!

fdsaf fdfg4r
uttmfgs bnswf mmsgv orange micron
"And what would you havve me do?" Said Emma. The Rain in Spain falls mainly in the plain.

Click here to unsubscrbe.

Re:Good for Apple

[mbbac]

Imagine a decked-out G5 costing the same as a similar Wintel box+monitor.

They already do.

Apple paid cause the debt was due

[RyanP]

The article said: "But there was still $300 million of remaining debt, which we decided to hold to maturity." Doesn't this mean that they paid off the debt when it came due? I know there's tax advantages, but the debt was due, the way I read it...

-Ryan

Re:want confirmation? - SEC filling just happened

[delphi125]

Trimesterly means every three months.

Quarterly means four times a year.

Your confusion probably arises from the fact that there are only three school terms, the word 'term' being an anglification of 'tri-mester'. To compound that, the prefix 'se-' before 'mester' in those schools which work with two longer terms (sems?) could easily be confused with 'semi'.

Attractive takeover target?

[OgGreeb]

According to money.cnn.com, Apple's market cap is about $8.6 billion. With (now) no debt, $4.8 billion in the bank and a relatively thriving and growing niche (plus the music distribution), doesn't this make them an even more attractive takeover target, with their bank account paying for much of the cost of acquisition?

And $300 million is missing from my PayPal acct.!

[turnstyle]

"Apple used $300 million in cash to pay off the rest of their debt, and is now a debt-free company."

And I just noticed that $300 million is missing from my PayPal acctount! The bastards.

Well, Apple said this would happen

[sribe]

Since this is not coming straight from Apple, confirmation -- or debunking -- would be helpful.

Well, given that at the announcement of their last quarterly results they stated that they would likely pay off their debt this quarter, it seems likely that this is true.

Re:Good for Apple

[gobbo]

Imagine a decked-out G5 costing the same as a similar Wintel box+monitor.

OK, I'm shopping right now anyway. I go to dell.ca and apple.ca and try to build equivalents.

Dell:
Dual Xeon 3GHz, 1GB RAM, 250GB SATA, modem, good keyboard low-end mouse, DVD+RW/CD-ROM, Audigy Soundblaster w/ firewire, ATI Fire GL X1 128MB, Win2K, no monitor:
$6,711 [CDN]

Apple:
Dual 2GHz G5, 1GB RAM, 250GB SATA, modem, Superdrive, Radeon 9800 pro, everything else standard, no monitor:
$5,044.00 [CDN]

OK so they aren't exactly equivalent. The Dell includes a floppy; the Apple's missing a mouse button. More, the Apple comes with optical sound connects, firewire800, and gigabit ethernet (no mention of the Dell's onboard networking in the summary). The Superdrive is way better than the Dell's DVD+RW. The Dell has a better video card by a bit. Some think that the Xeons would be faster but that probably depends heavily on application, and the g5's have a huge bus bandwidth. Not to mention other technology differences underneath it all, like case design and wireless integration. Oh, and, umm, bundled software and the operating systems.

Disclaimer: I'm comparing Apples and Dells because they're tier 1 manufacturers and people think Dells are cheap.

So, like, DUDE! why is the Dell costing $1600+ more than the Apple? Is it worth it? Which one is better made, longer lasting, which one is faster over all, which the better deal?

Their last filing

[minkeyboodle]

Their last filing show on their balance sheet showed that they had just over $300 million in long/short term debt. So if they did pay it, then that means they have no "debt." They still have lots of liability, though.

Since this is not coming straight from Apple...

[wfberg]

(Since this is not coming straight from Apple, confirmation -- or debunking -- would be helpful.)

How about you call them? They're required, as any public company is, to release information that may affect their stocks' value in a timely manner, especially if it has leaked - to avoid insider trading. That's a very firm legal obligation.

Have any of you ever tried calling their PR/Investor line and saying "Hi, I'm an editor for slashdot.org, we get x amount of hits, and I'm about to publish y bit of information"?

Objective-C

[Kris Magnusson]

Came from an author named Brad Cox, in book that's sitting on my floor called Object Oriented Programming: An Evolutionary Approach.

NeXT made a decision that it would be the next big thing due to its dynamic binding qualities, required for the AppKit and other kits, so they licensed it. ........... kris

But I thought Apple was still beleaguered

[Infonaut]

What happened to all the doom and gloom?

Where are the Wired magazine articles about how to "save" Apple?

Where in the hell is Dvorak when you need him?!

Why does apple keep so much in the bank?

[Unregistered]

It seems like it would make more sens for apple to put that 4.8 bil to good use instead of sitting on it by trying to expand into new markets, or if SJ doesn't think there are any new markets ready to be moved in to, selling at a loss as to get more customers. Do they keep tose cash reserves because they have been in financial trouble before and want to avoid that ever happening agiain or what? Or is 4.8 bil not nearly as much of a big deal to apple than i thought. Cauase it seems pretty wasteful it it only exists so we can easily respond to apple is dying trolls.

Re:Wasn't he also acting CEO?

[good soldier svejk]

Yes, he was acting CEO. He was also the only member of Gil's management team to survive Steve's purge, IIRC.

Supplementary Math Lesson

[Christopher Whitt]

When calculating interest, you use 1.x where x is the interest rate. 4% = 1.04 > 1 so while not that large, it does not tend toward to zero.

Re:Good for Apple

[Sgs-Cruz]

It's not so much the difference in price for the high-end stuff that matters. Apple equipment has a price vs. performance curve that starts high and is relatively shallow. Dell and others have one that starts very low but increases exponentially.

Yes, we know that the Apple curve is below the Dell curve for that fucking supercomputer you've spec'd out. But do the same comparison on equipment that would be okay for most home users, and it's a bit of a different story.

Predates but basically separate

[ynotds]

NeWS is about the only thing that would get me to post this late in the life of a story, and with mod points to burn.

My then company, PICA Pty Ltd, worked with both Sun and Adobe on the respective fronts way back then. Sun encouraged us to devote our own resources to a Macintosh port of NeWS by contracting us to develop NeWS demonstration applications, some of which got a guernsey in Gosling, Rosenthal and Arden's NeWS Book .

We were a recognised early player in the PostScript game because I landed the job of doing a technical review of one of the first two Apple LaserWriters to reach Australia for Australian Macworld. That led to PICA becoming the local distributor for Adobe and other early desktop publishing products, and to me contributing the final chapter to Roth, ed's Real World PostScript .

In what may seem like several cases of deja vu, Michelle Arden was very keen to help us try to convince Adobe to open up control of the PostScript standard, yet within a couple of years Sun, having made themselves quite unpopular through the success of NFS, were then rolled by the rest of the Unix community who insisted on adopting X as the blessed window system ahead of the much superior NeWS.

Despite strong support from our main contact person, the inability to focus by Sun's Sydney office brought our efforts to a premature end, on one hand because they had initially tried to motivate us by suggesting we were in competition in the porting project with Keith Henson's Grasshopper Group. Then when I finally met Keith we became instant friends. Meanwhile Sun Australia also managed to hold up payment for our contracted work for 14 months.

Bottom line is that Sun's efforts with NeWS were in spite of Adobe. The significantly later Display PostScript did not borrow directly from NeWS in any way. If Sun ever gain a clue as to why they are being overrun by history, despite making a technical contribution over the years that has been disproportionate to their financial strength, one thing they could start with even at this late stage would be releasing NeWS to the public domain.

Apple hiring hardware designers by the dozens

[Ross Heinlein]

I don't know if the memo is real or not, but I've just been hired by Apple, and they are hiring hardware guys hand over fist. I only wish I could talk about the things being worked on here!