Einhorn has a point: what the hell is Apple doing sitting on that money?

Apple hoards cash, apparently, "like a person who has gone through a trauma".

Apple has had to fend off an attack from one of its share holders who is demanding it fork out more of its $137bn cash pile to investors.

David Einhorn has sued iPhone maker Apple accusing the most valuable company in the world of having a “depression era” mentality.

But for a company with a reputation like Apple, which no amount of third world worker scandals seems able to damage, this should be seen as nothing more than an advertisement, splashing the fact that Apple is sitting on more ready cash than a fair amount of small countries on to headlines around the world.

The billionaire activist, who heads up hedge fund Greenlight Capital, told US TV news channel CNBC that Apple hoards cash like a person who has gone through a trauma, referring to Apples near bankruptcy in the early ‘90s before Steve Jobs turned the firms fortunes around with the introduction of the iPod.

Apple shares have tumbled 35 per cent from their peak in September 2012 as its growth has slowed, despite the successful, if not phenomenal, launch of the iPad mini and iPhone 5.

Einhorn’s opinion may be justified; Apple is planning to eliminate its “preferred” stock, which pays out a fixed dividend over time, at its shareholder meeting later this month. These shares are better than ordinary shares when it comes to paying out a company's assets.

Einhorn, it should be noted, has a history of corporate meddling. In May 2011, Einhorn called for Steve Ballmer, (who is still) CEO of Microsoft, to step down after Microsoft was passed by both IBM and Apple in market value.

While Einhorn may not be the most trustworthy of activists, his point may well stand: What the hell is Apple doing with all that money? 

Apple has never explained its reasons for holding onto the cash other than to say its preserving its options but it certainly isn’t using it to develop new products. Apple's tally for research and development in 2012 was 2 per cent of its annual spend, dwarfed by its tech rivals. IBM’s for example is 6 per cent.

While Einhorn’s motives for demanding Apple make use of their cash maybe entirely about increasing his own fortune, Apple is in danger of stagnation if it doesn’t use its vast hoard wisely. 

Maybe the reason it has yet to spend its money is that, without the guiding light of Jobs at the helm, it doesn’t know what to spend it on.

Photograph: Getty Images

Billy Bambrough writes for Retail Banker International at VRL financial news.

Photo: Getty Images
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Autumn Statement 2015: George Osborne abandons his target

How will George Osborne close the deficit after his U-Turns? Answer: he won't, of course. 

“Good governments U-Turn, and U-Turn frequently.” That’s Andrew Adonis’ maxim, and George Osborne borrowed heavily from him today, delivering two big U-Turns, on tax credits and on police funding. There will be no cuts to tax credits or to the police.

The Office for Budget Responsibility estimates that, in total, the government gave away £6.2 billion next year, more than half of which is the reverse to tax credits.

Osborne claims that he will still deliver his planned £12bn reduction in welfare. But, as I’ve written before, without cutting tax credits, it’s difficult to see how you can get £12bn out of the welfare bill. Here’s the OBR’s chart of welfare spending:

The government has already promised to protect child benefit and pension spending – in fact, it actually increased pensioner spending today. So all that’s left is tax credits. If the government is not going to cut them, where’s the £12bn come from?

A bit of clever accounting today got Osborne out of his hole. The Universal Credit, once it comes in in full, will replace tax credits anyway, allowing him to describe his U-Turn as a delay, not a full retreat. But the reality – as the Treasury has admitted privately for some time – is that the Universal Credit will never be wholly implemented. The pilot schemes – one of which, in Hammersmith, I have visited myself – are little more than Potemkin set-ups. Iain Duncan Smith’s Universal Credit will never be rolled out in full. The savings from switching from tax credits to Universal Credit will never materialise.

The £12bn is smaller, too, than it was this time last week. Instead of cutting £12bn from the welfare budget by 2017-8, the government will instead cut £12bn by the end of the parliament – a much smaller task.

That’s not to say that the cuts to departmental spending and welfare will be painless – far from it. Employment Support Allowance – what used to be called incapacity benefit and severe disablement benefit – will be cut down to the level of Jobseekers’ Allowance, while the government will erect further hurdles to claimants. Cuts to departmental spending will mean a further reduction in the numbers of public sector workers.  But it will be some way short of the reductions in welfare spending required to hit Osborne’s deficit reduction timetable.

So, where’s the money coming from? The answer is nowhere. What we'll instead get is five more years of the same: increasing household debt, austerity largely concentrated on the poorest, and yet more borrowing. As the last five years proved, the Conservatives don’t need to close the deficit to be re-elected. In fact, it may be that having the need to “finish the job” as a stick to beat Labour with actually helped the Tories in May. They have neither an economic imperative nor a political one to close the deficit. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.