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.
 

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Tom Watson rouses Labour's conference as he comes out fighting

The party's deputy leader exhilarated delegates with his paean to the Blair and Brown years. 

Tom Watson is down but not out. After Jeremy Corbyn's second landslide victory, and weeks of threats against his position, Labour's deputy leader could have played it safe. Instead, he came out fighting. 

With Corbyn seated directly behind him, he declared: "I don't know why we've been focusing on what was wrong with the Blair and Brown governments for the last six years. But trashing our record is not the way to enhance our brand. We won't win elections like that! And we need to win elections!" As Watson won a standing ovation from the hall and the platform, the Labour leader remained motionless. When a heckler interjected, Watson riposted: "Jeremy, I don't think she got the unity memo." Labour delegates, many of whom hail from the pre-Corbyn era, lapped it up.

Though he warned against another challenge to the leader ("we can't afford to keep doing this"), he offered a starkly different account of the party's past and its future. He reaffirmed Labour's commitment to Nato ("a socialist construct"), with Corbyn left isolated as the platform applauded. The only reference to the leader came when Watson recalled his recent PMQs victory over grammar schools. There were dissenting voices (Watson was heckled as he praised Sadiq Khan for winning an election: "Just like Jeremy Corbyn!"). But one would never have guessed that this was the party which had just re-elected Corbyn. 

There was much more to Watson's speech than this: a fine comic riff on "Saturday's result" (Ed Balls on Strictly), a spirited attack on Theresa May's "ducking and diving; humming and hahing" and a cerebral account of the automation revolution. But it was his paean to Labour history that roused the conference as no other speaker has. 

The party's deputy channelled the spirit of both Hugh Gaitskell ("fight, and fight, and fight again to save the party we love") and his mentor Gordon Brown (emulating his trademark rollcall of New Labour achivements). With his voice cracking, Watson recalled when "from the sunny uplands of increasing prosperity social democratic government started to feel normal to the people of Britain". For Labour, a party that has never been further from power in recent decades, that truly was another age. But for a brief moment, Watson's tubthumper allowed Corbyn's vanquished opponents to relive it. 

George Eaton is political editor of the New Statesman.