Apple [stckqut]aapl[/stckqut] has come under a great deal of discussion in the past week or so due to it’s ever expanding hoard of cash. Most companies hate having that much cash in the bank (or perhaps they are not fortunate enough to accumulate it) but Apple seems to really enjoy having a big savings account.
Since all the other bloggers that discuss companies and investing seem to have chimed into this conversation, I have to decided to do it as well. Here are my suggestions:
- Use the cash like they have been. Apple uses its cash very effectively and very aggressively. As pointed out in PC Magazine, Apple effectively uses its cash to gain a technical advantage by locking up its supplier community in ways that their computer and device competitors such as Toshiba, Dell [stckqut]dell[/stckqut], and Hewlett Packard [stckqut]hpq[/stckqut] simply cannot afford to do. They are able to help manufacturers build their plants to create new components and lock in a pricing and supply chain that virtually locks out or delays the competition from the latest and greatest hardware advances. This competitive advantage means that they can continue to create large amounts of profit and build more cash.
- Increase R&D and rapidly expand their products with things that people want. Last year, Apple spent about 2.7% of revenue on R&D (and last year about 3.1%). I would like to see this grow to 7 or 8% of revenue. Yes, this is a big increase but Apple has a unique opportunity to solidify their presence in the markets that are important to them. Think what would happen if Apple had twice as many products that covered a broader spectrum of electronic experience.
- Increase their library. They should vastly increase their library of movies and video content to stream. While they shouldn’t be stupid about the deals that they cut but they need to make deals with every movie and TV content holder out there. The consumer needs to feel that if they want to watch a professionally created video, Apple will always have the content. Making a ton of money in this area is not incredibly important (but don’t do it at a loss). What is more important is that they use this content to drive the sales of more multimedia devices and computers. While they are at it, they need to cut deals with the newspapers and magazines as well. Apple has had some short-sighted rules that have prevented the allegiance of those that create printed material – they need to put these rules aside.
- Streaming. They should make it so that they can stream to their subscribers more easily and more reliably than ANYONE else. Supposedly they are investing in more data centers and that is a project that should be accelerated and expanded. Also, there are rumors of acquisition discussions with Hulu, this would be an acquisition that makes sense as it fits with their core offering today. Some commentators suggest that they should diversify by buying a company like Facebook but that would be ill-advised. Most companies that try to expand into vaguely related markets end up screwing up (think of EBay [stckqut]ebay[/stckqut] buying Skype).
- Integration with the cloud. They should make it so that integration between their products on your local network and between their products and the cloud is seamless and easy – in fact even fun. Lion looks like it has great features in this area but they should take it to a new level. They would do well to expand that connectivity by putting a Windows application out there that makes Windows computers integrate easily and rapidly with Macs/iPhones/iPads. This doesn’t mean iTunes but instead iTunes on steroids – no cords – use the cloud, the private cloud, and the local connectivity connection of the computers.
- Invest in the enterprise. The iPad and the iPhone is making corporate America appreciate Apple. Now they need to get aggressive. They should make sure that corporate enterprise applications (e.g. Salesforce [stckqut]crm[/stckqut], Oracle [stckqut]orcl[/stckqut] and SAP) run well on Apple computers and devices. They should make the cloud and private cloud synonymous with the Apple name. Along those lines, they will need to hire an enterprise sales force. Apple should hire 2,000 of the best and brightest IT sales people on the market today and turn them loose on corporate purchasing agents. With this recession, there are plenty of talented IT salespeople out there that are stuck in jobs that they don’t like. Hire them to sell the vision of Apple and support them to do a great job.
- Cars are run by non-Apple computers. They should make the experience of using a computer be great in all areas that we use computers. This includes hooking up our computers to our cars so that it is simple and doesn’t require a geek to get our music to our cars. In fact, they should partner with one of the major automotive manufacturers and offer to build a great user experience in their vehicle. Does anyone doubt that a group of talented Apple user interface designers couldn’t dramatically improve the user experience of all the electronics in a car? Microsoft [stckqut]msft[/stckqut] started to show the way here with their Sync system in Ford [stckqut]F[/stckqut] vehicles. Sync is a major improvement in functionality and ease of use for most cars – surely Apple can run circles around Microsoft. Of course, Apple would want to make it so that you could only buy this car in an Apple Store and it would likely only use gas from an Apple approved gas station.
- Improve TV. I want to watch TV the way that I want to watch TV and at the time that I want to watch TV. They should make it so that a Mac can easily record any show and that show can easily be streamed to the Apple TV hooked to my TV monitor. I have to think that Jobs cries when he uses a TIVO – does anyone think Apple developers can’t do a better job? Apple TV is a great start but they need to use some of that cash and really step it up in this area.
- Universal phone. They should make my home phone obsolete. They should make it so that when I am in my home, I can integrate my home phone line to my iPhone but not incur cell phone charges. When I am using a phone attached to a wired line (either from the phone company or via the cable company), I need to interact with it like its based on the rotary dial phone that I used as a child. Compare the phone list and pre-programmed keys in your home phone with your iPhone. Do you ever ask yourself, “Why?” For instance, why can I text from my iPhone but not from my home phone? Why do I have a one-inch, 2-color screen on my home phone when I also have this great iPhone that shows me a picture of who is calling me? Apple, please solve this problem for me.
- Invest in programmers. They should teach every kid that has a desire how to program apps in their software environment. Their development environment for applications should be the best that is possible and they should give it away to ever kid in the US that wants one. To go with that, they should offer to train 1 teacher in every high school in the nation in how to teach app development for an iOS device.
So there is my top 10. You probably have a few other things that I didn’t think of for my list. Note that I didn’t say that Apple should pay a dividend. I think a dividend for a company like Apple is a bad idea. I would much rather have them use that cash to double the size of the company and therefore drive the value of my stock for a long time. If the money is really burning a hole in their collective pockets, I would be happy if they gave me some of that money (Steve: you can contact me via the Contact Form on this site or the comments below and I will tell you where you can send me a check). 