Apple’s $15 billion cash hoard

Pop quiz: Which tech company has the most cash?

(A) IBM (IBM)

(B) Hewlett-Packard (HPQ)

(D) Google (GOOG)

(E) Apple (AAPL)

If you picked E, congratulations. Apple’s $15.4 billion stash is indeed the biggest of the group, putting the iPod maker in the elite ranks of well-heeled Fortune 500 tech companies. (Only Microsoft (MSFT) and Cisco Systems (CSCO) stockpile more.) And lately the stacks have been rising fast; Apple has added $5 billion to its coffers in the past year alone, according to regulatory filings.

Unlike Microsoft or Cisco though, Apple (AAPL) doesn’t pay a dividend, doesn’t make big acquisitions, and doesn’t buy back many shares. Last month the company reported that since 1999, it has spent a relatively paltry $217 million to repurchase stock, though its board has authorized $500 million for that purpose.

So what does CEO Steve Jobs have in mind for all those greenbacks?

Traditional money managers would say he has to spend them somehow. Sure, a growing mound of cash looks impressive on financial reports; and a growing cash reserve also can be a sign of above-board profitability, since it’s easier for companies to play games with income numbers than with cash flow. But if the money just sits there, it smacks of waste.

When asked about Apple’s plans for the cash, a spokeswoman referred to chief financial officer Peter Oppenheimer’s statements earlier this year. When a Lehman Brothers analyst asked him where the money would go, Oppenheimer didn’t offer specifics beyond saying that having a few billion on hand helps to fund big projects, and “we do discuss share buyback and other forms of returning cash to the shareholders with the board from time to time.”

Indeed, investors tend to discuss those things, too — they like to see that kind of money either used to place big bets that drive future earnings, or handed back to them through buybacks and dividends. Technology companies often resist such suggestions, but not always. Under pressure from investors, Microsoft began offering a dividend five years ago.

Of course, as a quick glance at a stock chart makes obvious, Apple is not Microsoft. While the Redmond software giant has performed well — shares are up a respectable 15 percent this year on the strength of Windows Vista sales — Apple’s stock price has doubled. Considering Apple’s standout performance, and a big year ahead as the iPhone and redesigned iPod push into new overseas markets, no one’s about to start lecturing Jobs on shareholder value.

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But that still doesn’t answer the question of where Apple’s going to put that $15 billion, not to mention the next couple billion dollars it will probably pocket during this holiday season alone. Though Apple isn’t talking about its spending plans, history offers some clues.

If the past is any guide, Jobs & Co. could very well use some of the money to swallow smaller companies. In 2001 Apple bought education software company PowerSchool; in 2002 it went on a binge and snapped up audio production company Emagic, video effects company Nothing Real, and FireWire developer Zayante. (Apple’s acquisition record is mixed; it sold off PowerSchool last year and its FireWire technology has taken a backseat to USB 2.0, but audio and video software efforts have flourished.) It’s conceivable that Apple could use cash to buy its way into a new niche, like social networking or online collaboration.

Or Apple could make some investments. During tough times, the money Apple had put in Akamai Technologies (AKAM) and ARM Holdings (ARMHY) provided the company with valuable infusions of cash when necessary. It’s a bit more difficult to find places to stash $15 billion, however.

Might the company really launch a large-scale buyback program, or begin offering dividends? For Apple, there’s limited advantage in doing that until investors force the issue. Once a company gets onto the dividend treadmill, it has to keep doing it or risk being seen as in decline. The same goes for stock buybacks. For example, in its heyday Dell (DELL) regularly bought back $1 billion or more worth of stock at a time. Though Michael Dell surely needs every cent these days to finance a turnaround, analysts are already asking about restarting the old buybacks as a sign of renewed health.

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At Apple, there are some sizable projects ahead that could demand sizable chunks of cash. One of the few Apple endeavors that doesn’t get much press is the brand new campus the company plans to build down the road from its current Cupertino, Calif., headquarters, which should bring together teams of engineers that are now mostly scattered in offices around the area. Real estate experts last year suggested that Apple’s project costs could top $500 million, once it gets through tearing down old buildings at the future site. And, of course, it’s not clear whether their estimates factor in the possibility that Steve Jobs might decide to make a big architectural statement.

Finally, there’s always the chance that Jobs will surprise us all, break with tradition, and buy something big. Consider this: Just for kicks, with the money burning a hole in Apple’s pocket, he could easily buy TiVo (TIVO), Netflix (NFLX) and Circuit City (CC), and still have plenty left in the bank.