Quote:
Originally Posted by HotHotHeat
Off topic question.... But why would Apple want to hold that much cash in their reserves? As opposed to reinvesting it or buying up other assets?
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Just kinda delving back into this thread...
This is OT, but the reason Apple holds that large chunk of cash is to be able to make bulk purchases of components for their products. With the large orders they put in, they can negotiate better pricing, which then allows them to reduce the price of their products.
This has been Apple's m.o. for the last decade:
1) Spend the time and money to make something of high quality, and put it out there at a premium.
2) As you refine your product, watch competitors try to release ver 1.0 of theirs.
3) Through purchasing clout and market leadership, Apple makes ver 1.0 of their product competitively priced at the entry level, and they also release ver 2.0 at a premium price. At the same time, competitor ends up releasing their ver 1.0 at a premium price to apple's ver 1.0 product.
They've played this beautifully with the Ipod (can anyone name another mp3 player?), are playing it with the iphone (the iphone 3GS is now super cheap) and will do it with the ipad.
The money gives them the leverage to capitalize on their innovation.