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Tech's cash kings are sitting on billions

Compared to other industries, tech companies are the keepers of the cash

By , Network World
September 03, 2013 06:00 AM ET
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Credit: Nata Metlukh

Network World - Tech companies are hanging onto record amounts of cash, and industry watchers want to see more of it reinvested in the companies or distributed to shareholders.

FactSet, a financial research firm, tallied all the cash and marketable securities held by the S&P 500, excluding companies in the financials sector. Collectively, these non-finance companies reported $1.29 trillion in cash and short-term investments at the end of the first quarter, a gain of 7.8% compared to year-earlier numbers.

All that cash isn’t distributed equally, of course, and tech stalwarts are among the biggest hoarders. FactSet named the top 10 cash-rich companies, and half of them are in the tech industry: Microsoft, Google, Cisco, Apple and Oracle. Combined, these five tech companies held $245 billion in cash at the end of March -- which is 19% of the $1.29 trillion total.

TOP HOARDERS: 15 tech companies with huge cash piles

(“Cash,” for the purposes of this article, refers to the sum of cash, cash equivalents, and short-term investments in marketable securities, which can easily be converted into cash. Long-term investments aren’t counted.)

Both cash ratios (cash as a percentage of assets) and cash levels have been going up in U.S. corporations in general -- and tech companies in particular -- over the past several years, says Nikhil Varaiya, director of graduate programs and professor in the finance department at San Diego State University. “Current operating cash flows are higher than their current investment needs, so cash is beginning to pile up.”

Young companies, generally speaking, need cash to fuel their growth. As companies mature and growth slows, cash begins to accumulate. In the U.S. tech sector, a handful of big companies have been raking in the cash in recent years.

• Microsoft’s cash and short-term investments add up to $77 billion as of June 30. That total includes $3.8 billion in cash and cash equivalents, and $73.2 billion in short-term investments. Microsoft’s cash pile has been growing steadily since the end of 2008, when it totaled $20 billion.

• Google is sitting on $16.16 billion in cash and cash equivalents and $38.27 billion in marketable securities. Save for a dip in mid-2012, Google’s cash pile has been expanding for the last several years, climbing from nearly $16 billion in late 2008 to more than $54.4 billion today.

• Cisco’s balance sheet is flush with cash. It has $7.9 billion in cash and cash equivalents and $42.7 billion in investments, for a total of $50.6 billion. That’s more than double the $24.4 billion it had five years ago.

• Apple’s cash stash is legendary. At the end of June, Apple reported $11.2 billion in cash and cash equivalents, plus $31.4 billion in short-term marketable securities, for a total of $42.6 billion. (The more eye-popping number is the additional $104 billion Apple has in long-term marketable securities, which isn’t counted in this tally because long-term investments aren’t easily converted into cash.)

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