Investing

How America's Richest Companies Invest Their Cash

5. Apple (NASDAQ: AAPL)

> Cash, cash equivalents and short-term investments: $30,156 million
> Corporate securities: $8,171 million
> U.S. government and agency securities: $7,431 million
> Cash: $3,956 million
> Money market funds: $3,495 million

In addition to the $30 billion listed here, Apple has $67 billion classified as long-term marketable securities, which is mostly invested in corporate securities. Wall St. is waiting for Apple to decide what to do with the money. iPhone sales may be so huge that Apple’s cash balance improvement could move up $30 billion a quarter for the next few quarters. With a cash balance and longer term investment holdings of nearly $100 billion, the amount is nearly 20% of the company’s market capitalization. As the balance moves toward $200 billion, it will be interesting to see how Apple’s market cap is affected.

4. Oracle (NASDAQ: ORCL)

> Cash, cash equivalents and short-term investments: $31,012 million
> Commercial paper debt securities: $16,855 million
> Corporate debt securities: $2,018 million
> U.S. government and agency securities: $1,065 million

To keep evolving from its database software roots, Oracle uses frequent acquisitions to help expand its scope to servers and cloud services. Oracle is using $1.9 billion to purchase Taleo, which provides cloud-based talent management software. Big investments since 2005 include Sun Microsystems, BEA Systems, Siebel Systems and PeopleSoft. Founder and CEO Larry Ellison’s bias toward growth through mergers and acquisitions could reduce Oracle’s cash balance. But if the acquisitions are intelligent, the new acquired companies should eventually help strengthen Oracle’s balance sheet.

3. Google (NASDAQ: GOOG)

> Cash, cash equivalents and short-term investments: $44,626 million
> U.S. government and agency securities: $18,080 million
> Agency residential mortgage-backed securities: $6,501 million
> Corporate debt securities: $6,112 million
> Cash: $4,712 million

The search engine giant is not expensive to run compared to sales as reflected by Google’s 33% operating margin during 2011. Google, which has never paid a cash dividend, is using $12.5 billion to buy a partner of its Android operating system, Motorola Mobility. In some ways Google is like Apple. Each has achieved high operating margins for its sector. This remains true for Google, even as it adds thousands of employees per quarter. The growth in search revenue is still incredibly impressive. In terms of future cash generation, however, it is yet unclear whether Google can migrate its search ad model to mobile devices and make money from its widely used Android mobile operating system.

2. Cisco Systems (NASDAQ: CSCO)

> Cash, cash equivalents and short-term investments: $46,742 million
> U.S. government and agency securities: $29,590 million
> Money market funds: $6,612 million
> Corporate debt securities: $4,234 million
> Non-U.S. government and agency securities: $2,890 million

Networking products, such as routers and switches, account for half of Cisco’s revenue. Profits from this market have fueled an acquisition binge that lasted most of the past decade. After slumping on Wall St. in 2010, Cisco announced in 2011 a reorganization plan. It will focus on the margins of its core operations of routers and switches. As part of this plan, headcount is down about 8,000 over the past six months, and the Flip video camera line is gone. At the end of 2011, Cisco added to its cash, cash equivalents and investment balance and increased its 2012 dividend.

1. Microsoft (NASDAQ: MSFT)

> Cash, cash equivalents and short-term investments: $51,736 million
> U.S. government and agency securities: $31,700 million
> Corporate notes and bonds: $12,042 million
> Cash: $2,349 million
> Mortgage-backed securities: $2,018 million

Microsoft’s Windows franchise has been a huge cash generator for years. Microsoft’s online services and gaming divisions cut into the overall margins, but the company still has more than $50 billion on the books. Almost eight years ago, Microsoft decided to return $32 billion of its cash to shareholders with a one-time dividend. Microsoft spent $8.5 billion to purchase Skype last year, and its past four quarterly dividends amounted to $6 billion. Microsoft has gotten all of its cash from the divisions of its Windows franchises: Windows, Business, Tools & Servers. Last quarter, Microsoft had operating income of $2.8 billion from its flagship Window division on revenue of $4.7 billion — an extraordinary margin that should continue to increase the company’s cash balance

-Brian Zajac