APPLE CAPITAL: New love of Apple’s finance arm

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Our beloved Apple just hit the $800 billion mark in the market capitalization, midway this year. In the era of computer and mobile technology, where iPhones and Macs are ubiquitous, their sales was one of the most important factor for apple to reach this valuation and set up an industry standard. But in the hindsight, there is another factor which is also increasing the revenues for Apple Inc. day by day. The Apple Capital.

We all have a very clear picture of Apple as a pioneer in the technology industry by setting new standards every year with the release of its iPhones and Macbooks. Well, it looks like along with technology, Apple has also developed its interest in finance. In the post Steve Jobs era of Apple, the company has massively increased its investments in various financial instruments.

The long term marketable securities have a significant role in any company’s investment portfolio. But with Apple, this significance have been increasing day by day. Apple Capital previously used to invest in Government bonds mainly which were fairly risk averse, but now the course has changed. Around 68% of Apple Capital’s investment is in other type of securities which consist of corporate bonds. After Jobs, the company’s assets grew by 110%, but the growth of Apple Capital has been almost double of that by nearly 220%.Thus these investments have been a major part of the profits of the company. These investments have contributed 7% in the overall profits of Apple Inc.

How can this affect Apple?

Well, as the trend shows, the investments of apple are moving away from the risk averse towards the risky assets. With time passing by, the returns from these financial instruments will rise and so will the risk. The global demand of Apple products is on a declining trend. Samsung as well as the Chinese competitors are taking over the market with Google being a new competitor in the pond. In adverse situations, these investments will save Apple, but instead of sitting and waiting for it, Apple should focus on developing better and disruptive technology. The gradient of innovation by Apple is at an all-time low in the post Jobs era. Let’s hope Apple gets back its “Adrenaline for Innovation” back as soon as possible.

 

ADITYA GURJAR

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