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Alphabet overtakes Apple to become most cash-rich company

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Re: Alphabet overtakes Apple to become most cash-rich company

#21

Post by jammygit »

wufufufu wrote: post #16

In StarCraft, you always want to be at 0 minerals and 0 gas because that means you are maximizing your investment into buildings and units. People make fun of you if you don't have the skill to optimize for this.

You also want to survive rushes by the skin of your teeth because it indicates you min maxed your defense perfectly, investing as much as possible into your growth.

I wonder if Facebook is following that approach. Ie, maximizing growth and planning to just barely survive legal scrutiny

Re: Alphabet overtakes Apple to become most cash-rich company

#22

Post by dmix »

ralph84 wrote: post #5
wpasc wrote: post #4

This reminds me of a talk I watched with Peter Thiel and Eric Schmidt. I know Thiel is controversial, but he was well-meaningly digging at Google for running out of ideas and no longer innovating. The criticism was something like "You have so much cash on hand but no ideas to invest in. However, you can't pay a dividend because the second you do, you're admitting you've run out of ideas and are no longer innovating".…

Once you get to Google or Apple scale, you’re essentially a government and run into the same problems with central planning that governments do. It’s absolutely the right move to return the money to shareholders and let them reallocate it to more economically promising endeavors. That doesn’t make a statement about innovation stagnation on the whole, it just reflects the reality of diminishing returns to scale.

Why not buy some companies and get some proper entrepreneurs back into the mix of management? I can't remember any recent major Google acquisitions.

No mega company really has to have internal innovation. And I doubt the pretend internal startups ala skunkswork with an unlimited budget and extensive runways are a real replacement for innovation popping out of the marketplace among the bodies of a hundred other failed/acquihired startups.

Re: Alphabet overtakes Apple to become most cash-rich company

#23

Post by jammygit »

wpasc wrote: post #4

This reminds me of a talk I watched with Peter Thiel and Eric Schmidt. I know Thiel is controversial, but he was well-meaningly digging at Google for running out of ideas and no longer innovating. The criticism was something like "You have so much cash on hand but no ideas to invest in. However, you can't pay a dividend because the second you do, you're admitting you've run out of ideas and are no longer innovating".…

He elaborated on the idea in Zero to One. Amazing book and highly relevant here

Re: Alphabet overtakes Apple to become most cash-rich company

#24

Post by aero142 »

wufufufu wrote: post #16

In StarCraft, you always want to be at 0 minerals and 0 gas because that means you are maximizing your investment into buildings and units. People make fun of you if you don't have the skill to optimize for this.

Google is clearly ultra late game zerg. They are floating minerals, gas, and larvae to remax on a tech switch. This analogy is holding up surprisingly well.

Re: Alphabet overtakes Apple to become most cash-rich company

#25

Post by johannes1234321 »

bjelkeman-again wrote: post #15
Jun8 wrote: post #8

Earlier quoted context omitted.

Here's an HBR article that addresses some of the misunderstandings in maligning buy back programs: https://hbr.org/2018/03/are-buybacks-really-shortchanging-in... . They comment that: "... when we look at CAPEX and R&D as a percentage of revenue ... over the past 25 years, we see that the overall investment intensity of S&P 500 firms, while quite volatile on a year-to-year basis, has been rising over the past decade,…

I wouldn’t start one company. I would take a leaf out of Y Combinator’s book, and start funding lots a small startups, as well as advising them. I’d would attempt at investing in such a way that I create an ecosystem of companies that can learn from each other and support each other. I’d focus on climate resilience. Lots of current practices will be disrupted by changes we are already seeing. Easy? Probably not, but…

If Y Combiantor is doing that already why should Google? They can observe the development and then buy the winner (with a premium)

If Google/Alphabet does too many investments which fail shareholders will cry.

Re: Alphabet overtakes Apple to become most cash-rich company

#26

Post by johannes1234321 »

ergothus wrote: post #10
defertoreptar wrote: post #6

Earlier quoted context omitted.

The only way he doesn't have a point is if Google thinks its company is significantly undervalued, in which case buybacks are smart. Their CEO, Sundar Pichai, gets a huge stock-based compensation, so you have to factor in how management has a large incentive to grow the stock value, but not necessarily in the long term (making buybacks desirable regardless of whether the company is actually cheap or not).

> if Google thinks its company is significantly undervalued, in which case buybacks are smart Honest questions here, as my stock understanding is fairly limited: Why does a company care if it's "undervalued"? How does a buyback actually change that valuation? (doesn't the market cap remain the same after the purchase?)

Buying the stock is a way for distributing money to their share holders. Similar to a dividend.

Re: Alphabet overtakes Apple to become most cash-rich company

#27

Post by LeifCarrotson »

noego wrote: post #11

Finance 101: Being cash-rich is a major advantage in environments where fundraising is a major hurdle, and where the funds can be put to productive use very quickly. For example, for a startup to raise funds for a major marketing campaign, it has to go through a lengthy and attention-demanding process of pitching to VCs and negotiating terms. Hence why having a big war-chest ready to fire, can be a competitive advant…

> Whereas most of their investors would far prefer to invest the money in investments that produce better returns, such as the S&P 500.

Curiously, GOOG and AAPL are two of the many large companies who have large cash hoards who are themselves part of the S&P 500.

Re: Alphabet overtakes Apple to become most cash-rich company

#28

Post by AlanSE »

wufufufu wrote: post #16

In StarCraft, you always want to be at 0 minerals and 0 gas because that means you are maximizing your investment into buildings and units. People make fun of you if you don't have the skill to optimize for this.

This comment said the same thing as the 4-paragraph comment about corporate finance. Yet somehow so much easier to understand.

Re: Alphabet overtakes Apple to become most cash-rich company

#29

Post by mercules »

noego wrote: post #11

Finance 101: Being cash-rich is a major advantage in environments where fundraising is a major hurdle, and where the funds can be put to productive use very quickly. For example, for a startup to raise funds for a major marketing campaign, it has to go through a lengthy and attention-demanding process of pitching to VCs and negotiating terms. Hence why having a big war-chest ready to fire, can be a competitive advant…

At the same time, companies with a strong warchest are better prepared to weather the storm of an economic downturn and to afterwards, purchase valuable assets for pennies on the dollar.

Re: Alphabet overtakes Apple to become most cash-rich company

#30

Post by matthewvincent »

noego wrote: post #11

Finance 101: Being cash-rich is a major advantage in environments where fundraising is a major hurdle, and where the funds can be put to productive use very quickly. For example, for a startup to raise funds for a major marketing campaign, it has to go through a lengthy and attention-demanding process of pitching to VCs and negotiating terms. Hence why having a big war-chest ready to fire, can be a competitive advant…

Apple has spent ~30 billion on share buybacks this year so, I’d say pretty shareholder friendly.
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