Who has more money, Microsoft or Apple? Comparing liquidity

Posted by BallmerIsMyHero on June 21, 2012 09:33 am 0

If you look for "cash" in a place like Yahoo Finance, you see Apple at about $30 billion, and Microsoft at about $51 billion.

If you listen to the press you hear that Apple has over $95 billion.

So, what's what?

It all boils down to what the speaker or writer is referring to when they say "cash". Do they mean "cash", or "cash plus short-term investments", or "cash plus short-term investments plus long-term investments"?

They aren't the same thing, but each has been tossed out as "cash" from time-to-time. Be careful to take note of what they mean when they speak.

True "cash" can generally be relied upon to be as stated (unless, of course, you had it on deposit with Mr. Corzine and MF Global, or some similar entity).

"Short-term investments", often mean U.S. government instruments, and if they can be held to maturity present low risk of not generating the stated amount of cash in time.

"Long-term investments" are a less certain thing. Just because something is marketable, doesn't make its marketable price equal its cost.

There is a big difference between bonds held for sale and equities held for sale, and between bonds of one sort or the other, and between bonds of one maturity or the other.

Long-term investment needs a closer inspection than the other categories. That is probably why "cash" and "short-term investments" are the conventional way to define "cash" when they mean more that just true "cash".

Here are extracts of the holdings of Microsoft and Apple from their most recent 10-Q filings:

You can see that of its $67 billion of long-term securities, Apple has substantial exposure to municipals and corporates (maturities uncertain). Microsoft, which has a comparatively small long-term securities portfolio, is in virtually all equities.

Given how government bonds have sold off recently, Apple probably took a significant balance sheet his on those.

Microsoft is more liquid, and Apple has more money. Looking beyond the headlines is useful to keep perspective.

As a matter of follow-on curiosity, we ranked the top five companies by each of

(1) cash,
(2) short-term investments,
(3) long-term investments,
(4) cash + short-term investments, and
(5) cash + short-term investments + long-term investments.

Here they are:

Johnson and Johnson (JNJ) has the most cash. Microsoft has the most short-term investments, as well as cash plus short-term investments. Apple has the most long-term investments, as well as cash plus short-term and long-term investments.

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