Apple Inc. (AAPL): Notable Headwinds

4. Inefficient Allocation of Resources

With more than $137 billion in cash, Apple has roughly one-third of its firm value in cash. Apple generates substantial amounts of Cash from its operations every quarter, but is not handing out more to shareholders. Apple Inc. (NASDAQ:AAPL) generated more than $23 billion of cash from its operating activities in the last quarter, but the company is buying back roughly $10 billion of shares. As the company’s cash hoard is earning meager returns of slightly above 1%, the firm’s resources are not being allocated properly.

Apple can easily increase its dividend substantially from its current yield, acquire a number of companies, small and big, and increase its buyback program substantially from current levels. These steps will definitely address the concerns of shareholders and potential investors.

5. Slower Pace of Innovation

The pace of innovation in the smartphone and the broader IT Hardware space is very high. With new and rapidly evolving technologies coming to market, Apple Inc. (NASDAQ:AAPL)’s slower pace of innovation is increasing skepticism among investor groups. Apple is not handing out the breadth of product lines that consumers want, i.e. bigger screens in phones, lower priced sets in certain markets etc.

Apple’s ability to deliver newer products with completely new features to its already large installed customer-base on a timely basis is rather crucial for the company’s future growth trajectory.

The Takeaway

With Apple Inc. (NASDAQ:AAPL)’s cash earning very little returns, the company should take steps to increase shareholder value. Growing the pace of innovation rapidly, along with the addition of newer carriers will be great moves by the company. Success in key strategic markets like China will be crucial for the company, as most of its addressable market in developed countries already own Apple products.

The article Apple’s Notable Headwinds originally appeared on Fool.com and is written by Ishfaque Faruk.

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