Big cash holdings can often be a sign of corporate health, but they can also be a liability.
The Verge reports today that Google’s Alphabet company has now become “the most cash-rich company in the world” with $117 billion in reserves.
The runner-up, Apple, holds $102 billion after deliberately reducing its liquidity.
Apple has been active in repatriating reserves held overseas and turning those reserves into investor payouts of some sort.
Why Not Cash?
The news on Apple and Alphabet shows how cash holding might not be the status symbol it once was. For one thing, investors often like to see companies shell out wealth in dividends or share buybacks.
There are also reports suggesting that U.S. legislators are close to preparing an antitrust probe into the big tech companies including Apple, Google, and Amazon. And if so, having huge cash reserves might be something of a red flag.
Big-Cap Power
In market valuation, though, cash reserves aren’t everything. For instance, tech behemoth Microsoft actually has a market capitalization over $1 trillion, which makes it much larger than these other companies in terms of its overall value.
But Microsoft potentially dodged a bullet … Its major growth happened over the past few decades, compared to newcomers like Facebook and Google that are now seeing scrutiny from regulators.
Microsoft also stands out in terms of its exclusion from the so-called FAANG group — Facebook, Amazon, Apple, Netflix, and Google. FAANG is often shorthand for the largest tech equities in the U.S. market. The relationship between Alphabet and Google makes this acronym tricky. But for now, FAAAN hasn’t caught on.
