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Einhorn’s Apple Lawsuit Exposes Cash Hoarders in Tech Sector

David Einhorn is suing Apple (NASDAQ: AAPL). By now you probably know that. It’s been all over the news.

It makes for great headlines. “Einhorn: What Tim Cook Should Do with Apple’s Cash”, is how Bloomberg wrote it. “Einhorn Sues Apple: Will His Battle Save the Stock?” asked Yahoo! Finance.

Anytime a famed hedge sues the world’s largest company, it turns heads. Einhorn’s lawsuit also exposes a dirty little secret among large cap technology companies.

The reason Einhorn, who runs the hedge fund Greenlight Capital, is suing Apple has to do with cash hoarding. Einhorn argues that Apple is sitting on an enormous cash pile, and needs to issue more of it to shareholders in the form of a higher-yielding, preferred stock. At present, Apple is considering altering its charter to put a halt on issuing such a stock.

Apple, which is sitting on a cash pile of $137 billion, isn’t the only tech company that’s notoriously stingy with its money. Here are three other major cash hoarders in the tech sector:

  • Google (NASDAQ: GOOG): Apple’s rival doesn’t quite have the same amount cash on hand with “only” $48 billion. But unlike Apple, Google doesn’t pay a dividend.
  • Cisco (NASDAQ: CSCO): The world’s No. 1 chipmaker has $45 billion in cash yet didn’t start paying a dividend until 2011. Its 2.7% yield is almost as pedestrian as Apple’s 2.3% yield, though Cisco spends a lot of money on acquisitions. In fact, according to research firm Factset, no company has made more acquisitions over the past 15 years.  
  • Microsoft (NASDAQ: MSFT): Microsoft’s yield (3.3%) is more generous than Apple’s or Cisco’s. But the yield isn’t that generous when you factor in the company’s $68 billion cash balance.