Apple Sitting Pretty amidst Economy’s Double-Dip Concerns

Posted by on Aug 30, 2010 | No comment

Apple Inc. (NASDAQ: AAPL) has been in the limelight ever since the company entered into a deal with Liquidmetal Technologies (PINK: LQMT). As per the deal, Apple now has rights to Liquidmetal’s patented technology. Apple is likely to use the technology to make its future products more wear-and-tear resistant. Apple reportedly paid $11 million to acquire the rights from Liquidmetal.

The deal came within a few days of the talks of Apple’s huge cash pile on its balance sheet. Many on Wall Street expected the company to become more aggressive with managing its cash. And it seems Apple responded by acquiring Liquidmetal’s patented technology. However, the deal is small considering Apple’s huge cash pile. So is Apple going to look for more acquisitions?

In the current economic environment, Apple may look to make further acquisitions, provided the company finds targets that are attractively valued. And this may not be a bad time to find attractive valuations, as markets have again gone back into a shell due to the concerns of a double-dip recession in the U.S. In fact, this may be the best time for Apple to make use of the huge cash pile on its balance sheet as once the market recovers the company may end up overpaying.

The other option for Apple is to invest more in its technology and introduce new products. This has been Apple’s strategy in the past decade and the reason for the company’s phenomenal success in this period. Already this year, the company launched the much awaited iPad and the latest version of the iPhone, the iPhone 4. Both products were an immediate success, even as the iPhone 4 faced some criticism for its reception.

Another option Apple has is to reward shareholders by distributing dividends or initiating a share repurchase program. However, looking at the performance of the Apple Inc. stock this year, a repurchase program looks unlikely. Dividends also look an unlikely option.

In all likelihood then Apple will continue with its strategy of launching innovative products. The company may look to make smaller investments like the one it made in Liquidmetal. But this will be only to make its future products better.

The Apple Inc. stock has a 52-week range of $164.11-$279.01. Year-to-date, the stock is up 15.92%, outperforming the broader market and the technology sector. The stock has a support level at $237.25 and a resistance level at $249.66.

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