Apple's vow to put $163 billion in cash to work could ease the blow for shareholders during sell-off

  • Apple flexed the sheer power of its massive cash holdings on Thursday in a bid to dampen Wall Street's disappointment over its iPhone sales.
  • The company plans to use nearly all of its $163 billion in net cash, hinting at more stock buybacks, dividends or acquisitions.

Apple is flexing the sheer power of its massive cash holdings in a bid to dampen Wall Street's disappointment over its iPhone sales.

The smartphone maker reported weaker-than-expected December-quarter iPhone unit sales Thursday. The company also gave a lower-than-expected revenue forecast for the March quarter. Apple's stock fell 4.4 percent Friday.

Apple also announced a goal to use nearly all of its $163 billion in net cash, hinting at more stock buybacks, dividends or acquisitions. Its total cash holdings rose to $285 billion in the December quarter, while its total debt was $122 billion.

The company previously announced plans to make approximately $38 billion in tax payments to the U.S. government under the new tax plan's repatriation rate for its cumulative foreign earnings.

"Tax reform will allow us to pursue a more optimal capital structure for our company," Chief Financial Officer Luca Maestri said Thursday on the earnings call. "Our current net cash position is $163 billion and given the increased financial and operational flexibility from the access to our foreign cash, we are targeting to become approximately net cash neutral over time."

The executive noted that the company returned nearly 100 percent of its free cash flow during the past several years to investors.

"That is the approach that we're going to be taking," he said. "We're going to be very thoughtful and deliberate about it."

Maestri said Apple will not make any changes to its mergers and acquisition strategy, saying the company will continue to look "at all sizes" and aims to "accelerate our product road maps" from its acquisitions.

CEO Tim Cook explained that Apple's cash position won't literally go to nothing.

"What Luca's saying is not cash equals zero. He's saying there's an equal amount of cash and debt and that they balance to zero," he said.

Apple said it will reveal details of the new capital allocation plan when it reports its March quarter earnings results.