Google: Google parent Alphabet may have ‘welcome problem’ of $118 billion

Google parent Alphabet is sitting on a $118 billion cash pile. The company is among the three richest companies in the US in terms of cash reserves. The other two being the rivals Apple and Google. According to a report in Bloomberg, “Alphabet Inc is facing a new and, by most accounts, welcome problem — how to spend its rapidly expanding pile of cash.”

The top three cash generators in the Nasdaq 100 — Alphabet, Apple and Microsoft — reportedly brought in a combined $84 billion in the last quarter, the biggest haul for any such non-holiday period in history.
Why the $118 billion ‘welcome problem’

Alphabet generated nearly $29 billion in cash in the second quarter of this year after attempting to rein in costs by cutting thousands of jobs and reducing losses in its various moonshot projects. This left the company with cash and short-term marketable securities of about $118 billion, more than any other company in the Nasdaq 100 Stock Index aside from Apple’s total of about $167 billion.
Analysts, however, see the $118 cash pile as a problem for Alphabet. As to why, as unlike Apple, which aims to give back most of its cash to shareholders via stock buybacks and dividends, Alphabet is not known to follow the same path. The company reportedly has “a less clearly-defined capital return strategy, leaving investors seeking more detail on its plans.”
“Alphabet has stepped up buybacks and expanded its repurchase authorization to $70 billion in April. But last quarter, the firm spent $15 billion on its own shares, barely half of the cash it brought in. By contrast, Apple in the last five fiscal years has returned almost $5 billion more than the record $454 billion in cash it generated,” said the report.
Also Alphabet does not have a history of paying dividends like Apple and Microsoft. In contrast with Microsoft, which agreed to pay $69 billion for video game maker Activision Blizzard last year, Alphabet has stayed away from big acquisitions. Google’s biggest acquisition to date remains $12.5 billion for Motorola in 2012.
Also as the report points out even if executives wanted to, Alphabet may not be able to pull off a big acquisition given the heightened regulatory scrutiny. Microsoft’s Activision deal and Amazon.com’s acquisition of Roomba maker iRobot are still facing regulator scrutiny.