Why do companies hold huge cash reserves

These are the 5 US companies with the largest cash reserves

“Cash is King” is not only a preferred strategy for companies in times of crisis to prepare for longer dry spells. High cash reserves are also helpful from other strategic perspectives - for example when making company acquisitions.

High cash reserves in companies are so interesting for investors because these companies have the highest chances of dividend payments, dividend increases and share buybacks.

US technology companies are therefore particularly interesting for investors, because the cash reserves of these companies have risen sharply in recent years.

The top 5 richest US companies all come from the tech industry and own $ 1.9, 50% of the total cash reserves held by non-financial companies in the US.

An overview of the top 5 US companies with the largest cash reserves (as of 2017):

5. Oracle (Cash and Cash: $ 54.4 billion)

The US software house founded by Larry Ellison in 1977 initially appeared under the name Software Development Laboratories (SDL) and developed a database system under the name Oracle for the CIA. The company was later renamed Oracle Corp.

Oracle clearly owes its rise to its database software of the same name, which is standard in many large corporations today. Oracle used its high cash reserves to make numerous company acquisitions. Since 2005 alone, Oracle has spent more than US $ 40 billion on acquisitions - yet the US software house's cash reserves have recently added up to more than US $ 50 billion.

4. Cisco Systems (cash and cash equivalents: $ 61.5 billion)

Cisco Systems, which was founded in 1984, owes its rise and high cash reserves to the triumph of the Internet. Cisco is best known as the world's largest network supplier for its routers and switches, which in fact form the backbone of the global data network.

So it is hardly surprising that since the IPO on March 29, 1990, the split-adjusted Cisco share price climbed from US $ 0.08 to over US $ 77 on March 30, 2000, increasing by over 96,000% within 10 years. Cisco was briefly the world's most valuable company in March 2000, with a market value of $ 555 billion. Today, Cisco is primarily focused on the Internet of Things.

3. Alphabet aka Google (cash and cash equivalents: $ 77.1 billion)

“Googling” has long been a common verb and is synonymous with searching the Internet. With the establishment of the search engine Google on September 4, 1998, the two founders Larry Page and Sergey Brin achieved a great success. Today, with a few exceptions (China, Russia, etc.), Google is the dominant search engine in almost every country and now has a global market share of more than 80%.

This dominance is also reflected in the balance sheet figures. While sales are approaching the mark of US $ 100 billion and will probably be reached in 2017, Google and its parent company Alphabet have been making an annual profit of over US $ 10 billion since 2012, which has led to Alphabet aka Google is now sitting on cash reserves of over US $ 70 billion.

2. Microsoft (cash and cash equivalents: $ 108.4 billion)

The Microsoft software company, founded by Bill Gates and Paul Allen in 1975, owes its rise to the triumph of the Windows operating system and the Office suite. Windows is installed on over 90% of all desktop PCs today.

Only in 2003 did Microsoft's dominance pay off for the shareholders, because it was only 28 years after the company was founded that Microsoft paid out a dividend for the first time. Thanks to the success of Windows and Office over the past few decades, Microsoft's cash reserves have now surpassed the $ 100 billion mark.

1. Apple (cash and cash equivalents: $ 205.7 billion)

The PC pioneer Apple made the breakthrough relatively late. Started as a computer company in April 1976, Apple achieved the ultimate breakthrough in the technology industry with the return of the brilliant company co-founder Steve Jobs with the iPod and later with the iPhone and iPad.

Despite massive dividend payouts and share buyback programs - Apple has returned over $ 200 billion to shareholders in dividends and share buybacks since 2012 - Apple's cash reserves recently totaled over $ 200 billion. This makes Apple the absolute number 1 among the companies with the largest cash reserves.

Big techs come up with strong numbersThis week, four absolute tech heavyweights come up with numbers. Microsoft and Alphabet got off to a good start. > read more

© Verlag für die Deutsche Wirtschaft AG, all rights reserved