Here's an Idea for Apple's Cash Dilemma: Buy Something Exciting

Apple Inc. announced that it intends to dole out billions of dollars of profit to shareholders. Tim Cook, CEO, stated that Apple plans to pay shareholders $2.65 for every share of stock each quarter. This is the first stock divided from Apple in more than a decade. In addition to providing a dividend to shareholders, Apple intends to buy back roughy $10 billion in stock over the next three years, starting at the beginning of the 2013 fiscal year.

According to Cook, "Even with these investments, we can maintain a war chest of strategic opportunities and have plenty of cash to run our business." Analysts predict that Apple will likely generate $75 to $80 billion in free cash over the next four quarters. Add that to its current $97.6 billion cash surplus, subtract the $45 billion from the stock buyback and dividend, and Apple will still retain an enormous amount of cash in retained earnings.

While this new strategy for Apple sounds splashy, it isn't all that exciting. Most press conferences held by Apple unveil shiny, new tech products. However, since former CEO and tech guru Steve Jobs stepped down, Apple has done something unusual: flown under the radar. The iPhone 4S and the "New iPad" received good reviews, but hardly met the levels of innovation their predecessors reached. The newly announced $10 billion a year dividen only carries a yield of 1.81%. That is a significantly smaller yield than fellow technology firms both Microsoft (2.5%) and Intel (3%).

So how can Tim Cook make a splash? How about Apple goes out an buys a social media company? While Apple has created fantastic hardware and software, and integrated them seamlessly, they have not succeeded in making a jump into social media.

Imagine Facebook wasn't filing for an IPO. If Apple were to integrate Facebook into its products (think laptops, iPads, desktops, iPods, iPhones, and, most interestingly, iTunes), it could open new doors. Barry Ritoltz of The Big Picture mentions Twitter as a fantastic opportunity for Apple (The Big Picture). Other opportunities like Pinterest, LinkedIn, etc. all offer interesting and unique opportunities. But if Apple has the cash, why not swing for the fences? Make Mark Zuckerberg and offer he can't refuse before its too late.

- Reid Coopersmith