Following the release of Apple’s third quarter earnings report, which exceeded expectations, a story from 2012 has resurfaced in which Steve Jobs sought investment advice from legendary American investor Warren Buffett regarding Apple’s cash reserves.
In an interview in 2012 CNBCMr. Buffett recalled a memorable phone call he had with Mr. Jobs two years ago. “It was an interesting conversation because I hadn’t talked to him in a long time,” the Berkshire Hathaway chairman said. Mr. Jobs had asked for advice on managing Apple’s significant cash reserves. “He said, ‘We have so much cash. What should we do with it?’ So we discussed options.”
Mr. Buffett explained that companies generally have four options for using cash: stock buybacks, dividends, acquisitions or retaining it. Mr. Jobs made clear that Apple would not make large acquisitions that would require substantial cash.
During the interview, Mr. Buffett said, “I considered the logic of each option. He told me he would not have the opportunity to make a large acquisition that would require a lot of money.” When Buffett suggested that Apple should conduct a stock buyback if it felt its stock was undervalued, Mr. Jobs replied, “I think my stock is very undervalued.”
Ultimately, Mr. Jobs decided not to follow Mr. Buffett’s advice. “He didn’t do anything, and of course, he didn’t want to do anything. He just liked having cash,” Mr. Buffett said, laughing. “That was very interesting to me because I found out later that he said I agreed with him about not doing anything with cash.”
Earlier this year, Microsoft founder Bill Gates said in an interview with Dax Shepard, “Steve Jobs was a natural. It was always fun to watch him practice because part of his genius was that when he finally did something, it looked like he was just thinking.” He added, “I’ll never be able to achieve that level.”
During the podcast, Mr Gates said he and Mr Jobs were travelling the world in their respective capacities as representatives of Microsoft and Apple and their job was to convince individuals and organisations of the potential benefits of tools such as spreadsheets and email that could be useful to their daily lives and careers.
He said, “We also called it ‘evangelization.’ Some people didn’t like that we stole a term from religion, but telling the story of the magic of software — certainly when I was 30 — was a big part of the job.”
