You know those great tech earnings reports from last week? Forget them. Intel (NASDAQ:INTC) has nothing on Apple (NASDAQ:AAPL).

Let's get right to the numbers. For the fiscal fourth quarter, ended Sept. 26, revenue improved 25% and diluted per-share earnings soared to $1.82, up 44% year over year. Both results easily beat Street estimates, which called for $9.2 billion in revenue and $1.42 in per-share earnings.

Most media outlets are reporting how the iPhone tailwind -- 7.4 million handsets sold, $2.3 billion in recognized revenue -- helped Apple soar. I'm more interested in the MacBook numbers. Portable unit shipments were up 35% over last year, while revenue improved 27%, to $2.87 billion.

Compare those numbers with the latest market data from DisplaySearch. Total portable PC revenue fell 5% in the second quarter, 14% if you exclude the sort of margin-killing netbooks that Dell (NASDAQ:DELL) founder and CEO Michael Dell spoke out against recently.

Apple, in short, is defying not just the "Great Recession," but also a broader industry trend toward lower revenue and margins. (Gross margin improved to 36.6% in fiscal Q4.)

How Apple is cheating you
And yet, as great as these numbers are, I'm troubled by Apple's capital allocation. Here's why:


Fiscal 2009*

Fiscal 2008*

Fiscal 2007*

Fiscal 2006*

R&D Spending





Capital Expenditures





Free Cash Flow





Total Cash and Investments





Diluted Shares Outstanding





Dividends Paid





Sources: Apple and Capital IQ.
*Numbers in millions.

Apple has been mostly stockpiling cash since fiscal 2006, earning very little for what it has. How little, you ask? Turn to page 35 of Apple's last 10-Q quarterly report:

The weighted-average interest rate earned by [Apple] on its cash, cash equivalents and marketable securities decreased to 1.11% in the third quarter of 2009 from 2.66% in the third quarter of 2008.

Billions in the bank, earning nothing more than passbook savings rates. You call that excellent capital allocation?

Don't get me wrong; I support Apple's right to retain and reinvest operating capital back into the business. This is a growth company with a runway in front of it, thanks to the iPhone and its fast-growing App Store. What I don't understand is why so much cash hasn't been reinvested into the business -- $23 billion over three fiscal years.

What are you waiting for, Apple? An acquisition? Adobe (NASDAQ:ADBE) could be a smart buy. Netflix (NASDAQ:NFLX) is still affordable.

History says that CEO Steve Jobs isn't pining for a big buy. PA Semi was one of his bigger bets, and that deal was worth only $278 million. As for other alternatives ... I have no idea; $34 billion is more than enough for Apple to endure anything other than a cataclysmic downturn.  

Semismart investing
When Apple does invest, it does so judiciously. For example, its new data center facility in Silicon Valley was originally outfitted by MCI Worldcom, and then mothballed. Apple got it secondhand for roughly $50 million, the San Jose Business Journal reports.

The Mac maker is also being careful with expanding its retail presence. Apple opened 15 stores during the quarter; it now has 273 worldwide, up from 247 at the end of last year's Q4. That's an 11% boost, less than half Apple's revenue growth rate.

In short: All signs point to Apple being unable to deploy all of the cash it produces, and what it doesn't deploy often lingers in the equivalent of a passbook savings account.

You can do better than this, Steve. You should follow Warren Buffett's dictum and Microsoft's (NASDAQ:MSFT) lead, and return some of your underused capital to shareholders in the form of a one-time dividend.

There's no downside to this plan. Say you were to pay out $4 billion. That's a 2% one-time yield at current prices, and it would leave Apple with $30 billion in the bank. And you'd be under no obligation to pay dividends on an ongoing basis, as IBM and Oracle (NASDAQ:ORCL) are.

Investors are right to bid up shares of Apple this morning. There's so much this business is doing right, and doing better than competitors. A long-overdue dividend payment would add a fairy-tale ending to this almost-perfect stock story.

That's my take. What do you think? Use the comments box below to sound off on Apple's earnings and bulging bank account.