As Apple faces increasing competition in the smartphone market analysts are questioning what it might do with the nearly US$29 billion cash it has on hand . At the same time the US Trade Commission is investigating Apple’s close relationship with Google.

A dividend from Apple’s war chest is unlikely – the “D” word is rarely mentioned at Apple’s Cupertino HQ; nor is the re-purchase of stock. Acquisitions have been rare, though the company did buy chip designer PA Semi last year.
 
Apple has a history of hoarding cash and investors have seen handsome returns without the benefit of buybacks or dividends.
 
The stock has nearly quadrupled since the start of 2005; over that same period, the Morgan Stanley High-Technology Index of major tech stocks has declined by more than 15 percent.
 
Apple shares are up more than 45 percent this year, twice the gain of the Hi-Tech index. The shares soared to $132.07, up almost 5 percent yesterday, amid reports the company is planning a new e-reader device.

Also of concern at Apple is an FTC inquiry into whether the ties between the boards of Apple and Google violate antitrust laws, the New York Times reported on Monday.

The FTC has already notified the companies of the inquiry the report said, citing people briefed on the matter.

Google Chief Executive Eric Schmidt and former Genentech CEO Arthur Levinson are directors of both companies. Under federal antitrust law, a person is not allowed to sit on the board of two companies if it decreases competition between them.

Both Apple and Google declined to comment.

The two companies compete directly or indirectly in a number of areas, the most obvious being the fast-growing smartphone market.

Apple’s iPhone has been a huge hit for the company and is key to its future growth prospects. Google’s Android operating system is used on the HTC G1 smartphone.

In addition, the companies are both major rivals of software giant Microsoft.