Competitive Pre-Pay

Interesting news: “CUPERTINO, California—November 21, 2005—Apple® today announced that it has reached long-term supply agreements with Hynix, Intel, Micron, Samsung Electronics and Toshiba to secure the supply of NAND flash memory through 2010. As part of these agreements, Apple intends to prepay a total of $1.25 billion for flash memory components during the next three months.”
Flash memory is used in the (wildly successful) iPod nano and Shuffle products. So Apple is going to spend, in three months, $1.25 billion – for memory deliveries over the next five years. I wonder if they’re buying most of the available production as a way to limit competition, as did the inventors of liquid soap:

The original liquid soap was introduced in 1980 by Minnetonka Corporation. Minnetonka cornered the liquid soap market by buying up the entire supply of the plastic pumps needed for the liquid soap dispensers. The Colgate Company acquired the liquid soap business from Minnetonka and renamed the product Softsoap in 1987.

Eventually Minnetonka had competition, but they were prepared for it, on their own timeframe, after they had cashed out to the conglomerate. Textbook study of business strategy (it was a bet-the-company move, since they could only pay for their supply agreements out of projected future sales), and for Apple it’s a worthwhile use of the $3 billion cash horde they keep on hand.