Tech companies specifically have seen their historical predecessors disappear very quickly - Sun and SGI nearly evaporated, IBM has had 16 quarters of shrinking earnings. So tech company execs hoard cash in the hope that if they get blindsided they'll have time to recover. I'm pretty sure this is Eric Schmidt's explicit strategy.
Also, as someone else noted, a lot of this cash is "trapped" overseas as it would cost 35% to repatriate it to the US. The logical thing to do would be to move more operations out of the US to balance expenses with revenues but I guess there are issues with doing that.
"Nearly Half of So-Called “Offshore” Funds Already in the United States"
"Corporations are able to invest their foreign earnings in U.S. assets without treating them as “repatriated” and subject to taxation, because the federal tax code, specifically Section 956(c)(2), already allows U.S. corporations to use foreign funds to make a wide range of U.S. investments without incurring tax liability."
That doesn't change anything. Cash on hand, even outside of the US lowers cost of capital, potentially almost to zero.
Paying the money to shareholders would imply double or triple taxation before the money is with the shareholders. (once, returning the money (corporate tax), once capital gains tax, then income tax or corporate tax again in the case of corporate shareholder). Just so we're clear, that means 35% and then another 35% or 50% tax, or 57% up to 67% tax.
So I think the original argument stands. The company has a choice. Either spend 3x the money on something that will make the stock price go up (like creating an offshore entity buying your own stock if you want to do this rather directly), or give 60% to the US government, 40% to the shareholders. That's why buybacks, which have been proven inefficient to say the least, still happen. They'd have to be 3x as inefficient to break even.
And from the perspective of the management itself : that's either a trillion dollars under their direct control (not quite property, but ...) or 400 billion payout to shareholders, none of it under their control. As long as they can get away with it, they'll keep it. Just look at what Amazon does to it's shareholders.
Also, as someone else noted, a lot of this cash is "trapped" overseas as it would cost 35% to repatriate it to the US. The logical thing to do would be to move more operations out of the US to balance expenses with revenues but I guess there are issues with doing that.