Apple Issues Statement About Returning Cash to Shareholders

[mrhick01]

Originally Posted by IJ Reilly

It is the utter lack of substance.

Please explain. What are the benefits of Apple doing what Einhorn wants?

[fmaxwell]

Originally Posted by k995

They will stil buy overpriced apple products so what about them?

Apple's products are only overpriced if you aspire to some day save enough from your meth lab to buy a double-wide.

To the rest of us, all personal computers are cheap. It's not like 1984 where a decent desktop PC could cost an engineer 25% of their annual income. Now a MacBook Air can be bought for less money than many engineers take home in a week.

Professionals are willing to pay for quality tools. That's why Apple notebooks are the tool of choice for journalists whose livelihood depends on their computers being reliable and supported.

[JarScott]

Can't help thinking Apple should put more money back into the government and other countries too. Sitting on that much money could seriously give a few areas the cash they desperately need. I'm sure Apple could stop tax increases alone!

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Surely Apple have enough money to lower their prices a bit? It seems silly still charging a lot more than similar products from other companies when they generate so much money. How about giving a bit back to the customers?

[winston1236]

Originally Posted by ogee

How about giving the staff, including retail, a bonus. We never get bonuses, and in my store all we were got for christmas was a small bag of peanuts!

No offense but retail workers are a dime a dozen and seen as highly replaceable. Try to work your way up to corporate and then youll start getting bonuses.

[Badandy]

Originally Posted by mrhick01

Please explain. What are the benefits of Apple doing what Einhorn wants?

Giving money back to shareholders who can use it better than it going unused in a bank barely earning anything. That's it. Apple isn't using it, and they haven't needed to use it. How is this so hard to understand?

[IJ Reilly]

Originally Posted by mrhick01

Please explain. What are the benefits of Apple doing what Einhorn wants?

First, tell me what we are really debating here. Is it the possible use of preferred shares to pay a dividend to current shareholders, or the payment of dividends by any method? From what I am hearing, the latter is the real objection as we have seen argument after argument against the very concept of dividends, and very little discussion about the merits of using preferred stock as a dividend vs. ordinary dividends.

Just so we're clear, all Greenlight is saying is that Apple should not eliminate the issuance of preferred stock as a dividend payment option. Apple says that the proposed charter amendment doesn't actually do that. I don't claim to know the real answer to that question, but as a stockholder I am going to find out as much as I can before I vote my shares. Note that Apple isn't objecting to the concept of using preferred shares as a dividend. In fact they say it is being considered.

So, what are we really debating?

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Originally Posted by Badandy

Giving money back to shareholders who can use it better than it going unused in a bank barely earning anything. That's it. Apple isn't using it, and they haven't needed to use it. How is this so hard to understand?

Since you allude to it, corporations have been larding away cash for years now. Their cash reserves continue to grow, and this is one of the reasons why our economy is sluggish and unemployment remains high. Apple is only one biggest offenders. The largest at this point, I presume.

[SteveW928]

Originally Posted by JarScott

Can't help thinking Apple should put more money back into the government and other countries too. Sitting on that much money could seriously give a few areas the cash they desperately need. I'm sure Apple could stop tax increases alone!
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Surely Apple have enough money to lower their prices a bit? It seems silly still charging a lot more than similar products from other companies when they generate so much money. How about giving a bit back to the customers?

Or, how about the government spend less and set the tax rates appropriately and fairly to cover expenses... like a real budget... like EACH OF US HAS TO DO.

Corporate taxes in the US are already high. Personal taxes for most people, overall, are quite high as well (with little services compared to many other developed countries). Only the upper income ranges don't have a fair percentage currently and far too many loopholes. But, even if their tax were increased, percentage wise, to a reasonable amount, it still won't balance the budget if spending doesn't drop. That's just the reality of it folks.

Drop prices? I suppose they could do that, but people are paying the current prices. That keeps their profits up. If you grew some tomatoes and people were willing to pay $10 for them, would you just say, hey, I think i'll sell the for $7 instead.

Originally Posted by IJ Reilly

Since you allude to it, corporations have been larding away cash for years now. Their cash reserves continue to grow, and this is one of the reasons why our economy is sluggish and unemployment remains high. Apple is only one biggest offenders. The largest at this point, I presume.

Possibly because they are a bit more awake than the average American as to the hard times coming? (BTW, if memory serves correctly, one of the economic fundamentals in question is this whole idea of 'spending yourself out of trouble' vs increasing production and trade. Spending can help in a recession, but it's only a temporary thing with downsides... certainly not normal operation.)

[JarScott]

Originally Posted by fmaxwell

Apple's products are only overpriced if you aspire to some day save enough from your meth lab to buy a double-wide.

To the rest of us, all personal computers are cheap. It's not like 1984 where a decent desktop PC could cost an engineer 25% of their annual income. Now a MacBook Air can be bought for less money than many engineers take home in a week.

Professionals are willing to pay for quality tools. That's why Apple notebooks are the tool of choice for journalists whose livelihood depends on their computers being reliable and supported.

Hmm, even so, Apple products are still rather expensive. But it's all about demand, if people are willing to pay those prices, Apple have no reason to price them lower I suppose.

[yung]

Originally Posted by Yvan256

Anything that can shield Apple from the crazy mood of the stock market is a good thing. Their value keeps going up and down because of a few insane people who keep writing stupid rumors and predicting out-of-this-world profits based on wishful thinking.

EXACTLY!!! Why people don't see this, I don't know.

[SteveW928]

Originally Posted by JarScott

Hmm, even so, Apple products are still rather expensive. But it's all about demand, if people are willing to pay those prices, Apple have no reason to price them lower I suppose.

Expensive, compared to what? That's the critical question. Like fmaxwell was saying, they are quite cheap, historically (in comparison to cost of living and capability, etc.).

When compared to other competing products, I still think they are a pretty good value, apple to apples (no pun intended). Unless your time is worth very little (either to yourself, or in your ability to produce income), it just isn't worth saving the difference in money between two tools if one of them enables you to be more effective, by very much margin, over the long-term.

[peter.stegemann]

As an Apple shareholder, I have no interest in them paying out dividends. What would that be good for? For the amount paid out, the stock value will drop, so it's like fetching money from your bank account and thinking you have more money now because it's in your pocket. Every shareholder who wants to have some of "his" money is free to sell some stock. Whenever he wants. If they pay dividends, it will just waste some of my money by forcing me to pay taxes on them.

[Badandy]

Originally Posted by peter.stegemann

As an Apple shareholder, I have no interest in them paying out dividends. What would that be good for? For the amount paid out, the stock value will drop, so it's like fetching money from your bank account and thinking you have more money now because it's in your pocket. Every shareholder who wants to have some of "his" money is free to sell some stock. Whenever he wants. If they pay dividends, it will just waste some of my money by forcing me to pay taxes on them.

You clearly haven't read the comments for an against paying out dividends. Shareholders still want to invest in Apple, but they want money the money that is sitting there unused to invest in other things.

[mrhick01]

[QUOTE=IJ Reilly;16822857]First, tell me what we are really debating here. Is it the possible use of preferred shares to pay a dividend to current shareholders, or the payment of dividends by any method? From what I am hearing, the latter is the real objection as we have seen argument after argument against the very concept of dividends, and very little discussion about the merits of using preferred stock as a dividend vs. ordinary dividends.

Just so we're clear, all Greenlight is saying is that Apple should not eliminate the issuance of preferred stock as a dividend payment option. Apple says that the proposed charter amendment doesn't actually do that. I don't claim to know the real answer to that question, but as a stockholder I am going to find out as much as I can before I vote my shares. Note that Apple isn't objecting to the concept of using preferred shares as a dividend. In fact they say it is being considered.

So, what are we really debating?

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I'm talking about Einhorn's means "to extract more value."

[IJ Reilly]

Originally Posted by Badandy

You clearly haven't read the comments for an against paying out dividends. Shareholders still want to invest in Apple, but they want money the money that is sitting there unused to invest in other things.

What we've got here is a bunch of amateur investors who jumped on the Apple train, probably quite recently, because they are fans of Apple products and/or thought they couldn't lose. The first reason might actually be a good one, if a person also knows something about investing. By now they've learned something about the reality of the second proposition.

No matter how often or patiently you try to explain to greenhorn investors that a company's assets (cash or otherwise) are not factored into the stock price, they simply will not believe you. They apparently are convinced that market cap is like a company's statement of net worth, when it is nothing of the kind. "Please, please, please don't stuff dollars into my pockets," they keep saying.

I am never so happy at moments like these that so much of AAPL is controlled by institutional investors who understand things like capital asset management. They aren't always going to want the right thing for all investors, but if they can persuade Apple to release more of their fallow holdings to stockholders, then they will have done individual investors who don't have much of a voice a great favor. Even the amateurs will benefit, though many of them hardly know it now.

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Originally Posted by mrhick01

I'm talking about Einhorn's means "to extract more value."

What are you saying about it? Nothing, as nearly as I can tell. If you believe that issuing preferred shares is a bad way to pay out dividends to investors, then you haven't said why you think so. It seems you are also opposed to the entire concept of dividends, though you seem to be dodging that position now. Your argument is vague and slippery. I have no idea what you are arguing, let alone, why.

[SteveW928]

Originally Posted by Badandy

You clearly haven't read the comments for an against paying out dividends. Shareholders still want to invest in Apple, but they want money the money that is sitting there unused to invest in other things.

Give me some of your money, and I'll happily invest it too. Of course THEY want it. The question is what is best for Apple, long-term. I don't give two hoots about the investors. If the ship sinks, they go with it (well, if they are actual investors and not just trying to make a quick buck). Investments are risky... cash in the mattress isn't. If hard times are coming, I'd rather have a bit more of the latter.

[FluJunkie]

Originally Posted by peter.stegemann

As an Apple shareholder, I have no interest in them paying out dividends. What would that be good for? For the amount paid out, the stock value will drop, so it's like fetching money from your bank account and thinking you have more money now because it's in your pocket. Every shareholder who wants to have some of "his" money is free to sell some stock. Whenever he wants. If they pay dividends, it will just waste some of my money by forcing me to pay taxes on them.

The stock price will recover - for me, its a way to see a return on my long-term investment in Apple without having to *sell* said investment.

And to be frank, the money sitting in Apple's bank belongs to the shareholders. If they can make it grow well, then they should keep it, but right now, they're just letting it sit, earning very, very little. The shareholders can do more with it, and it's clearly not impeding Apple's ability to operate (hint: If they had a use for the money, they would have spent it).

[Badandy]

Originally Posted by stevew928

investments are risky... Cash in the mattress isn't.

You have some reading to do.

Originally Posted by FluJunkie

And to be frank, the money sitting in Apple's bank belongs to the shareholders. If they can make it grow well, then they should keep it, but right now, they're just letting it sit, earning very, very little. The shareholders can do more with it, and it's clearly not impeding Apple's ability to operate (hint: If they had a use for the money, they would have spent it).

Well said.

[SteveW928]

Originally Posted by FluJunkie

And to be frank, the money sitting in Apple's bank belongs to the shareholders. ... (hint: If they had a use for the money, they would have spent it).

True, which is the problem with being a public company. If the shareholders are idiots, they can literally ruin the company.

Have you never heard of a savings account? A rainy day? The storm is brewing off in the distance.

Originally Posted by Badandy

You have some reading to do.

Go do a Google search on investment. You'll probably see the word risk within the first paragraph. It's practically part of the definition. Do you think investments pay a return just because you're a nice guy/gal?

[Badandy]

Originally Posted by SteveW928

Have you never heard of a savings account? A rainy day? The storm is brewing off in the distance.

They have well over $100 billion. They would have to change from being massively profitable to cash flow negative on a scale we've never seen before. And even then, the cash horde represents a huge risk for investors: it would encourage a massively unprofitable company to burn through all their assets (remember all that cash that they didn't give to investors when times were good?) before entertaining the thought of liquidation which could at least return some of the investor's money.

Go do a Google search on investment. You'll probably see the word risk within the first paragraph. It's practically part of the definition. Do you think investments pay a return just because you're a nice guy/gal?

I'm not saying investments are riskless; check the other assertion you made.

In total, I'm saying that you're a nut if you like the fact that when you put your hard-earned money into Apple you're getting a fantastic tech company...PLUS a pile of cash they have no idea what to do with earning close to zero. Being liquid and able to ride out seasonality pressures is one thing, but holding this much cash is absurd. They could buy Ford Motor Company almost three times over in pure cash. People don't get the scale of it. There is never too much money for a person to have (if you're that person), but there IS too much cash for a corporation to have.

Apple should keep about $30b cash on hand, if that. Distribute the rest to the people who own the company. If an opportunity comes up that costs some large sum, raise debt at near-historic low rates.

EDIT:

People don't understand the concept that they would have made more money over the past ten years if Apple didn't build up this cash position. They would have received all the growth Apple experienced + money distributed them at regular intervals for reinvestment (you could also reinvest in Apple!).

Say you had $1,000 to invest in Apple. Assume Apple's business appreciated by 10%.

-If Apple were leaner than now (but nowhere near what constitutes being lean), most of your investment appreciates by 10%.

-As it stands now, only about 2/3 of your investment appreciates by 10%. The other third appreciates by 1%, since it's in cash. This reduces your return.

In the first case, you make about $100. In the second case, you make about $68. There's definitely value to having cash. You don't want minor business shocks to cause a liquidity crunch. But we're far beyond that and it's not even close.

[FluJunkie]

Originally Posted by SteveW928

True, which is the problem with being a public company. If the shareholders are idiots, they can literally ruin the company.

Have you never heard of a savings account? A rainy day? The storm is brewing off in the distance.

I have heard of a savings account - Apple's is excessively large. And just like someone who has too much in a savings account earning very poor interest, beyond what they'll need to cover emergencies and planned purchases, Apple should do something better with their money.

None of the proposals to this point actually make much of a dent in Apple's massive cash pile - they just suggest it not keep accumulating. And to be frank, if Apple needs to burn through a cash pile that big for a "rainy day", they're going out of business.