Apple Board Has Been "Considering" Dividends and Buybacks Since 2005

MacRumors · Feb 7, 2012

Much has been made of the recent comment by Apple CEO Tim Cook that the Apple board of directors has been "actively discussing" what to do with its enormous cash pile. Some see it as a sign that Apple will soon pay a dividend or initiate a share buyback program -- except Apple's board has been discussing what to do with its cash for nearly 7 years.

MacRumors went through Seeking Alpha's entire Apple earnings call transcript history to find out what Apple has been saying about the likelihood of a dividend. Between July of 2005 and October of 2010, Apple execs had very little to say about what Apple was going to do with its burgeoning cash pile -- a pile that grew from $7.5 billion to $51 billion over that time.

July 2005 was the earliest transcript, and the first time an Apple exec said that the board "from time to time" considered its options for the use of Apple's cash. CFO Peter Oppenheimer on July 13, 2005:

I don't have a change in our philosophy that I can share with you today. We are maintaining our cash for flexibility to invest in the business and share buyback are considered with the Board from time to time.

Then-COO Tim Cook used the same phrasing on April 20, 2006:

Regarding our use of cash, we are continuing to be conservative with the cash, despite some of the investments we made this quarter. We're wanting to retain it for flexibility to invest in the business. We do discuss with the board from time to time share buyback, but don't have a change in philosophy to discuss with you today.

Finally, after twelve conference calls during which Apple's cash pile was discussed and the phrase "from time to time" used on six separate occasions, CEO Steve Jobs appeared on October 18, 2010 and laid out a more detailed vision for Apple's investment strategy:

We strongly believe that one or more very strategic opportunities may come along that we're in a unique position to take advantage of because of our strong cash position. And I think we've demonstrated a really strong track record of being very disciplined with the use of our cash. We don't let it burn a hole in our pocket, we don't allow it to motivate us to do stupid acquisitions.

And so I think that we'd like to continue to keep our powder dry because we do feel that there are one or more strategic opportunities in the future. That's the biggest reason. And there are other reasons as well that we could go into. But that's the biggest one.

Newly appointed Apple CEO Tim Cook expanded on Jobs' thoughts a year later, perhaps indicating a more flexible approach to disclosure and Apple's use of cash. October 18, 2011:

I believe what we're doing with cash, the way we're -- this cash that we do spend we're doing an extremely good job of it and we're very frugal about using it and using it in the right places. That said, I'm not religious about holding cash or not holding it. I'm religious about a lot of things but not that one. And so we will continually ask ourselves what's in Apple's best interest and always do what we believe is in Apple's best interest. And so it's a topic for the board on an ongoing basis, and we'll continue to discuss it.

With Apple nearing $100 billion in cash, COO Peter Oppenheimer addressed the issue again on January 24 of this year, during the introductory remarks and the Q&A session when he answered four separate questions about cash:

We have always discussed, internally as a management team and with our board, our cash. We recognize that the cash is growing for all the right reasons and I would characterize our discussions today as active about what makes the most sense to do with the cash balance, but we don't have anything to announce specifically today.

[...]

We're examining all uses of our cash balance, what we might do in the supply chain, what we can do from an acquisition perspective and otherwise. Since I don't have any perspective to share with you today, specifically on dividends or buybacks, other than again, we are actively discussing the cash balance. And in the meantime, we're not letting it burn a hole in our pockets.

Analysts have inquired about Apple's cash plans for more than half a decade, and Apple, as it is wont to do, has said very little of substance. Apple execs have consistently said that they have "nothing to share" and that "it's a topic for the board on an ongoing basis".

This may be changing, however -- a UBS research report noted that the Apple board's ongoing discussions may be progressing slightly. UBS's Bob Faulkner writes "We ... understand that management has been soliciting the opinions of large shareholders on the subject [of paying a dividend]." If this is true, it is a significant shift in direction for the company.

That said, Apple has been growing its sales and profits like no other company in the world. Some may feel that, as the adage goes, if it ain't broke, don't fix it. Perhaps the board's ongoing discussions will finally come to some sort of a conclusion, but no one should be surprised if they don't.

The full list of quotes and links to earnings call transcripts is available. Transcripts courtesy Seeking Alpha.

Article Link: Apple Board Has Been "Considering" Dividends and Buybacks Since 2005

jlgolson · Feb 7, 2012

Apple CFO Peter Oppenheimer on July 13, 2005:

I dont have change in our philosophy that I can share with you today. We are maintaining our cash for flexibility to invest in the business and share buyback are considered with the Board from time to time.

Then-COO Tim Cook on April 20, 2006:

Regarding our use of cash, we are continuing to be conservative with the cash, despite some of the investments we made this quarter. Were wanting to retain it for flexibility to invest in the business. We do discuss with the board from time to time share buyback, but don't have a change in philosophy to discuss with you today.

Oppenheimer on January 17, 2007:

The stock buyback programs and other forms of returning cash to the shareholders are reviewed with the senior management and the board from time to time, but our preference continues to be to maintain a strong balance sheet in order to preserve our ability to make strategic investments or acquisitions.

Oppenheimer on April 25, 2007:

I don't have a change in our position to share with you today. We continue to retain our cash for our flexibility to invest in the business and we do discuss share buyback and other forms of returning cash to the shareholders with the board from time to time.

Oppenheimer on July 25, 2007:

We still discuss this with the board from time to time, but dont have a change to share with you today.

Oppenheimer on January 22, 2008:

Stock buy-back programs and other forms of returning the cash are discussed with the Board from time to time but our preference continues to be to maintain a strong balance sheet in order to preserve our flexibility to make strategic investments and/or acquisitions.

Oppenheimer on April 23, 2008:

No change to announce to you today.

Oppenheimer on July 21, 2008:

I dont have a change in our position to share with you today.

Then-CEO Steve Jobs on October 21, 2008:

You know, I think this economic downturn may present some extraordinary opportunities to companies that have cash. I think cash is already king and it may get more so that way, so we are very comfortable with our cash position in the bank and its not burning a hole in our pocket.

Oppenheimer on January 21, 2009:

There is no new update from what we shared with you last quarter.

Oppenheimer on April 23, 2009:

No, nothing new to announce to you today and we continue to be careful with how were investing cash and were very focused on principal preservations.

Oppenheimer on January 25, 2010:

We have told you our philosophy on cash. I dont have a change in that philosophy to share with you today but nothing is forever.

Jobs on October 18, 2010:

We strongly believe that one or more very strategic opportunities may come along that we're in a unique position to take advantage of because of our strong cash position. And I think we've demonstrated a really strong track record of being very disciplined with the use of our cash. We don't let it burn a hole in our pocket, we don't allow it to motivate us to do stupid acquisitions.

And so I think that we'd like to continue to keep our powder dry because we do feel that there are one or more strategic opportunities in the future. That's the biggest reason. And there are other reasons as well that we could go into. But that's the biggest one.

Newly appointed Apple CEO Tim Cook on October 18, 2011:

To date as you know, we've wanted to maintain flexibility. I think everyone that knows us knows that the cash isn't burning a hole in our pocket and we're not the type of people to do silly things with it. We invest it conservatively. If you look at Gary and his team's track record, they've done a phenomenal job in a extremely difficult market for the last few years. We've also taken money and done things with it that are in Apple's best interest. For example, we've acquired several companies. We've acquired some IP as you know. We've invested in the supply chain, and we used money to build out our stores and provide for a lot of new product tooling and the like.

And so I believe what we're doing with cash, the way we're -- this cash that we do spend we're doing an extremely good job of it and we're very frugal about using it and using it in the right places. That said, I'm not religious about holding cash or not holding it. I'm religious about a lot of things but not that one. And so we will continually ask ourselves what's in Apple's best interest and always do what we believe is in Apple's best interest. And so it's a topic for the board on an ongoing basis, and we'll continue to discuss it.

Oppenheimer during the introductory remarks on January 24, 2012:

We are actively discussing uses of our cash balance and don't have anything specific to announce today. In the meantime, we continue to be very disciplined with the cash and are not letting it burn a hole in our pockets.

Oppenheimer during the Q&A on January 24, 2012:

We have always discussed, internally as a management team and with our board, our cash. We recognize that the cash is growing for all the right reasons and I would characterize our discussions today as active about what makes the most sense to do with the cash balance, but we don't have anything to announce specifically today.

[...]

When we have something to announce ... we will announce it. But I want to say again that we are actively discussing the best uses of our cash balance.

[...]

We're examining all uses of our cash balance, what we might do in the supply chain, what we can do from an acquisition perspective and otherwise. Since I don't have any perspective to share with you today, specifically on dividends or buybacks, other than again, we are actively discussing the cash balance. And in the meantime, we're not letting it burn a hole in our pockets.

[...]

We have done acquisitions where it tended be smaller or medium-sized companies that have just great engineering and other talent, a great start on a product or a technology that we'd like to bring in to Apple, and sometimes including the IP. And that's really the acquisitions that we've done. We tend to do several a year. We're very, very disciplined in how we think about this and how we do it. And I think our track record here has been very strong.

iMikeT · Feb 7, 2012

Fine with me.

Keep up the good rumors like this one guys, I love seeing AAPL dominate the market like it has been since the last earnings call.

*Full disclosure, I day trade and I am currently holding a long position in AAPL.*

ctdonath · Feb 7, 2012

"We strongly believe that one or more very strategic opportunities may come along that we're in a unique position to take advantage of because of our strong cash position."

Going private seems a very strategic Apple-like thing to do.

rdowns · Feb 7, 2012

ctdonath said:
"We strongly believe that one or more very strategic opportunities may come along that we're in a unique position to take advantage of because of our strong cash position."

Going private seems a very strategic Apple-like thing to do.

Where do people get this stuff?

bobringer · Feb 7, 2012

It's not the words... it's the tone

Anybody that listened to the conference calls over the years heard the difference this time.

In previous years, it was the standard canned response that companies give. This time, Cook CLEARLY stressed the word ACTIVELY when responding to questions about discussions using the cash. He did this several times on the call.

I've been listening to AAPL conference calls every quarter for about 13 years now and this one was clearly different in the way they talked about cash.

jlgolson · Feb 7, 2012

iMikeT said:
*Full disclosure, I day trade and I am currently holding a long position in AAPL.*

My father was telling me that his investment advisor has been getting on him for a few years because Apple makes up more than 5% of his portfolio and he should diversify.

His response? "Well, it started lower than 5%, and now that it's successful you want me to sell it? NO!"

I bet he's not the only person to have that discussion.

stridemat · Feb 7, 2012

bobringer said:
Anybody that listened to the conference calls over the years heard the difference this time.

In previous years, it was the standard canned response that companies give. This time, Cook CLEARLY stressed the word ACTIVELY when responding to questions about discussions using the cash. He did this several times on the call.

I've been listening to AAPL conference calls every quarter for about 13 years now and this one was clearly different in the way they talked about cash.

Agreed. I remember thinking that while reading the latest conference call article, that this time it seemed different and that they had actually explored the option.

kolax · Feb 7, 2012

$100 billion is just insane. It's incredible how quickly they've accumulated so much cash.

As long as someone sane is sitting on the top of the pile... I'd hate to see things go sour. $100 billion won't last long with a few idiotic decisions.

snberk103 · Feb 7, 2012

How does the deferred-tax off-shore cash affect what Apple can do. That is to say, the news media keep referring to the off-shore profits Apple has not paid US taxes on. If they paid a dividend or bought a US company, would the cash used first have to be repatriated and therefore taxed? Would this add an extra cost to paying the dividend/buying a firm.

Perhaps the recent purchase of the Israeli firm was a way to invest the cash, but keep it off-shore?

LordVic · Feb 7, 2012

I for one, am impressed with the Corporate responsibility that Apple is showing under the leadership of Cook.

It's been a short few months, but he's already been more open, and forward facing than I believe Job's ever was when it came to Criticism and "scandal".

Things like the way he addressed health and safety of suppliers, To pushing with the Dividends and revenue sharing shows that Tim Cook is more understanding of todays economies and where the average worker fits into than Steve Jobs was.

Steve Jobs might have been an amazing sales person. Fantastic ideas and a brilliant strategist. But a Philanthropist or a "people person" i think was something he never was

patsfan83 · Feb 7, 2012

Any guesses to how much the dividend could be?

mbrannon47 · Feb 7, 2012

I am LOVING this type of MacRumors reporting. Original, fresh, and relevant. Spot on, guys. Keep up the great work.

mw360 · Feb 7, 2012

LordVic said:
I for one, am impressed with the Corporate responsibility that Apple is showing under the leadership of Cook.

It's been a short few months, but he's already been more open, and forward facing than I believe Job's ever was when it came to Criticism and "scandal".

Things like the way he addressed health and safety of suppliers, To pushing with the Dividends and revenue sharing shows that Tim Cook is more understanding of todays economies and where the average worker fits into than Steve Jobs was.

Steve Jobs might have been an amazing sales person. Fantastic ideas and a brilliant strategist. But a Philanthropist or a "people person" i think was something he never was

Maybe Tim should go run a charity instead. All this nicey nicey stuff will be the end of Apple. You try to be nice in business and everyone else takes advantage, or tries to dig up a scandal to destroy you. Apple needs to stay cool and a little bit mysterious. That's what makes their products sell.

Rocketman · Feb 7, 2012

The answer

article said:
We are maintaining our cash for flexibility to invest in the business

we are continuing to be conservative with the cash, despite some of the investments we made this quarter. We’re wanting to retain it for flexibility to invest in the business

one or more very strategic opportunities may come along

We don't let it burn a hole in our pocket

And there are other reasons as well that we could go into. But that's the biggest one.

[never followed-up on!]

what we might do in the supply chain, what we can do from an acquisition perspective and otherwise

We have seen the very clear and compelling supply chain uses and we have no concept of the sheer amount involved but it is at least 2 months advance on parts and 2 months advance on inventory. Based on sales that is tens of billions of dollars right there. There are capital investments in factories including in China and TX and MX. Interestingly nobody followed up on "other reasons or otherwise". But we do know they have made strategic investments in technology companies, key technologies licenses, lawsuits, international regulatory approvals, partner agreements, retail store rehab, leases, new HQs, new server farms, and other financial decisions that require a thing called liquid capital to get the very best prices and rates for. Capital is a lost art in this debt ridden country. Imagine if our country had $5T in the "bank" from which to pay social security and medicare payments, FROM THE INTEREST. NO MORE TAXES!!!

Rocketman

ArtOfWarfare · Feb 7, 2012

With Apple closing in on $100B, they could have a significant impact on the national debt...

A bigger thing they could do to help, however, would probably be displace all of Congress with their own management teams.

Or at least go and teach Congress how to properly make financial decisions.

LordVic · Feb 7, 2012

mw360 said:
Maybe Tim should go run a charity instead. All this nicey nicey stuff will be the end of Apple. You try to be nice in business and everyone else takes advantage, or tries to dig up a scandal to destroy you. Apple needs to stay cool and a little bit mysterious. That's what makes their products sell.

its not about being "nice".
it's about being socially responsible.

The worst thing for any economy is hoarded cash. The best thing is for money to be re-circled into the economic ecosystem.

Apple sitting on 100 billion in Cash reserves is absolutely a detriment to America, and the current economic conditions of the world.
Just imagine if Apple spent even 1/2 of that on hiring people and raises. Injecting 50 BILLION back into the economy.

it has nothing to do with being charity. More money in the consumers hands means more consumers and more consumers with money buying more stuff.

Jonny1989 · Feb 7, 2012

I was considering buying £2000 (im a student, its a lot for me) worth of shares until they went down $7. I was waiting the next day to see what happens with the price and go buy them, AAPL only release record breaking shares and they havent been down since.

Been kicking myself since late Jan but keep checking on the price. Anyone know/predict if there will be a slight drop nearer the iPad release? or will it go up and up?

mcfmullen · Feb 7, 2012

They should buy AT&T in the US and Bell in Canada. Then we could see REAL change in the industry.

iMikeT · Feb 7, 2012

jlgolson said:
My father was telling me that his investment advisor has been getting on him for a few years because Apple makes up more than 5% of his portfolio and he should diversify.

His response? "Well, it started lower than 5%, and now that it's successful you want me to sell it? NO!"

I bet he's not the only person to have that discussion.

I'm listening to MacBreak Weekly right now and the panel made mention about AAPL continuing to ass since the their financials. Jason Snell, one of the panelists on today's show went on to mock "analysts" who say that AAPL is "too high" and "there's only one direction for AAPL to go, down." To which he replied, "No there is another direction for AAPL to go, up!"

dickf24 · Feb 7, 2012

ctdonath said:
"We strongly believe that one or more very strategic opportunities may come along that we're in a unique position to take advantage of because of our strong cash position."

Going private seems a very strategic Apple-like thing to do.

I have a better idea and I'll bet that every Apple fan that owns a car will agree.
Apple should buy Saab. Create the Apple iCar with electronics that are intuitive and make sense. And Siri! Try using voice recognition in your car.

There is a factory with competent engineers and workers that need a management and design team with common sense. GM would have to sign off on a deal. GM ought to turn to Apple for their entertainment/phone centers.

I just turned in a Lexus with the most frustrating iPhone connectivity. Saab is supplied by GM and it is a little better, but compared to an real iPhone, iPod or iPad, dreadful.

I'm just saying. Apple TV, Apple iSaab. Sign me up.

ctdonath · Feb 7, 2012

Rocketman said:
Imagine if our country had $5T in the "bank" from which to pay social security and medicare payments, FROM THE INTEREST. NO MORE TAXES!!!

Finally - somebody else realizing that after 225+ years our government should be financially independent, instead of gouging $2.5T from taxpayers every year and another $1T from their kids' future.

RalfTheDog · Feb 7, 2012

jlgolson said:
My father was telling me that his investment advisor has been getting on him for a few years because Apple makes up more than 5% of his portfolio and he should diversify.

His response? "Well, it started lower than 5%, and now that it's successful you want me to sell it? NO!"

I bet he's not the only person to have that discussion.

I love it when they tell you, we can do a better job managing your money than you can.

"What percentage were you guys up last year?"

"It was a bad year for everyone."

"Did you check my numbers before you called me?"

"Wow, never mind."

***********

The advantage of a buy back over a dividend is, a dividend reduces your purchasing power.

Lets say, in two years, Apple decides to purchase AMD, ATT and Microsoft (all at the same time). If Apple were to do a buyback, they could either reissue the stocks for more money or they could trade the stocks for the purchased companies stocks (again at a greater value than they paid for the stocks today.)

Being a person who owns a bit of Apple, I like the idea of a dividend, I like the idea of (smart) big purchases down the road better. I also like the idea of Apple having cash on hand for bad times and the idea of Apple spending more on R&D.

marksman · Feb 7, 2012

Wirelessly posted (Mozilla/5.0 (iPhone; CPU iPhone OS 5_0 like Mac OS X) AppleWebKit/534.46 (KHTML, like Gecko) Version/5.1 Mobile/9A334 Safari/7534.48.3)

Dividends were commonplace back when the stock market was used for investing instead of gambling.

If they choose to do one of these I would prefer dividends over buyback. I don't think apple gets any real long term value from a buy back but I think they do from having a dividend

Thunderhawks · Feb 7, 2012

patsfan83 said:
Any guesses to how much the dividend could be?

$ 2.18 1/2, really?

Apple Board Has Been "Considering" Dividends and Buybacks Since 2005

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