Apple Issues Statement About Returning Cash to Shareholders

[edoates]

Originally Posted by iMikeT

It's to give even more money back so investors. Possibly in higher dividend yields or a buyback. So people get in on it and rocket the stock price.

Issuing a preferred stock bonus (usually, non-voting shares, but they can be traded) is a way of providing a return on investment to shareholders without repatriating the money held outside the US and paying the tax.

[TallManNY]

Originally Posted by CIA

They should just continue to buy back stock. The low stock price can only enhance that. As much as I love the public nature of companies that are, well, publicly traded on the open market, it would probably help Apple to go private. This isn't something that happens overnight with a company this large, but spending 25-40 billion a year on stock buy backs will only increase stock value overall, and eventually help them become private. Private companies have a lot more leeway in how they run their businesses. Also we all know how much Apple wants to be "secretive", going private will help that cause.

First of all, spending $40 billion, the high end of your estimate, is unlikely to even use up each year's free cash flow. They made 23 billion dollars last quarter. The smartphone and tablet markets continue to grow. Apple will have a better Christmas quarter this year.

Second, when a company goes private it gets owned by someone. Who in the world would have the necessary hundreds of billions of dollars to buy Apple? It would probably take at least $600 billion to take Apple public (the current Market Cap is NOT the price that a company will go private at because that price does not include the control premium) and "only" $137 billion could be funded from Apple's cash pile.

[Lennholm]

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!

Didn't you guys get an additional week of paid vacation during thanksgiving the last two years?

[TallManNY]

Originally Posted by actionjunky

Keep the 2.7% dividend. You are going to need the cash for future technology and legal battles ahead. Just grow the stock value by delivering products we don't know we want yet. If you do, and the stock price growth reflects it, I doubt anyone is going to miss the dividend.

You don't need billions for legal battles. Apple spends a lot on lawyers, but it doesn't add up into several billion a year. Even the largest US lawfirm only pull in about $1 billion in revenue and that is with a thousand plus lawyers working full time. You're just thinking in the wrong order of magnitude on legal costs. Now losing legal battles I guess there could be damages. But Apple hasn't really lost anything that significant ever.

Apple is already funding R&D fine. None of this money is being used on R&D, there are huge amounts of cash coming in every week, so there is going to be plenty of money for R&D in the future. No one is suggesting skimping on R&D, but the fact is that Apple can't think of anything to spend this money on. And the scale of this money (I suspect a billion dollars is more than you really realize) means you can't spend this money hiring engineers and software developers, those folks just aren't that expensive.

And with iPad mini and iPhone 5 getting into China, there is just gobs of money coming down the pipe. The tablet market is just getting started. Apple still struggles to fulfill demand for the iPhone during launch quarters. There is plenty of room for growth in revenue and margins are staying strong. It is a great problem to have but it remains silly for Apple's board to just keep sitting on this cash. Remember, they had a $40 billion cash pile at the end of 2008. They never used that money, it has just continued to be added to.

[kwikdeth]

Originally Posted by neuropsychguy

"Bain Apple"? You mean take a struggling company and help turn it around? That certainly doesn't apply here.

if by "turn it around" you mean load it down with high-interest debt that far exceeded the original value of the company, gut it for assets, then scramble before the roof caves in taking all the golden parachutes with them when they leave, then you're right, it doesnt apply here. Apple prefers to manage their company in what used to be considered a reasonable manner - sustainable growth with rewards to shareholders when its appropriate. not trust fund kids-come-managers who feel like they've somehow been robbed if they dont return double-digit growth every three months.

if i buy shares in an airline it doesnt give me the right to dictate where they should fly. i invest in a company because i see the potential for the return on MY investment. If i feel that they are not making business decisions that are good for the future of the company or my investment, then i will sell my investment and move on and chalk it up as a learning experience. its some kind of nouveau-american-tea-party thing it seems that if you dont do your due diligence and dont get what you were expecting as a result, then simply because you threw money in it somehow gives you the right to insist others fix your own mistakes. the guy made an unsound investment and now he's trying to force apple into covering his loss. incredible that people would even defend this kind of action.

[Fatalbert]

Originally Posted by smoledman

Explain to me why you care.

He could be a shareholder. He probably is. Many people here are.

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Originally Posted by phillipduran

Their loyal customers buy stock.

What about their unloyal shareholders (me)?
Anyone who says that holding AAPL long-term is the best is just mad because he didn't sell at 700

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Originally Posted by Ryth

That time was before they announced it.

No, the price will go up if the reward is good. They haven't announced anything concrete.

Apple's management team and Board of Directors have been in active discussions about returning additional cash to shareholders. As part of our review, we will thoroughly evaluate Greenlight Capital's current proposal to issue some form of preferred stock. We welcome Greenlight's views and the views of all of our shareholders.

Something I find amusing is that buying up Irish bank stocks right after a bailout still gives you a profit, presumably because people are wary of buying something so risky. The stock does shoot up after a bailout, but it keeps going up on that news the next few days... interesting.

[swingerofbirch]

Spend a million on tending to Mac OS software (fixing OS X bugs, updating iLife and iWork)!

[SPUY767]

Originally Posted by Ryth

Exactly...no one has ever had this much $$$ coming in.

Most companies have debts, very few are free and clear. No company in modern times has ever had 1/4 of their market cap, in cash, just sitting in the bank.

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Originally Posted by pgwalsh

chunk of Microsoft.

Why one earth would Apple want to buy a huge chunk of a company with no strategic benefit.

[Thunderhawks]

Make Safari snappier and

FREE WI-FI for ALL, NOW!!!!!!!!!!!

[driceman]

This just goes to show what a bunch of flaky tools people on Wall Street are. "Oh they're not innovating... Wait, money to shareholders?" *gobbles up stocks*

[mcfrazieriv]

Originally Posted by TallManNY

How? Do you suggest they go to the R&D store and say, "I'd like to order $20 billion in research please."

Assuming an engineer or software developer costs about $250,000 in salary and $250,000 in yearly supplies, office space, equipment (pretty large assumption) that would require hiring 40,000 new R&D folks. Setting aside Apple's retail stores, that would more than double the current number of Apple employees. Where would you find all these engineers and software developers.

People in this forum really have an issue with belittling others. My comment about applying 20 billion to R&D is an exaggeration (obviously) and comes from my opinion that iOS/OS X has become stale.

CAN I GO TO YOUR STORE AND ORDER $20 BILLION IN BELITTLEMENT, PLEASE?

[joueboy]

The shareholders are already rich considering the value of their stocks. It would have been nice if Apple would give something back to it's loyal customers which they got all the money anyway. For example if you've been a long time customer you should be able to apply for a free $100-200 credit towards your next Apple product purchase depending how long you've been a customer. Like me I just bought a new 27" iMac and iPhone 5 the very first day. They should atleast give me $100 credit toward my next purchase so I could buy an extended warranty or additional accessories for my iMac or maybe buy me the iPad mini. Apple should think about this and use it as a marketing tool yet they still make a profit towards another sell.

[driceman]

Originally Posted by joueboy

The shareholders are already rich considering the value of their stocks. It would have been nice if Apple would give something back to it's loyal customers which they got all the money anyway. For example if you've been a long time customer you should be able to apply for a free $100-200 credit towards your next Apple product purchase depending how long you've been a customer. Like me I just bought a new 27" iMac and iPhone 5 the very first day. They should atleast give me $100 credit toward my next purchase so I could buy an extended warranty or additional accessories for my iMac or maybe buy me the iPad mini. Apple should think about this and use it as a marketing tool yet they still make a profit towards another sell.

I second this, although the way Apple works it's probably just wishful thinking. :P

[lazard]

Originally Posted by joueboy

The shareholders are already rich considering the value of their stocks. It would have been nice if Apple would give something back to it's loyal customers which they got all the money anyway. For example if you've been a long time customer you should be able to apply for a free $100-200 credit towards your next Apple product purchase depending how long you've been a customer. Like me I just bought a new 27" iMac and iPhone 5 the very first day. They should atleast give me $100 credit toward my next purchase so I could buy an extended warranty or additional accessories for my iMac or maybe buy me the iPad mini. Apple should think about this and use it as a marketing tool yet they still make a profit towards another sell.

the board of directors could care less about the customers. Their only concern is their shareholders.

[Mackan]

How about starting to give 2 years warranty on all their products?

It's disgusting to hear about shareholders, dividends, and not knowing what to do with their money. They should instead take the opportunity to set new bars regarding their products and customers.

[darkplanets]

Shortsighted greed.

As if the opinions of a hedge-fund manager aren't biased against long term growth and stability... especially when the guy is in the business of shorts. It's disappointing to see abhorrent greed -- guys like this epitomize the current banker paradigm -- maximize shareholder profits at all costs, especially at first sign of trouble.

While Apple does have a nice war chest right now, the future is incredibly uncertain and the tech world is volatile. They face unprecedented challenges -- they either need to create new markets or uncharacteristically support the existing ones, which we all know they're slowly losing ground in. Staying on top of either requires extensive capital.

The best way to get to the top is to buy good ideas, though increasing R&D certainly helps. I'd like to see more engineering staff for hardware, more software-side employees focusing on drivers, and most importantly, a much larger and comprehensive QA department. Those of course come with a recurring price tag, which must be accounted for in long term stability.

There's also an issue of overseas cash -- if Apple were to pay out more dividends they'd have to repatriate cash and pay (double) taxes.

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Originally Posted by Fatalbert

What about their unloyal shareholders (me)?
Anyone who says that holding AAPL long-term is the best is just mad because he didn't sell at 700

I'd reckon that the stock will return. Investors are stupid and fickle. Apple is still turning a hefty profit and AAPL is undervalued. If (when) they break into a new market (ala TV) the stock will rebound hard.

[IJ Reilly]

Originally Posted by Evangelion

Is it really "giving money back to shareholders", since that money didn't come from the shareholders, but from the people who bought their products? When investor buys a share in a company, the money does not go to the company in question, but to the investor he bought the share from. Unless he took part in the IPO that is.

Misleading. First, the capital market can't function or even exist without a stock market for trading the stock. It is all one system. No stock market, no IPO. Second, the stockholders own the equity in the company. This is is why it is called an equity market. So while technically giving the money "back" to the stockholders is a bit of a misnomer, it is the stockholders who have invested their money in the company so they are first in line to get cash payouts, otherwise known as dividends.

[Fatalbert]

Originally Posted by darkplanets

I'd reckon that the stock will return. Investors are stupid and fickle. Apple is still turning a hefty profit and AAPL is undervalued. If (when) they break into a new market (ala TV) the stock will rebound hard.

Agreed. Imagine if Apple released the Surface, not Microsoft, and sold an amount of Surface tablets even lower than the expectations, like MSFT did. Or if they released the horrible atrocity that is the new YouTube site layout. Nobody takes as much criticism as AAPL. The price would plummet to around the amount of cash AAPL has

[IJ Reilly]

Originally Posted by TEG

They could indirectly give the money back to the shareholders by buying back stock. Less available stock usually raises the price, giving people value, at least on paper.

TEG

They are already doing this. Dividends give the stockholders a return for sure, not just on paper.

[Fatalbert]

Originally Posted by swingerofbirch

Spend a million on tending to Mac OS software (fixing OS X bugs, updating iLife and iWork)!

Yes! It feels like Mac OS is run by a small company still.

[bencjedi]

Of course it rose sharply after I sold 80% of my shares just before the last investor's call. I put the money into mutual funds that should ease my anxiety. AAPL cost me $1600 in losses since the originsl purchase of my shares last July.

[IJ Reilly]

Originally Posted by OasisNYK

Personally I don't see this as such a good thing. I know Wall Street generally likes it, but this is basically Apple admitting that they cannot get a better return investing that money in the business so they are giving it to the shareholders instead. My concern is they have either run out of ideas to use the money, the future tech is far too expensive to invest in, or some other unflattering reason that is masked by the news of a large dividend.

I wonder what their hurdle rate is. Didn't Microsoft do a one time dividend to give back some of their cash hoard at some point? I don't think it generally helps a stock long term but I could be wrong.

All it means is that the company is generating more free cash than God, way more money than they any company could use for growth. They can easily fund any idea you or anyone else can imagine.

Microsoft did issue a large, one-time dividend. It didn't help the stock price longterm because earnings are not growing much longterm. But it did shove a lot of dollars into the pockets of investors, which is sort of a nice thing, if you are an investor.

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Originally Posted by Squeak825

No, when you buy a share of stock you are buying a portion of the right to the assets, which includes cash.

The stock is very much priced to include the amount of cash in hand.

Right now the $468 per share price can be split between $145 for the right to the cash on hand, and $323 for the right to future earnings.

Sort of. Stockholders do own the equity in the company, but the stock markets do not price in cash assets (or any others, really) since stockholders don't see any of that cash unless the board declares a dividend. Or if a stockholder buys the entire company. Only in those two ways do stockholders care about cash.

[QCassidy352]

Originally Posted by OasisNYK

Personally I don't see this as such a good thing. I know Wall Street generally likes it, but this is basically Apple admitting that they cannot get a better return investing that money in the business so they are giving it to the shareholders instead. My concern is they have either run out of ideas to use the money, the future tech is far too expensive to invest in, or some other unflattering reason that is masked by the news of a large dividend.

I would agree if they had $1b in the bank, or $10b. But they have over $130b. There comes a point where you just can't need that much stockpiled cash for any legitimate business purpose, and they passed that point long, long ago. They can return an ungodly amount of money to the shareholders and still have far more than enough for the kind of investment you're talking about.

[carlgo]

Originally Posted by BZIG

Billions of dollars in cash and no SatIphone in sight.

I want my SATELLITE iPHONE NOW

Thanks AAPL

Or that nation-wide WiFi thing...something.

Drones could be used like low-orbit satellites.

It would seem smarter to not talk about buying back stock so you could buy it cheaper. Maybe it is impossible to hide the plan. Make me an offer for mine! or perhaps some huge dividends...

[jpasca]

What happens the original shareholder owned X shares of aapl. A part OWNER of the company. That is what you are. That VALUE you own goes up and down depending on the share price and the dividend. The share price is only what you bought it for and what you can sell it for. It's true the company no longer gets money from the sale of it's stock after it raised the initial capital and subsequent share offerings. However APPLE is you TOO if you own the stock. So the point of wanting apple to give money to shareholders- it is to distribute more of the profits to the part owners (shareholders) of apple.

Originally Posted by Evangelion

Is it really "giving money back to shareholders", since that money didn't come from the shareholders, but from the people who bought their products? When investor buys a share in a company, the money does not go to the company in question, but to the investor he bought the share from. Unless he took part in the IPO that is.