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Old Apr 23, 2013, 04:52 PM   #1
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Apple More Than Doubles Capital Return Program to $100 Billion




Alongside today's earnings release, Apple also announced a major increase in its capital return program, boosting the previous $45 billion program to $100 program.

The company announced a 15% increase in dividend payments, but Apple is making a significant increase in its stock buyback initiative, taking advantage of the company's depressed stock price to reduce the amount of stock available on the market.
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The Company expects to utilize a total of $100 billion of cash under the expanded program by the end of calendar 2015. This represents a $55 billion increase to the program announced last year and translates to an average rate of $30 billion per year from the time of the first dividend payment in August 2012 through December 2015.

As part of this program, the Board has increased its share repurchase authorization to $60 billion from the $10 billion level announced last year. This is the largest single share repurchase authorization in history and is expected to be executed by the end of calendar 2015. Apple also expects to utilize about $1 billion annually to net-share-settle vesting restricted stock units.
As part of the newly-expanded capital return program, Apple does plan to take on debt and will announced its plans on that aspect of the program at a later date.
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"We are very fortunate to be in a position to more than double the size of the capital return program we announced last year," said Tim Cook, Apple's CEO. "We believe so strongly that repurchasing our shares represents an attractive use of our capital that we have dedicated the vast majority of the increase in our capital return program to share repurchases."
Apple notes that it will continue to evaluate its capital return strategy on an annual basis and will look to optimize the use of excess cash through its mix dividends, stock buybacks, and settling of restricted stock unit grants to employees.

Following Apple's announcement, Moody's gave Apple an Aa1 credit rating with a stable outlook, indicating that the company's obligations should be considered of high quality and hold low credit risk.

Article Link: Apple More Than Doubles Capital Return Program to $100 Billion
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Old Apr 23, 2013, 04:55 PM   #2
Ventilatedbrain
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Jump apple .. JUMP good call
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Old Apr 23, 2013, 05:02 PM   #3
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Can someone please explain this to me in English? :/
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Old Apr 23, 2013, 05:14 PM   #4
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Originally Posted by bjsterilite View Post
Can someone please explain this to me in English? :/
They buy their own stock so less people have it, thus making it more of a rare commodity, increasing its value.

I think that's how it works, anyway.
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Old Apr 23, 2013, 06:15 PM   #5
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okay...
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Old Apr 23, 2013, 06:22 PM   #6
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Too bad they have to borrow money to do this (most of their money is overseas for tax reasons. i.e. they can't use it.).
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Old Apr 23, 2013, 06:24 PM   #7
e-coli
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This is a nice way of giving Wall Street the middle finger. Fewer shares = less leverage to be wielded by large institutions.

In English it translates to greater earnings per share (EPS), which looks better on paper for those who are required to or choose to trade on fundamentals. (remember those days...)
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Old Apr 23, 2013, 06:25 PM   #8
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Too bad they have to borrow money to do this (most of their money is overseas for tax reasons. i.e. they can't use it.).
Meh, whatever. Apple is probably as good a credit risk at the US government, and maybe better. They'll pay 30 year Treasury bond rates when borrowing. It's basically nothing.
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Old Apr 23, 2013, 06:26 PM   #9
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The return program is a $55b increase, so I believe the first paragraph of this article should say "...boosting the previous $45 billion program to $100 program." Or else going from $55b to $100b isn't "more than doubling." Unless I'm worse at math than I thought (entirely possible)
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Old Apr 23, 2013, 06:29 PM   #10
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Originally Posted by keysofanxiety View Post
They buy their own stock so less people have it, thus making it more of a rare commodity, increasing its value.

I think that's how it works, anyway.
That is what they say - but how has it worked so far? I think it is a boondoggle waste of money.

They have roughly 1 billion shares in the market

Spending $50 billion will buy back 125 million shares @ $400 share.

They will now have 875 million shares on the market PLUS new incentive shares for employees. $50,000,000,000 just disappeared from the balance sheet, investors don't have squat to show for it.

If Apple had spent $50,000,000,000 on a special dividend = $51 per share.

This is a ripoff.
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Old Apr 23, 2013, 06:38 PM   #11
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I can't believe it. How is this any different than just throwing the money away? Why does Apple suddenly care so much about their stock price? Wouldn't that $55 billion dollars be put to better use by developing the iCar or something? Or maybe buying a telecommunications company to secure rights to broadcasting for an Apple TV, and creating cheaper wireless service for iPhones.

I always thought Apple had some secret master plan for that stack of cash they have.

I don't see how this benefits Apple or customers, but hey, I'm only in like my second year business school.
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Old Apr 23, 2013, 06:44 PM   #12
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Originally Posted by MacRumors View Post
Alongside today's earnings release, Apple also announced a major increase in its capital return program, boosting the previous $55 billion program to $100 program.
I think you forgot something. ;-)
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Old Apr 23, 2013, 06:57 PM   #13
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It would have been better if Apple just focused on making products and strengthening the business, seems strange that it became such a priority to get rid of the cash. What will happen a few years down the line, what if they can't generate same revenues anymore? The cash should have been left alone because the more money Apple has the safer the position they will be in the future.
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Old Apr 23, 2013, 07:15 PM   #14
Mike Valmike
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It would have been better if Apple just focused on making products and strengthening the business, seems strange that it became such a priority to get rid of the cash. What will happen a few years down the line, what if they can't generate same revenues anymore? The cash should have been left alone because the more money Apple has the safer the position they will be in the future.
That WAS the plan. Apple had survived the '90s with no shortage of luck and fortunate attraction of capital on what Jobs executed as combination royal gamble and sympathy play. Once bitten (ha ha), Apple seemed content to make sure it had sufficient funds on hand to weather the next dozen challenges from Microsoft-esque nemeses anywhere, be they Google, Samsung, or whichever opportunistic conglomerate arose next.

Then, Einhorn's shenanigans made it clear that, much like Heorot, the Mead Hall in the epic "Beowulf," Apple's cash hoard was too much of a target for the Grendel we know as Wall Street looters and pillagers. Rather than seeing its treasure bled away by such brigandry, Apple is using that cash to wrest control away from Wall Street and reduce the aggregate clout of external shareholders, increasing the company's freedom to do what it wants long-term. If Apple's cash hoard had been big enough to take the company private, be assured, Cook would have made it happen. Then, under no pressure whatever from Wall Street and beholden only to its own sales performance going forward, Apple would have been free to pursue all the blue sky research it wanted and reap the rewards of any consumer applications developed thereby.

And that still might happen. But it could take a while before it does.
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Old Apr 23, 2013, 07:15 PM   #15
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"I'd shut it down and give the money back to the shareholders"
-Michael Dell, 1997

I guess they're finally taking his advice.

Rampdown strategy:

1) stop making innovative products and instead start fielding spec-bumped also-rans and competing modestly into segments that others are already dominating

2) start giving cash hoard back to investors rather than using it to invent killer new market segments

3) start buying shares in a company whose stock is a) overvalued due to hype, and b) on a downward trajectory.

A logical approach now that their source of innovation died.
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Old Apr 23, 2013, 07:22 PM   #16
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I can see Apple going private in 5-10 years time and not needing to be beholden to Wall Street. Interesting move indeed.
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Old Apr 23, 2013, 07:30 PM   #17
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I can see Apple going private in 5-10 years time and not needing to be beholden to Wall Street. Interesting move indeed.
Impossible. The amount of money involved is extremely high. Too high for Apple, even.
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Old Apr 23, 2013, 07:34 PM   #18
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Originally Posted by MacRumors View Post
... Apple is making a significant increase in its stock buyback initiative, taking advantage of the company's depressed stock price ...
The real culprit behind all this mindless anti-Apple bullishness?
Could be Apple itself, working to get a better deal on its own stock.

Think of it this way. AAPL is still higher than when Tim Cook took over.
Apple's hardware, software, and services are selling extremely well.
And all of this in the middle of a worldwide recession.

What better time for Apple to buy back its own stock for the ride up?
Not just over the next few quarters. For the next decade or more,
as the world economy gradually recovers. Just in time for the full
Apple television solution to start disrupting the TV industry...
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Old Apr 23, 2013, 07:37 PM   #19
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Originally Posted by Dirtfarmer View Post
"I'd shut it down and give the money back to the shareholders"
-Michael Dell, 1997

I guess they're finally taking his advice.

Rampdown strategy:

1) stop making innovative products and instead start fielding spec-bumped also-rans and competing modestly into segments that others are already dominating

2) start giving cash hoard back to investors rather than using it to invent killer new market segments

3) start buying shares in a company whose stock is a) overvalued due to hype, and b) on a downward trajectory.

A logical approach now that their source of innovation died.
What do you think theyve been doing with R&D? The more you spend, the less return you get on that investment. Just look how all that spending turned put for Microsoft! So the logical thing to efficiently employ capital is to buy undervalued shares that yield 10 percent and encourage more investors to buy shares instead of keeping that cash in low rate investments
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Old Apr 23, 2013, 07:39 PM   #20
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So Apple gave the vultures what they want and the stock is flat after hours.
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Old Apr 23, 2013, 07:41 PM   #21
dysamoria
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Originally Posted by Mr. Retrofire View Post
I think you forgot something. ;-)
Yeah. That's an Apple Insider kind of error. Proof reading is dead.
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Old Apr 23, 2013, 07:43 PM   #22
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So Apple gave the vultures what they want and the stock is flat after hours.
Yes indeed they did. Bought themselves some goodwill with their cash hoard.

New products? Not so fast.. same old story, lots of talk.

Procrastinate till 2014, that'll buy em some time
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Old Apr 23, 2013, 07:53 PM   #23
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Originally Posted by Mike Valmike View Post
That WAS the plan. Apple had survived the '90s with no shortage of luck and fortunate attraction of capital on what Jobs executed as combination royal gamble and sympathy play. Once bitten (ha ha), Apple seemed content to make sure it had sufficient funds on hand to weather the next dozen challenges from Microsoft-esque nemeses anywhere, be they Google, Samsung, or whichever opportunistic conglomerate arose next.

Then, Einhorn's shenanigans made it clear that, much like Heorot, the Mead Hall in the epic "Beowulf," Apple's cash hoard was too much of a target for the Grendel we know as Wall Street looters and pillagers. Rather than seeing its treasure bled away by such brigandry, Apple is using that cash to wrest control away from Wall Street and reduce the aggregate clout of external shareholders, increasing the company's freedom to do what it wants long-term. If Apple's cash hoard had been big enough to take the company private, be assured, Cook would have made it happen. Then, under no pressure whatever from Wall Street and beholden only to its own sales performance going forward, Apple would have been free to pursue all the blue sky research it wanted and reap the rewards of any consumer applications developed thereby.

And that still might happen. But it could take a while before it does.
I don't see how they could use the money to take the company private. If they buy back shares the remaining shareholders gain more of a vote and may want to keep the shares. Besides, the share prices has generally remained at about four or five times the cash per share so it is like chasing the horizon.

I don't understand the nuances of this action. It does seem like a good idea to soak up extra shares. It will be harder for the hedge funds to sell shars and drive down the price for their own purposes. Historically I don't think buy backs have kept the share price up for more than a short time. It may, as you say, be a defensive maneuver to deflect the actions of those who want to strip this cash from Apple. Personally, I would rather have a larger dividend.

Even with this action the cash on hand will not shrink. It just won't grow quickly. Possibly they will raise the dividend again next year.
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Old Apr 23, 2013, 09:23 PM   #24
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Tim Cook failed. Apple is burning the money.
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Old Apr 23, 2013, 09:55 PM   #25
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They should buy Intel for $115B instead.
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