Wow. I didn't realize what a f***-up job the previous CEOs did to Apple. Thank God Steve Jobs is back to the company he help founded.
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Apple is now Debt Free
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I actually disagree. Money needs to be put into supply chain efficiency and manufacturing. Apple already spends an incredible amount on R&D, but it needs to put money into making that research into a widely distributed product.
And now that the economy is getting better, hopefully Apple won't need cash reserves as large. Of course, the economy hasn't fully recovered, but I hope to see in the next few months investment on Apple's part into more efficient manufacturing, bigger manufacturing contracts, and a supply chain that doesn't keep new products out of its customers' hands for months.
Not important
Debt is not a bad thing. To borrow money is cheap. Theres a good amount of debt - short term debt, and even some long. Perhaps cash is needed to pay employees but they dont want to take it out of other investments that are giving them a better return than the interest they have to pay on the debt. They may be "making" money on debt. This is small potatoes for a 4.5 bill bank account.
Debt is not a bad thing. To borrow money is cheap. Theres a good amount of debt - short term debt, and even some long. Perhaps cash is needed to pay employees but they dont want to take it out of other investments that are giving them a better return than the interest they have to pay on the debt. They may be "making" money on debt. This is small potatoes for a 4.5 bill bank account.
$300 million in debt ain't that bad (step outside of your "consumer credit" mindset for a moment.) These days, with interest rates so low, money is practically free. Many "forward" thinking companies would take advantage of this "free" money and borrow to finance expansion. To a corporation, on a strictly balance-book view, debt can be an asset.
Keep in mind that gobs of cash sitting around unused can be a anchor on stock price. Ford, in the late 90's, had tremendous cash reserves of around $9 billion and no plan to invest them in growing the company which served to keep the stock low despite huge profits.
That being said, I wish I had $300 million to pay off debt.
Keep in mind that gobs of cash sitting around unused can be a anchor on stock price. Ford, in the late 90's, had tremendous cash reserves of around $9 billion and no plan to invest them in growing the company which served to keep the stock low despite huge profits.
That being said, I wish I had $300 million to pay off debt.
I think the billions in the bank are there primarily to provide the company with capital into which to dip, so as to be able to stay self-sufficient for a while in the event that expenses overcome profit and interest -- basically a rather large slush fund.
But I can just imagine the commentators: "Apple doesn't owe a penny to anyone, they have five billion dollars in the bank, and iPods are selling like hotcakes; therefore, they are on the verge of bankruptcy."
But I can just imagine the commentators: "Apple doesn't owe a penny to anyone, they have five billion dollars in the bank, and iPods are selling like hotcakes; therefore, they are on the verge of bankruptcy."
once again. this news is more negative than positive. take an accounting course peeople! =P
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for example, i bought stock on margin yesterday (this is not advised) but following UNTD closely, I know its waves. Today its up 4+%. Ill sell for a nice gain and pay pennies on the dollar.
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for example, i bought stock on margin yesterday (this is not advised) but following UNTD closely, I know its waves. Today its up 4+%. Ill sell for a nice gain and pay pennies on the dollar.
Just a PR thing: the street won't care
The guys who work on the street and manage billions don't really care whether Apple has $5.1m in the bank and $300m in debt, or $4.8m in the bank and $0 in debt. It's just a minor blip in the financials. They care about revenues and profits.
The street would actually rather see the company buy back shares. Companies tend to buy back their own shares when they feel they're undervalued. It's a sign of confidence in the future.
It does change Apple's company profile a little though - for whatever reason, manufacturing companies generally have debt, while software and internet companies usually don't. So it could be Apple's way of saying "hey we're not a computer manufacturer, we're a software and internet play."
The guys who work on the street and manage billions don't really care whether Apple has $5.1m in the bank and $300m in debt, or $4.8m in the bank and $0 in debt. It's just a minor blip in the financials. They care about revenues and profits.
The street would actually rather see the company buy back shares. Companies tend to buy back their own shares when they feel they're undervalued. It's a sign of confidence in the future.
It does change Apple's company profile a little though - for whatever reason, manufacturing companies generally have debt, while software and internet companies usually don't. So it could be Apple's way of saying "hey we're not a computer manufacturer, we're a software and internet play."
Re: Not important
Thanks dudeweb83 for pointing out that being in debt can be a good thing. Think about it personally, most of us would rather be in debt so we can own a home, with manageable monthly mortgage payments, than to rent for a long time accumulating cash until we can pay cash. Having manageable debt essentially frees up cash for companies to do things sooner, like invest in R&D, or buy up software companies, etc.
But I do agree that Apple becoming debt-free is a symbolic achievement, and the previous debt was probably "bad" debt with higher interest rates and restrictive terms.
Now, let's see some kick-a** new G5 PowerBooks!
Thanks dudeweb83 for pointing out that being in debt can be a good thing. Think about it personally, most of us would rather be in debt so we can own a home, with manageable monthly mortgage payments, than to rent for a long time accumulating cash until we can pay cash. Having manageable debt essentially frees up cash for companies to do things sooner, like invest in R&D, or buy up software companies, etc.
But I do agree that Apple becoming debt-free is a symbolic achievement, and the previous debt was probably "bad" debt with higher interest rates and restrictive terms.
Now, let's see some kick-a** new G5 PowerBooks!
While it is cheaper for Apple to finance new 'projects' by burrowing than financing with their own money (because the interest payments are tax-deductable), I think it is uncertain whether it's more negative than positive. There is a lot signalling in saying we have got a 100% healthy company.
This might also be a way of doing something good to the people who hold their stock - or by making their stock more worth.
I don't know if IBM has any debt, but not so many years ago they were debt-free as well. This wasn't because it was the cheapest thing but because they wanted to signal that they had/have a healthy company.
But from a accounting point of view you are 100% correct: Being debt-free is not a good thing when interest payments are tax-deductible
Pretty irrelevant. The company has loads of cash, so a small "debt" is pretty irrelevant. It's like having a few charges on a credit card, but a huge savings account.
But the stock price has been great over the last 9 mos. or so. Nearly doubled from its low.
Very Nice PR. Not much else, considering the debt was not all that much (relative).
But Apple IS most definitely in the PR biz these days. I spend my days as a media analyst...and any supportive media impressions are looked upon as positive for the company. Forget the stock price...for now. The elimination of debt is just one more way for Apple to distinguish itself from the rest of the technology sector.
It's all psychological. The good kind-- BRAGGING rights.
But Apple IS most definitely in the PR biz these days. I spend my days as a media analyst...and any supportive media impressions are looked upon as positive for the company. Forget the stock price...for now. The elimination of debt is just one more way for Apple to distinguish itself from the rest of the technology sector.
It's all psychological. The good kind-- BRAGGING rights.
Finally, something other than iPod news! For a second there I thought I was going to the iPodlounge.
Re: Re: Not important
Debt can be a good thing, but it usually isn't. Especially considering how bad people are with money in America these days.
Debt can be a good thing, but it usually isn't. Especially considering how bad people are with money in America these days.
What's the big deal?
Like some others here, I'm wondering what the big deal is. It will not be interpreted positively by investors, and Apple could have paid off that debt a long time ago from petty cash. Why they chose to do so now is puzzling, as is why Steve promoted it as a milestone.
I'm not saying debt is a good thing, nor am I saying paying it off is a bad thing. I just don't see any reason to pop the champagne corks, as some others are doing.
Like some others here, I'm wondering what the big deal is. It will not be interpreted positively by investors, and Apple could have paid off that debt a long time ago from petty cash. Why they chose to do so now is puzzling, as is why Steve promoted it as a milestone.
I'm not saying debt is a good thing, nor am I saying paying it off is a bad thing. I just don't see any reason to pop the champagne corks, as some others are doing.
Re: Re: Re: Not important
Hell, maybe he paid off the debt so that he can sell Apple and make a new company for all of his clever little gadgets.
Hell, maybe he paid off the debt so that he can sell Apple and make a new company for all of his clever little gadgets.
I guess Steve has been watching the Suze Orman show.
Now if he will just cut up those darned credit cards....
Now if he will just cut up those darned credit cards....
Steve Jobs could sell ice to Eskimos, that's why Apple has him back as CEO. He also made it where no other company could sell Mac clones anymore. In other words he really cleaned house when he came back in 1997. The only thing I hope is that Apple doesn't become like Microsoft, because then we all would get infected with Mac viruses.
Apple can spend more on R&D because apple won't have to repay interest on $300 million that is being owed.
As for those whinners.... why on earth did people rate this as negative?!!!! Debt free is *good*, no interest to pay, less liabilities. How can this possibility be negative?!
As for those whinners.... why on earth did people rate this as negative?!!!! Debt free is *good*, no interest to pay, less liabilities. How can this possibility be negative?!
As others have said, debt is not nessesarily bad. On a small scale, think about this: if you borrow $100,000 and buy investment property putting nothing down and rent it out at $200 more than your mortgage payment, taxes and insurance. You are making $200 a month on the bank's money. This is done everyday, it's called leveraging, and it works for real-estate, stocks capital investments, etc... If this is even true, I doubt the stock will see much change due to it.
a signal
Steve has the cash (with the permission of the board natch) to potentially carry out some more acquisitions, and I would venture that this is what the cash is being kept on hand for. When and what those will be, I haven't a clue, but I would bet against a purchase of Maya. There are already plenty of excellent 3D products on the market.
Personally, I wish that Apple would spend some of its cash funding/assisting various companies in strategic businesses (MCAD, Science, Architecture) to port existing UNIX applications to full Aqua/Quartz compatibility. This, and the PPC 970FX would be huge draws to those industries, and would greatly broaden the appeal of Apple hardware.
Steve has the cash (with the permission of the board natch) to potentially carry out some more acquisitions, and I would venture that this is what the cash is being kept on hand for. When and what those will be, I haven't a clue, but I would bet against a purchase of Maya. There are already plenty of excellent 3D products on the market.
Personally, I wish that Apple would spend some of its cash funding/assisting various companies in strategic businesses (MCAD, Science, Architecture) to port existing UNIX applications to full Aqua/Quartz compatibility. This, and the PPC 970FX would be huge draws to those industries, and would greatly broaden the appeal of Apple hardware.
If your interest is 4% but you can make 10% with the 300 million, it's a bad move.
I'm not saying they "can" do this, or that being debt free is bad. But it's not always as cut-and-dry as it may seem.