Apple is now Debt Free

[Rocketman]

1. I commend Steve Jobs for a job well done.

2. Debt financing has NEVER been cheaper or more wise.

3. Debt or not the stock price either does not care or actually encourages companies who use debt to leverage sales. Slight negative.

4. This makes a hostile buyout much easier and cleaner.

5. If Apple does not have any projects at all worth leveraging they have hit a sales cieling that they cannot grow into and that is also a negative.

Rocketman

 

[ccuilla]

Speaking of intelligence vs. morons...and what Apple "should" do...with all due respect, don't we think that the guys running finance at Apple KNOW what they are doing (and better than ANY of us)? Especially when you consider they know a lot of stuff we DON'T (such as Apple's future plans).

Apple has had very good financial stewardship over the past few years. I'm sure this is a fine move, and perhaps a precursor to something even better.

 

[eric_n_dfw]

Originally posted by ccuilla
Interesting article. Not sure I agree with all of it, but I do love this one:

"Apple has a more modest and less aggressive approach."

I would suggest a better way to say this:

"Apple has a more honest approach."

Agreed. But I am 100% behind his point that they need to provide something to compete in the sub-$100 range. At my work, I have a G4 500 that was going to collect dust after they closed an office. I want to upgrade to a faster machine but the only ways to do it are:

• Convince them to pay $400-$500 for a G4 upgrade
• Convince them to pay $2000 for a Dual 1.8 G5
• Be happy with an our standard desktop hardware, 2.6Ghz P4 with 512Mb Dual Channel DDR RAM which lists for $904 (I'm sure they get it at a better price as they buy them for tons of employees (either that or a same brand laptop)

I'm doing Java development so there is no real business reason for using Mac OS X, so convincing them buy me a new one ain't gonna happen. The upgrade may be a little cheaper than the "COE" solution, and I may try to lobby for it, but I don't have high hopes.

If Apple had a competitive machine in this price range I might be able to sweet talk my managers into buying me one, but at the current G5 prices, there's just no way. (And, no, the eMac is not a viable option for what I do - maybe if it was headless and a bit more powerfull.)

 

[ccuilla]

Originally posted by eric_n_dfw
I'm doing Java development so there is no real business reason for using Mac OS X

I don't know. OS X is nice platform for doing a lot of software development, including Java. Being UNIX OS, it has a boat load of tools (through the shell) that are enormously useful during software development.

 

[Sun Baked]

If they replaced the typical revolving credit line used for suppliers, leases, payroll, etc. with cash...

That'll tie up a huge chunk of the $4.8 billion.

But how much depends on the velocity of the cash moving through their accounts (cash flow) -- and how quickly it's being replaced.

 

[ImAlwaysRight]

Originally posted by srobert
Once again, as with every "Good News" thread, you enivitably get a few "negative" votes.

I wonder how people can think that Apple getting out of debt is negative.

I'm just curious.

I vote negative on everything just to piss people like you off. It gives me a good laugh!


j/k

 

[RIP]

Great!

Now they can start hiring Americans again...

 

[ccuilla]

Re: Great!

Originally posted by RIP
Now they can start hiring Americans again...

Don't count on that. Apple is a very "hip" company, and right now it is very "hip" to hollow out the American economy by sending high-paying jobs to India...because of course this is good for the economy and will create new, even higher paying jobs here. From what I can see the only higher paying jobs it creates here belong to the CEOs doing such outsourcing.

( sorry, off my soap box now... )

 

[Awimoway]

Re: Re: Great!

Originally posted by ccuilla
Don't count on that. Apple is a very "hip" company, and right now it is very "hip" to hollow out the American economy by sending high-paying jobs to India...because of course this is good for the economy and will create new, even higher paying jobs here. From what I can see the only higher paying jobs it creates here belong to the CEOs doing such outsourcing.

( sorry, off my soap box now... )

 

[mrsebastian]

cleaning up the house keep up the good work steve and co.

 

[nagromme]

Is Dell debt-free?

I think it's obvious that Apple's financial leadership does NOT have a CLUE what they are doing. In the middle of a struggling industry, Apple is profitable, debt-free, and has a lot of cash in the bank to guard against the economic future, all the while spending on R&D instead of waiting. Clearly Apple needs a shake-up at the top

BTW... is Apple the only big PC maker that is both profitable AND debt-free? Or is Dell too debt-free?

 

[eric_n_dfw]

Originally posted by ImAlwaysRight
I vote negative on everything just to piss people like you off. It gives me a good laugh!


j/k

You rable-rouser, you!

 

[rdowns]

Originally posted by alandail
what I don't get is that no matter what the story is, someone clicks on the negative button.

Who cares? I find that aspect of this forum to be ridiculous. I couldn't care less whether others find a thread positive or negative.

 

[Frohickey]

Re: Apple is now Debt Free

Originally posted by Macrumors
99mac.se publishes an internal memo from Steve Jobs to Apple employees today.

According to the Memo, Jobs states that "Today is a historic day of sorts for our company." Apple used $300 million in cash to pay off the rest of their debt, and is now a debt-free company. A big turnaround from over $1 billion in debt in mid-1997. Also noted in the memo is that Apple currently has $4.8 billion in the bank at this time.

A pox on the idiot Apple employee who sent the internal memo to outside people. Internal memos are supposed to be internal!

 

[Frohickey]

Re: Re: Great!

Originally posted by ccuilla
Don't count on that. Apple is a very "hip" company, and right now it is very "hip" to hollow out the American economy by sending high-paying jobs to India...because of course this is good for the economy and will create new, even higher paying jobs here. From what I can see the only higher paying jobs it creates here belong to the CEOs doing such outsourcing.

( sorry, off my soap box now... )

You are right.

I think Apple should only hire Americans and produce everything in the USA using union labor. Doesn't matter that Apple's competitors go overseas to make their products as low cost as possible. This way, when Apple finally goes bankrupt, it can go bankrupt with its head held high.

<end_sarcasm>

 

[ccuilla]

Re: Re: Re: Great!

Originally posted by Frohickey
You are right.

I think Apple should only hire Americans and produce everything in the USA using union labor. Doesn't matter that Apple's competitors go overseas to make their products as low cost as possible. This way, when Apple finally goes bankrupt, it can go bankrupt with its head held high.

<end_sarcasm>

Look, I understand this argument. Been hearing it for years. Still, the real question is "What's next?" If there are no jobs left here...or we're all working for minimum wage at McDonald's and Wal-Mart...there won't be anyone BUYING computers. I know...very "chicken little" of me...doomsday scenario and all. Point is though, there has to be a bottom here, and there appears to be a race for it (low wages that is).

 

[Playball]

Say goodbye to AAPL.....

Taking a look at the numbers for a second, the stock market values Apple @ $8.58B, but of that value, $4.8B is cold hard cash, meaning that ignoring the bank account, AAPL as a company is worth only $3.78B. (Or roughly 1/23rd of the value of Dell.)

(Hmm, funny how this is roughly AAPL's marketshare too.)

Anyway, if the next digital media product from Apple after the iPod mini is a hit, expect somebody like Sony to scoop Apple up for little more than a a rounding error (in Sony's terms, $3.8B is peanuts.)

Alternatively, some larger but weaker player could buy AAPL mostly for the cash.

Regardless of Apple's fate, there's a strong implied message when more than half of a company's value is simply it's bank account: "we can't find a better use of the money!" This is especially sad when Apple's $4.8B is cash is earning an interest rate of probably only 1-2%. Apple is in effect saying that investing the cash into R & D, or any other operating expense will do less than earn a 1-2% return on investment.

Personally, I'm stunned that Apple can't find any interesting partnerships or acquisitions to make to spend some of this money, and I'm stunned by what this implies. (To me, it says one of 2 things: either we're so in love withourselves that we can't find any partners worthy of our loot, or because Macs have such a small share of the market and developer interest, there aren't any Mac-based (software or hardware) business worth investing in. (by extension, all of the innovation starts on other platforms.)

The other option, that Apple has somehow avoided, is to return the cash to the shareholders, either thru a dividend or a share buyback. (That's what I'd like to see.)

 

[Krizoitz]

Originally posted by eric_n_dfw
Not to get too far off subject, but David Every (formerly of http://www.mackido.com) recently posted, IMO, an excellent article about what "Apple Needs To Do": http://www.igeek.com/articles/Apple/AppleDell.txt

I spawned this off into another thread

https://forums.macrumors.com/showthread.php?s=&threadid=61018

 

[Frohickey]

Re: Say goodbye to AAPL.....

Originally posted by Playball
Regardless of Apple's fate, there's a strong implied message when more than half of a company's value is simply it's bank account: "we can't find a better use of the money!" This is especially sad when Apple's $4.8B is cash is earning an interest rate of probably only 1-2%. Apple is in effect saying that investing the cash into R & D, or any other operating expense will do less than earn a 1-2% return on investment.

The other option, that Apple has somehow avoided, is to return the cash to the shareholders, either thru a dividend or a share buyback. (That's what I'd like to see.) [/B]

Could be that there isn't an awful lot of good companies out there with good technology to buy. As to only 1-2% interest rate, I think its probably more than that. Remember the Akamai shares that Apple has been selling? That was bought using the cash that Apple has accumulated, and they got in on the ground floor on that deal, and its been enough to pay more than 1-2% return on investment.

Because Apple is a niche player, it needs a sizeable amount of cash to weather market ups and downs. You can't compare Apple with Dell/Intel/Microsoft in financials. The other 3 companies can generate enough profit in one quarter to keep paying for their operations for more than one quarter. I don't think Apple has that kind of luxury.

 

[Vector]

Re: Say goodbye to AAPL.....

Originally posted by Playball

Personally, I'm stunned that Apple can't find any interesting partnerships or acquisitions to make to spend some of this money, and I'm stunned by what this implies. (To me, it says one of 2 things: either we're so in love withourselves that we can't find any partners worthy of our loot, or because Macs have such a small share of the market and developer interest, there aren't any Mac-based (software or hardware) business worth investing in. (by extension, all of the innovation starts on other platforms.)

The other option, that Apple has somehow avoided, is to return the cash to the shareholders, either thru a dividend or a share buyback. (That's what I'd like to see.)

I am not going to comment on the first part because I don't want to start an argument.

As to your position on acquisitions, you are somewhat right. They should be acquiring companies, and they have been. They acquired the companies that made Shake and Logic, both very important apps in their respective industries. Apple also acquired several other smaller companies for software and technology, but I cannot remember them. You can probably do a search on this site and find references to the original announcements.

As a stockholder, I would like to see a stock buyback program, but it won't really matter since I am trying to get out. I am not sure how much a buyback would really help the stock price since it is controlled so much by traders' perceptions of apple's volatility and the idea that apple is always on the verge of dying. I think that it would probably go up initially, but then return to the previous price once people assume it is being overvalued since its computers hold such a small share of the market.

 

[fixyourthinking]

debt free is free=good

Originally posted by carletonmusic
it will be interesting to see how investors look at this. Stock prices for Apple have never been all that great.

A lot of posters have also mentioned that Apple could have financed the debt at the low interest rate. Why? When you have $4.8 Billion - why do you need $300 million more in cash?

You also have to realize that Apple used to have a stock dividend - something long suspended. The reason why companies like coca cola have great shareholder loyalty and are attractive to shareholders is the dividends. I have 500 shares of coca cola and get $440 a year in dividends out of it. Maybe Apple could present a new dividend plan at the next shareholders meeting and make the stock more attractive.

Stocks will usually split to attract shareholders - Apple is too low to split right now - adding a dividend would definitely attract shareholders and increase value in the company. I believe that companies can also right off dividends in taxes too.

 

[virividox]

i dont think the fact that apple is out of debt will make its stock a buy, it needs to show growth and continued profits (which is does, but not so much growth).

 

[mraudet]

present a new dividend plan at the next shareholders meeting and make the stock more attractive.

exactly the point i was thinking. i love how folks quoting finance 101 second guess a company that has made such a dramatic turn around in its finances in a relatively short time. as someone mentioned, i suspect the financiers and accountants at aapl have a good idea on the near and long term business plan. shedding their debt is no doubt part of this strategy. rather than an "oops".


steve, give me a dividend!

this. must. happen.

 

[geerlingguy]

Congratulations! Now, how about giving loyal customers G5s for being with Apple through those bad days?

 

[makkystyle]

Re: Say goodbye to AAPL.....

Originally posted by Playball
Taking a look at the numbers for a second, the stock market values Apple @ $8.58B, but of that value, $4.8B is cold hard cash, meaning that ignoring the bank account, AAPL as a company is worth only $3.78B. (Or roughly 1/23rd of the value of Dell.)

(Hmm, funny how this is roughly AAPL's marketshare too.)

Anyway, if the next digital media product from Apple after the iPod mini is a hit, expect somebody like Sony to scoop Apple up for little more than a a rounding error (in Sony's terms, $3.8B is peanuts.)

Alternatively, some larger but weaker player could buy AAPL mostly for the cash.

Regardless of Apple's fate, there's a strong implied message when more than half of a company's value is simply it's bank account: "we can't find a better use of the money!" This is especially sad when Apple's $4.8B is cash is earning an interest rate of probably only 1-2%. Apple is in effect saying that investing the cash into R & D, or any other operating expense will do less than earn a 1-2% return on investment.

Personally, I'm stunned that Apple can't find any interesting partnerships or acquisitions to make to spend some of this money, and I'm stunned by what this implies. (To me, it says one of 2 things: either we're so in love withourselves that we can't find any partners worthy of our loot, or because Macs have such a small share of the market and developer interest, there aren't any Mac-based (software or hardware) business worth investing in. (by extension, all of the innovation starts on other platforms.)

The other option, that Apple has somehow avoided, is to return the cash to the shareholders, either thru a dividend or a share buyback. (That's what I'd like to see.)

Now maybe I drank too many beers during my education in finance but I've always believed that by holding that much cash in reserves apple is able to protect against a buyout because it can in essence buyout itself by purchasing shares back from shareholders. Am I just drunk?