Apple Posts 4Q 2008 Earnings Results

[synp]

Heh

Finally someone who understands stock pricing and valuations. Well said.

I knew all those courses at business school would pay off some day 😛

 

[IJ Reilly]

IJ, I just want to thank you for your insight and comments, from what I follow, you are quite vested in Apple and have followed them quite exstensively. Would you care to remind us your position stake and/or your relationship? I recall you were a columnist for MacWorld in the early 90's? If you don't want to respond publicly, could you PM? I would love to chat... 🙂

I was a freelance tech columnist, but not for MacWorld. The market for freelance tech writing dried up several years ago. Fortunately, it was always a sideline occupation.

I've been an AAPL investor for eleven years now.

 

[IJ Reilly]

Not really.

Really. Very simplistic.

Sure. But that still doesn't mean that Apple "owes" the investors anything. They invested voluntarily on Apple's shares and they have got plenty of return for their investment.

Apple might owe the investors who invested in them during their initial IPO, since they gave their money to Apple, instead of other investors. But those are few and far between.

Yes, I know that my reasoning goes against the currently popular thinking of "I am the stock-owner, everyone bow down before me!". So be it.

Besides, company does not have to be publicly traded in order to be successful.

Apple chose a long time ago to participate in the equity markets. They can't simply turn their back on it now.

"Owes" is a poor word to choose, and not my word. The better way of thinking about this is stock stability. Investors who are never rewarded but from selling a stock are going to do just that -- which induces volatility. A dividend rewards investor patience. In general this is a good thing, which is why many companies which are in a position to do so pay a dividend. Apple is certainly in that position.

When Microsoft issued a dividend, their stock-price went down, because investors perceived that as a sign of the fact that Microsoft has moved from being a growth-company in to a stable blue-chip company. And after MS spent their cash on dividends, they found themselves to be short on cash, which meant that they had to borrow money.

This is just plain false. MSFT actually bounced quite nicely after they announced the dividend. Paying a dividend is popular with investors, no matter what you might think. Also Microsoft has not had to borrow since announcing the dividend -- they've still got over $20 billion in cash reserves and no debt.

Apple could easily afford to pay out a dividend of $1.00/share (which would be generous) and still continue to accumulate cash at an impressive rate. This is what they should do, if only because it's becoming painfully obvious that they have no other plan to use their growing cash horde. The fact that they seem to feel the need for this huge security blanket suggests to this investor that perhaps they are still very worried about the future. That's not a feeling I like to have about a company where've I've invested quite a lot of my own money.

 

[eastcoastsurfer]

This is just plain false. MSFT actually bounced quite nicely after they announced the dividend. Paying a dividend is popular with investors, no matter what you might think. Also Microsoft has not had to borrow since announcing the dividend -- they've still got over $20 billion in cash reserves and no debt.

Good point. I'll also point out that MS had already started losing their 'growth' status prior to offering the dividend. Offering the dividend stabilized their stock and made it very attractive to a huge segment of more conservative, traditional investors.

 

[IJ Reilly]

Good point. I'll also point out that MS had already started losing their 'growth' status prior to offering the dividend. Offering the dividend stabilized their stock and made it very attractive to a huge segment of more conservative, traditional investors.

Absolutely. The dividend was offered at least in part because the stock had already been flatlining for years. As was noted at the time, the dividend was a big benefit to Microsoft employees many of whom had been compensated with options. I don't recall the exact figure, but the amount Bill Gates received when the dividend was declared was pretty staggering. I suspect that if AAPL continues to languish, that eventually the board will begin to think of themselves and their top executives who are no longer enjoying the benefits of being paid in stock options. They'll take a look at that big wad of cash in the bank and ask why they can't have a taste. Then and only then will we see Apple declare a dividend.