Apple Reports $1.61 Billion Profit for Q1 2009

[Syrus28]

I would suggest that AAPL is not in business to win at the game of capitalism. AAPL exists to create cool products that AAPL employess are proud of.

Other companies are much better at the game of capitalism. They do not seem to be doing as well as AAPL these days, though. Are they closer to winning?

BTW, the game of capitalism does call for ALL cash reserves to be spent or returned to the stockholder. Because cash sitting in a bank is not being productive. So by suggesting that AAPL keep some of it around, you're already forsaking some of the rules of the game.

Not exactly right. A public company such as AAPL exists to please stock holders, not make "cool products that employees are proud of". While these two things may often go hand-in-hand, don't let it cloud your vision. Apple is a public company first, a "cool product maker" second.

Secondly, the game of capitalism does NOT call for all cash reserves to be spent. There is nothing wrong with being conservative with your cash, but after a certain extent it gets silly. Apple can't possibly spend ALL its $30 billion in cash. Therefore, as IJ Reilly suggested, paying a dividend is a logical choice.

Apple is, technically, owned by its stockholders. While they don't exert a direct control, they do expect a return on their investment. That is what being a public company is all about.

 

[jbernie]

Apple could always spend some of this money quietly buying back shares over a period of a few months.

They have almost 900 million shares outstanding, at around $90 they could pull back around 56 million shares for $5 billion. Given how secretive Apple is I wouldn't be surprised to see them pull it off without others knowing, unless of course they are oblidged to report this.

 

[IJ Reilly]

Wasn't the Dividend questions covered in one of the previous Conference Calls.

Along the lines of "Once you pop, you can't stop"

They pay a health dividend this quarter to buy investor confidence, then they have to keep doing that same or better healthy dividend every quarter to hold investor confidence. If they don't pay anything or as much then the price tanks regardless of other factors which may show the company is strong.

Soon enough no cash left and no money to grow the company.
Which is why growing companies don't pay dividends unless they did from day one.

No, they declare a dividend and it stays the same for years. Even if the dividend was absolutely ridiculously massive, on the order of 15%, it would still be less than the amount of cash Apple is currently accumulating every year. For "no money left to grow the company" to happen, the dividend would have to staggeringly large, like 25% or more -- and still it would take years. Nobody is suggesting anything even remotely like this.

Apple could always spend some of this money quietly buying back shares over a period of a few months.

They have almost 900 million shares outstanding, at around $90 they could pull back around 56 million shares for $5 billion. Given how secretive Apple is I wouldn't be surprised to see them pull it off without others knowing, unless of course they are oblidged to report this.

Another good way to use mountains of cash, especially in a bad market. Stock repurchases are generally announced. I believe it's required.

 

[BuddyTronic]

So how much would be enough?

I just don't see the point in about complaining about something that is a vital part of AAPL's corporate character.

AAPL does not pay dividends. AAPL rarely, if ever, touches their cash reserves. AAPL is extremely secretive about everything, sometimes needlessly so. AAPL always gives conservative guidance. AAPL does a lot of things that are not what "grown-up" companies do. Why does AAPL need to change to be more like other companies which are suffering more and doing worse?

I am not complaining - just asking if anyone knows what the reason is, or has ever heard someone at Apple explain their position on dividends. I am guessing there is a real reason, but maybe all of us computer geeks (me included) don't know our finance as well as our Mac's because I still haven't gotten an answer to my question here - it's kind of funny how useless these forums can be sometimes.

I would wish for a dividend to be declared - a buck per share or 2% or whatever. The company can choose to pay dividends to shareholders at any time, but they have so far chosen not to pay dividends.

I am open to the possibility that there is a good reason why Apple chooses not to declare a dividend of any kind to this date. I don't know what it is though, and since I can point out some advantages for Apple to declare a dividend it makes me even more curious as to what the reasons are that they choose not to pay a dividend.

This thread is about finance, so if any readers here are literate in the world of finance, and have insight into the company are out there, and are willing to go through the effort of posting the answer, I'd like that very much and thanks in advance.

Wasn't the Dividend questions covered in one of the previous Conference Calls.

Along the lines of "Once you pop, you can't stop"

They pay a health dividend this quarter to buy investor confidence, then they have to keep doing that same or better healthy dividend every quarter to hold investor confidence. If they don't pay anything or as much then the price tanks regardless of other factors which may show the company is strong.

Soon enough no cash left and no money to grow the company.
Which is why growing companies don't pay dividends unless they did from day one.

OK, I think that sounds like a reasonable answer - I'll note it in my tally.

Thanks for the response

Apple could always spend some of this money quietly buying back shares over a period of a few months.

They have almost 900 million shares outstanding, at around $90 they could pull back around 56 million shares for $5 billion. Given how secretive Apple is I wouldn't be surprised to see them pull it off without others knowing, unless of course they are oblidged to report this.

Yes, share buybacks are the other way to go, and Apple does this. In my view, buybacks can have a similar effect as dividends in reducing the beta volatility.

All insider transactions are publicly reported - of course!

Here you go:
http://finance.yahoo.com/q/it?s=AAPL

 

[IJ Reilly]

I am open to the possibility that there is a good reason why Apple chooses not to declare a dividend of any kind to this date. I don't know what it is though, and since I can point out some advantages for Apple to declare a dividend it makes me even more curious as to what the reasons are that they choose not to pay a dividend.

The board doesn't really need a good reason, at least not in the way we'd understand it. Several months ago someone asked during an earnings conference call what plans Apple had for their cash. All Steve would say, vaguely, is "cash is king." This suggests that they're positioning the company to use it to leverage something (such as the recent deal locking up production of flat panels from LG), but even if that was the case, the amount they've accumulated is beyond any needs they are likely to have. If they were planning on going hunting for acquisitions, now would be the time. Any sign of it? No. They could easily snap up a bunch of small ventures for chump change, but they aren't doing that either.

So what else are they planning to do with that huge pile of cash? To stack it up and admire it?

 

[jbernie]

So what else are they planning to do with that huge pile of cash? To stack it up and admire it?

Well, given how Apple likes to keep secrets, $$ is very handy when it comes to making investments, obtaining supplies for a new product etc, anything that helps them avoid stories about them "raising capital" works in their favor. Got out and get all the new components for the next iPhone and pay cash, or as you noted, pay cash to Samsung etc for better prices on flash memory and panels.

The hard part is to find potential major investments that aren't viewed as wasteful, isn't Adobe one of those companies that is at the top of the "possibles" list? But Apple already has some products that compete with Adobe's line up, what benefit do you get for over paying for a company when there is little benefit in merging two strongs applications?

Apple could maybe spend some cash to expand the server line up, get some more applications or management products dedicated to the servers, though I dont follow the Apple server news so this might also be somewhat redundant.

The same goes for Microsoft, you reach a point where you just can't buy anything no matter how much $$$ you have sitting around, wierd position to be in but especially with Microsoft they have to jump through endless antitrust hurdles for even a moderate acquisition. They talked with SAP and only ended up with a working agreement to make their products work better together, they almost through the bank at Yahoo but thanks to Yang umming and ahhing and postering nothing happened and they probably saved a good $25 billion there.

Hmm... another good thing for Apple... with all that cash in the bank maybe they can just use it as a way to avoid hostile takeovers?

Regardless they could probably use up about half of what they have now based on their current inflow of cash and not worry.

 

[IJ Reilly]

Regardless they could probably use up about half of what they have now based on their current inflow of cash and not worry.

Well, right. We are talking $28 billion here. That's billion with a B. In three months, they'll probably be admiring more than $30 billion stacked up in their vaults. By the end of FY09, $40 billion?

They couldn't spend that much money without being completely reckless. Give the stockholders a little taste, Apple. We're feeling pretty battered and bruised these days. Reward our patience in tough times, just as you reward your executives and board members.