Even after doing the buybacks, Apple has still piles of money left to invest in R&D. Also, spending more to develop products will not lead to cheaper products, since the costs need to be recovered eventually. Apple is obligated to their shareholders and not a non-profit.
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Apple Reports 2Q 2024 Results: $23.6B Profit on $90.8B Revenue
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I just don't think the AVP is a big enough component of that category to be very meaningful. I think if they broke out AVP sales, it would be a vanishingly thin slice of that pie even if they were selling on the high end of Apple's projections.
Too early to tell whether AVP will be another niche product like HomePods or Apple TVs or a category-definer like AirPods.
A: Have they always done buybacks like these? No.
B: R&D spending and lowering prices aren't tied together.
C: Of course Apple isn't a non-profit, why type those words other than to antagonise?
D: Companies are not obligated to have this level of buybacks.
E: Apple raised MacBook prices at the same time component costs plummeted. They did not need to as their profit per unit was rising regardless.
That’s sad to hear - but also your experience is vastly different from others. In my household we have every service (for different reasons).
We use a lot of iCloud storage cause the girls LOVE taking photos, my son uses Apple Arcade, and we share an Apple Music account. I myself use Apple News (it’s a great source)
We all have Applecare+ (which Apple considers a service) and we love it.
Everyone is different, but I do believe Service revenue will increase - especially since there are a lot more services Apple can add (imagine a library service for iBooks, something my Wife wants).
For simple uses like this that seems reasonable. My experience has been different. I've lost photos several times, music is so screwed up right not I am not listening to anything until I get it fixed (by moving to something other that Apple Music). Been locked out of my account several times. In other words, I just can't count on any Apple services. We had Apple TV, but it would just quit, the remote requires a 3 axis precision motor to use without doing things I don't want.
No "Apple's numbers" tells you that Tim Cook can squeeze every last dollar out of Apple users.
Yep. I am also a developer and it took Apple 10 years to even get close to having iCould working correctly. I lost so much data that I don't use it. My Apps can if the user wants, but there is no way I would trust Apple's iCould.
I was interested, so I did the math. Wearables were 8.7% of revenue, so $7.9 billion. 250K AVPs at at average selling price of around $4,000 would be $1 billion. So around 10-12% of the wearables category.
Interesting, and higher than I'd have guessed!
How do we know how many AVPs were actually sold though?
Because it goes back to 2009 when iPods were a significant part of Apple's revenue.
We need less share buy-backs and more R+D and higher dividends. That $0.01 dividend increase is an insult.
Yep, and remember that iOS browsers suddenly disabled the ability to listen to YouTube videos in the background as they previously could, only for that to become a paid feature of YouTube Premium.
Share buybacks make more sense than higher dividends, IMO. On one hand, you don't really want a company varying the amount of dividends they pay out every quarter because that just adds more variability into the mix. In this context, Apple is keeping dividends at a steady 25 cents per share, so investors know what they are getting into when they buy Apple stock.
Share buybacks also perform the same purpose of returning money to the shareholders (by increasing the value of the shares they already hold), just that they have the option of deferring the amount of taxes paid by deciding when they want to sell their shares.
I know share buybacks have a bit of a bad rep around here, but I feel that Apple has been using them in a fairly responsible manner. Tim Cook demonstrates financial acumen and discipline and I don't see the need to tie his hands in this regard.
The $5 billion amortized over the life of the agreement. It is not added to the bottom line as one payment and it is not meaningless.
Well said.
If buybacks have a bad rep here it is because most, but not all, technophiles have a poor understander of corporate finance and capital markets and decisions that pertain to those parts of running a company.
I have noticed during my time here that while the level of technical knowledge is superb, the quality of financial and business management knowledge is of dubious quality. Lots of SMH when I read them.
Apple spends more on R&D every year and is always among leaders.
Regarding point A, Apple has bought back a massive amount of shares since 2012, close to $700 Billion. So yeah, they kind of have always done buybacks like this.
During this round, $110B will be added, but to answer your question, Apple has been buying back more than any company in the last 10 years and averaged $70-$90B per year over the last 5 years. $110B is the most added, but in terms of inflation adjusted dollars, it’s probably less than the $100B announced in 2018. So you’re objectively mistaken on that point.
Since Apple makes around $100-110B in free cash flow annually, they need big places to deploy excess cash and are obligated to do so as their fiduciary duty to shareholders. Sure, they could do other things, but the amount of money Apple already spends on R&D and the amount of cash they make being unprecedented means they have a lot of leftover money.
So, no, they aren’t going to decide to “make less” or charge less than markets will dictate as this isn’t a charity and the company is owned by shareholders. They also aren’t going to randomly spend extra money on useless R&D given they already budget for it.
Questioning how they run the business is pretty silly as Apple has performed better than the S&P500 by a significant margin, the broader Nasdaq, and most of its industry peers over the last 15 years. They are doing a fantastic job and you frankly aren’t in a position to say otherwise.
Hope this helps.
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Buybacks are also a lot more tax efficient. Smart finance managers understand this, look no further than Warren Buffett. Does Berkshire pay a dividend? No.
I don't think the AVP was ever designed to be more than a blip on Apple's turnover. It's only available in one country, it's clearly a high priced experimental niche device. You won't see the results of VR on Apple's books until the 3rd or 4th generation which launches globally at the same time - this is not an iPad.
Some folks would have you believe the AVP is an iPhone moment, which of course took the world by storm almost immediately.
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There's a fundamental difference between Apple back when it was teetering on the brink of bankruptcy and searching under the cushions for spare change, vs the Apple of today who is literally making more money every second than they know what to do with.
I am also willing to bet that if Apple were to invest $100 billion in R&D the next day, you would all turn around and accuse Apple of squandering their spare cash irresponsibly.
I get that share buybacks have a bad rep (not just here) because there have been companies who use it as a means of "raiding the coffers" even as they engage in mass layoffs or start to file for bankruptcy. However, there are a number of situations where this practice makes financial sense for a company who uses it responsibility like Apple.
1) For one, the money in a company does, in a sense, belong to shareholders. Returning that excess cash to shareholders is a responsible way of managing a company's balance sheet, and they can choose to do so via dividends or share buybacks. Apple is a company with a business model that generates more free cash than they know what to do with. Rather than invest that money themselves (and run the risk of being blamed for losing money if that investment goes awry), why not return that cash to shareholders and let them do the investing themselves? They might be able to earn above the prevailing market rate, or they may not, but either way, it's on them, not Apple.
2) Apple is able to do share buybacks because they have relatively light capital expenditure, in part because they are not in the business of offering free services to billions of people with the end goal of monetising via ads. They also outsource a lot of their manufacturing. So less money is needed for plants, equipment and servers.
3) Apple is also not interested in doing large, flashy acquisitions for the sake of buying products, users or garnering headlines. Such a move would likely be more trouble than it is worth due to the challenges involved in assimilating their culture into Apple. Instead, Apple uses M&A to fill asset holes in the form of accessing technology and talent. This lends itself to Apple pursuing smaller deals involving companies with less in the way of thriving business models. For example, they buy a smaller company that makes fingerprint sensors, which they can then replicate across entire product lines, thereby benefiting hundreds of millions of users. This is why a suggestion like "Apple should acquire Netflix" is always met with me rolling my eyes, because it shows a fundamental misunderstanding as to how Apple operates.
In a way, share buybacks also serve to reduce this sort of temptation to engage in flashy but ultimately frivolous acquisitions by limiting the amount of spare cash Apple has on hand.
4) People generally buy shares with the hope that those shares are undervalued relative to their future value. Looking at current trends, I believe Apple will continue to generate even more money in the future. Share buybacks is one way of getting shares back from people who don't believe in Apple's "bright future" and sharing it amongst a smaller number of investors who do believe. The latter won't just get those profits, but a larger share of them as well.
This is the exact opposite of a total lack of vision. Apple is engaging in share buybacks precisely because they are doing well, and because they believe they will continue to do well in the future. and if you believe in Apple, hold on to your shares. If you don't (or simply decide it is time to cash out), sell them.
5) And finally, share buybacks aren't taxed (at least not until the individual sells those shares). So investors get to decide when they want to vest their shares, rather than have it decided for them (as would be the case in dividend payouts).
So yes, a company like Apple should be returning excess cash to investors (either via dividends or stock buyback) rather than hoard that money for itself, and between the two, buybacks make a little more sense due to how US tax laws work.