Apple Reports Record March Quarter Results, Splits Stock 7-for-1, and Boosts Share Buyback

[thekev]

Buy it all back and go private, Apple.

That's not how it works. The company doesn't take ownership of itself by buying back stock. For them to go private, an offer would have to be made. This would require investors capable of raising enough money to buy out all shareholders. In Apple's case that would be several hundred billion. There is no way for them go to private. They're worth too much.

 

[IJ Reilly]

I hope Apple's stock continues to rise before the split.

Anyone care to drop some knowledge about what happens to the share price around the time of the split?

Nothing, actually. It's a non-event.

 

[everything-i]

I'm not too familiar with this stuff.

Does a 7-for-1 stock split means the stock will now be worth $75?.
Does it also mean dividends will be increased by 7x?

Basically each share is now 7 shares so if you owned 10 before you now own 70 with each share being worth 1/7th of the pre-split value. Dividends will be similarly split so if dividend was $7 per share before it will be $1 per share now. If they kept the dividend at $7 per share after the split it would cost them 7 times more which is unlikely to happen

 

[IJ Reilly]

That's not how it works. The company doesn't take ownership of itself by buying back stock. For them to go private, an offer would have to be made. This would require investors capable of raising enough money to buy out all shareholders. In Apple's case that would be several hundred billion. There is no way for them go to private. They're worth too much.

In theory a company could use their own cash to reduce the float enough that it would be more feasible for an equity partner to buy out the remaining stockholders, but in practice this would probably be a losing proposition as it also reduces one of the company's attractive assets. But you are right, Apple is not going private, if for no other reason than this is typically a survival strategy used by failing companies that need to get out from under the public company spotlight in order to make major structural changes to their business.

 

[thekev]

In theory a company could use their own cash to reduce the float enough that it would be more feasible for an equity partner to buy out the remaining stockholders, but in practice this would probably be a losing proposition as it also reduces one of the company's attractive assets.

As you also mentioned, Apple isn't in a weak spot. Buying out shareholders reduces both cash on hand and the number of shareholders. The remaining shareholders each retain a larger percentage of the outstanding shares, and there is no way for them to buy out >90% of them. Even if they exhausted all cash buying back shares, it would still be a massive buyout. The person I responded to seemed to think that Apple could somehow take ownership of itself. It doesn't work that way, and he might be disappointed by who might ownership of Apple one day if their value falls to a point where it is actually feasible. The argument was in favor of something that he doesn't really want to see (nor do I for that matter). It's just that he was slightly misguided in thinking that this would somehow free them from the influence of institutional investors.

 

[IJ Reilly]

As you also mentioned, Apple isn't in a weak spot. Buying out shareholders reduces both cash on hand and the number of shareholders. The remaining shareholders each retain a larger percentage of the outstanding shares, and there is no way for them to buy out >90% of them. Even if they exhausted all cash buying back shares, it would still be a massive buyout. The person I responded to seemed to think that Apple could somehow take ownership of itself. It doesn't work that way, and he might be disappointed by who might ownership of Apple one day if their value falls to a point where it is actually feasible. The argument was in favor of something that he doesn't really want to see (nor do I for that matter). It's just that he was slightly misguided in thinking that this would somehow free them from the influence of institutional investors.

Going private can easily become a gigantic hairball. Just ask Michael Dell. A company has to be fairly desperate to take that route. Anybody who thinks being a publicly owned company is intrusive should consider the other worst case scenario for going private: being passed around like a bad penny, as in Chrysler.

 

[thekev]

Anybody who thinks being a publicly owned company is intrusive should consider the other worst case scenario for going private: being passed around like a bad penny, as in Chrysler.

That was part of my point. The original point was that a company can't own itself, so someone will always have a controlling interest. As you point out those with a controlling interest may not turn it around.

 

[IJ Reilly]

That was part of my point. The original point was that a company can't own itself, so someone will always have a controlling interest. As you point out those with a controlling interest may not turn it around.

I got it, I was just elaborating. In some cases the controlling equity interest is a founder and/or a current large shareholder (e.g., Dell). In other cases it could be unrelated equity investors who may or may not know what the hell to do with the business, or who are bent on breaking it up and selling off the pieces.

 

[LastQuadrant]

Impressive quarter, but the stock split is pretty interesting. I might be a buyer now with iwatch coming.

I would wait at least a week after the stock split. It may drop right afterwards. Don't be surprised if it does. Look at the P/E ratio and make sure it's at the low end of the spectrum. Look at the P/E range over the past year and buy when it's at that low point. I think the P/E is way too high right now. Right before the earnings announcement, the stock was down, the reason why the stock when up is because Apple bought a bunch of shares in after hours trading. Seriously, I would wait this one out until AFTER the split takes place in June before buying the stock.

The iWatch is only an accessory, it's not going to have much impact on earnings. What would make a BIGGER impact is the ~5 inch iPhone as long as they can start shipping about 20% more than last year. Last year they sold about 158 Million iPhones, I don't know how they are doing with their production levels but not too long ago they reached about 180 million max, but they are going to need quite a bit more than that to reach a 20% increase in iPhone sales from a year to year standpoint. I would be VERY nervous about their chances of hitting this between now and a year from now if the iPhone 6 isn't announced in June, if they announce in Sept, it's going to be even longer until they can reach a 20% increase from the end of last quarter.

I just think with the impending stock split that Apple Stock is just going to end up much like Microsoft stock for the time being and foreseeable future unless some new MAJOR markets of new product market segments open up. So, it'll be more of a stable stock that just makes lots of dividends and that's how investors will make money, not off the actual growth of the share price.

 

[s2mikey]

Going private can easily become a gigantic hairball. Just ask Michael Dell. A company has to be fairly desperate to take that route. Anybody who thinks being a publicly owned company is intrusive should consider the other worst case scenario for going private: being passed around like a bad penny, as in Chrysler.

I dunno about that. IMO, having to slobber the knobs of obnoxious and never happy shareholders is a huge problem in this country. Employees get the shaft and it's starting to get annoying having to please Wall Street apes and miserable investors. There are issues with private ownership too but in my experience, private companies tend to treat people better and provide a better work environment. That's because the owner probably started from nothing and understands the struggles of regular people. They actually have a heart and don't mind sharing some of the bounty with those that produce the goods.

On the other hand, publicly owned companies have ZERO responsibility other than to to satisfy investor monkeys who are never pleased. The USA would be a much better place and our economy would be much better off for more people if there was more private ownership of companies. That's because private companies are much more likely to invest back into the community via local jobs, expansion, etc, etc. now though, it's just cut costs, move jobs overseas, reduce benefits, lay people off, get Chinese children to make the stuff, etc.

Bunch of crap if you ask me.

 

[IJ Reilly]

I would wait at least a week after the stock split. It may drop right afterwards. Don't be surprised if it does. Look at the P/E ratio and make sure it's at the low end of the spectrum. Look at the P/E range over the past year and buy when it's at that low point. I think the P/E is way too high right now. Right before the earnings announcement, the stock was down, the reason why the stock when up is because Apple bought a bunch of shares in after hours trading. Seriously, I would wait this one out until AFTER the split takes place in June before buying the stock.

The iWatch is only an accessory, it's not going to have much impact on earnings. What would make a BIGGER impact is the ~5 inch iPhone as long as they can start shipping about 20% more than last year. Last year they sold about 158 Million iPhones, I don't know how they are doing with their production levels but not too long ago they reached about 180 million max, but they are going to need quite a bit more than that to reach a 20% increase in iPhone sales from a year to year standpoint. I would be VERY nervous about their chances of hitting this between now and a year from now if the iPhone 6 isn't announced in June, if they announce in Sept, it's going to be even longer until they can reach a 20% increase from the end of last quarter.

I just think with the impending stock split that Apple Stock is just going to end up much like Microsoft stock for the time being and foreseeable future unless some new MAJOR markets of new product market segments open up. So, it'll be more of a stable stock that just makes lots of dividends and that's how investors will make money, not off the actual growth of the share price.

It's a good thing this advice was offered for free, because it's too expensive even at that price.

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I dunno about that. IMO, having to slobber the knobs of obnoxious and never happy shareholders is a huge problem in this country. Employees get the shaft and it's starting to get annoying having to please Wall Street apes and miserable investors. There are issues with private ownership too but in my experience, private companies tend to treat people better and provide a better work environment. That's because the owner probably started from nothing and understands the struggles of regular people. They actually have a heart and don't mind sharing some of the bounty with those that produce the goods.

On the other hand, publicly owned companies have ZERO responsibility other than to to satisfy investor monkeys who are never pleased. The USA would be a much better place and our economy would be much better off for more people if there was more private ownership of companies. That's because private companies are much more likely to invest back into the community via local jobs, expansion, etc, etc. now though, it's just cut costs, move jobs overseas, reduce benefits, lay people off, get Chinese children to make the stuff, etc.

Bunch of crap if you ask me.

Well, no. I don't think so. We've seen plenty of large privately-held companies ransack their employees. In fact this is often the first thing that happens when a public company goes private. Many times the company is broken up and the pieces sold off. Lots of people lose their jobs. The goal of both privately-held and public companies is the same. It's called making money. This doesn't change one iota, whether the company is owned by public stockholders or a private equity firm.

You might also want to consider a different term to describe investors. Calling them monkeys really doesn't do much for your argument.