Apple to Host Conference Call Monday Concerning its Near $100 Billion Cash Balance

[bobringer]

Although I totally agree the valuations aren't extreme just to play devils advocate for a minute. First of all forward PE ex cash is more like 10.5 now after run up. Second, those are of course earnings estimates, they could be a lot more could be a lot less. Third a lot of tech stocks (higher cap ones at least) command a lower PE ratio because technology moves so fast compared to a company like PG with IIRC around a 20 PE; because look at Microsoft it was thought of as unstoppable when it had around a $600 billion market cap. I am also aware the MSFT had a MUCH higher PE at the time but since the .com bubble people have been WAY more wary of valuations.

Lastly with a market cap this huge there starts to be less and less who are able to buy it, that's another reason I think a dividend could unlock value by income investors and funds swarming in. I also think although it SHOULDN'T make a difference a stock split WOULD bring buyers in. I know 5 people that said they would buy it if a split occurred even after I explained it shouldn't make a difference they said they still would. Heck I would even buy more just so I could write covered calls on the stock or a protective put without having to own almost $60,000 worth of stock.

I'm mostly with you. My 9x number comes from *MY* rough estimate that AAPL ends the year just short of $150/share cash and $50 earnings for 2012. Wildcard that could put us well above $50... "new" iPad could be the trigger for Apple to make massive inroads into the enterprise that nobody is expecting this year. (I'm an enterprise developer... and we're doing a good amount of iPad development for targeted units within my company... I think this expands)

I understand larger companies can command a lower PE, but Apple has broken every law of large numbers to this point... and every indication is that they intend to continue doing that for the foreseeable future.

I've given up on trying to explain to people about the value of a stock pre/post split. They just don't get it. I am with you on the ability to write covered calls... my position is a lot simpler... I just buy LEAPS 2 years out at the money. Over and over and over again. So far so good...

 

[KPOM]

Erm... Ok, I don't really understand the people here who are against a buy back.

Someone mentioned why buy the stock at an all time high -- versus what? Waiting for the stock to move down to an all time low?

In 2012, a buyback has no tax advantage over a qualified dividend. With a dividend, they can better manage how and when the cash is distributed. With a buyback, they are dependent upon the market and how many investors are out there wanting to sell their Apple shares. Most companies buy back shares in an attempt to boost the stock price from a low level.

A dividend has the advantage of making Apple's stock eligible for investment by institutional investors whose charters require them to purchase stocks of companies who pay dividends.

 

[Rad99004]

I'm actually worried it could be a boring dividend.

But that would be the expected thing, so hopefully they skate to where the puck will be.

* Search?

* TV?

* Buying a network operator? Starting a network?

I have no idea either.

I was thinking they would buy DishNetwork, Disney/Pixar, Netflix and also build or buy a national LTE network.

 

[sennekuyl]

Manufacturing jobs are the back bone of the economy. More people are employed in manufacturing than in office jobs. That's why the economy has gone down the tubes in the USA, because all of the good high paying manufacturing jobs are being cut.
Manufacturing jobs are not low pay. Some are, but a lot of auto workers make $30+ an hour, which is pretty good money these days.
Also, a lot of people want a boring, respetitive job. They want to show up, do there job, and go home. They don't want to have to worry and stress over the pressures of the job.
I've worked in manufacturing, and it was a great way to earn decent money. I jumped into an office job when an opening came available, and I'm really liking it. But I wouldn't have had this opportunity had it not been for my manufacturing job.

I think you'll find that most economies are trying to be the top dog in knowledge generation. Much of manufacturing is steadily being absorbed into unskilled labor jobs which will eventually be replaced by mechanical means. (Okay so a lot of that mechanical means is a long way off, but a lot of poor countries are getting to the stage that they can do first world manufacturing. It is only going to increase before the 'slave labor' drops off.)

 

[IJ Reilly]

CNBC is reporting that Apple will announce a 2.5% annual dividend (that would be a little bit less than $4 per quarter right now):

http://www.cnbc.com/id/46779100?__source=yahoo|headline|quote|text|&par=yahoo

They are announcing that some analyst has made this guesstimate. The article cites other analysts making other guesses.

 

[Apple Corps]

They are announcing that some analyst has made this guesstimate. The article cites other analysts making other guesses.

That sounds low to me. With around 920 million shares outstanding each $ costs Apple almost a billion. So reducing the cash reserves by that amount would be only 16 billion a year and they are adding to cash reserves at a faster rate than that - the cash issue gets worse.

I guess we will know shortly...

 

[miss.manson]

Who cares

 

[Michael CM1]

Turn that chart upside down and it looks like my personal cash balance.

 

[bobringer]

It's an election year and despite the "good" jobs reports the past few months unemployment is still very high. That said, I agree with you. There's a reason Apple doesn't make products here. Americans in general wouldn't want to work in the kind of jobs that Foxconn has to offer, and if they did, they would demand a lot higher wages, which would make the products uncompetitive.

We need more engineers and scientists in this country. That's what will drive growth in the future. However, unfortunately, our education system is falling a bit behind the times. The solution isn't to bring back low-skilled jobs. It's to bring education into the 21st century.

Of course, in the meantime, we still need engineers and scientists here, since it takes about 10-20 years before improvements in our educational system are felt. That, unintuitively, means that to help improve the American job scene, we need to make it easier for engineers and scientists from overseas come here or stay here. Our universities are the best in the world. It used to be a given that the best and brightest from around the world came here and stayed here. Now more and more of them are coming here to get educated, and then returning home to China or India to make it over there.

Everybody needs to read this again... and everybody needs to understand this.

KPOM is EXACTLY EXACTLY RIGHT.

Today... in the United States we design amazing products. Asia is brilliant at producing these products. In 20 years, unless we DRASTICALLY improve our education system, China will be outdesigning us as well. At that point... they will be designing AND producing everything the world needs. We will be their bitch.

While I think Lenovo needs to be more focused... anybody that watched what was happening at CES this year knows that there is already some serious innovation happening in China.

 

[kwags]

In 2012, a buyback has no tax advantage over a qualified dividend. With a dividend, they can better manage how and when the cash is distributed. With a buyback, they are dependent upon the market and how many investors are out there wanting to sell their Apple shares. Most companies buy back shares in an attempt to boost the stock price from a low level.

A dividend has the advantage of making Apple's stock eligible for investment by institutional investors whose charters require them to purchase stocks of companies who pay dividends.

Tax advantages aren't the only reasons to make a business decision. Again, if the pipeline of Apple products is as good as we hope, a buy back now does plenty for investors by changing the P/E numbers in a meaningful way. And again, we should all be hoping that Apple sees their stock at a low level compared to its potential. *shrug*

If investing in their own stock yields me as an investor a higher overall gain, I'd prefer they didn't do some of the other willy-nilly things other people suggested (like colonizing space and the like... unless their going to name iSpace and connect it to my iPad in someway).

I'm not against a dividend, mind you and indeed, some portion of any dividend will go back into buying stock (like my co profit sharing plan that automatically reinvests dividends back into the stock).

If Tim is letting me pick, I'd prefer to see a buy back plus an ongoing dividend ... rather than a big one time dividend followed with an ongoing one.

... Somehow I don't think I have much of a say, though.

 

[sennekuyl]

I'd like to see Apple use some of their cash to secure mineral mining rights for the rare-earth raw materials they need to produce pretty much all of their products.

The supply for these raw materials will only get tighter and prices will only go up as time moves on.

Seems that securing a supply of these raw materials would be the best long-term bet for use of at least some of their cash.

Besides that?

Investing in some research partnerships to develop alternatives to the hard to find rare-earth raw materials, as well as improving battery technology....

Expanding local production outside China, to hedge on the always increasing petroleum/transportation costs... At the very least have limited production capacity in each continent for each product line? Sooner or later, the value of cheap labor with centralized production in Asia will be surpassed by the transportation costs as fuel prices continue their predictable rise.


There's quite a few options for Apple's cash that doesn't involve dividends. Options that would provide far greater benefits to investors moving forward.

Now, as far as what Apple will discuss?

I don't expect Apple to give us any real specifics..

I tend to think we'll get a very general announcement with very general figures outlining some use of the money in R&D, acquisitions, expansion of campuses/construction, and long-term component contracts..

If they do include any specifics I think it will focus on the new UFO campus.

Fund SpaceX and take manufacture into space. /dream

Imagine mining asteroids & meteors for various elements, manufacturing end products then flying them down to earth. The trip up would be cream on top.

That said, I don't know that the fear regarding manufacture in China is fuel costs. I thought it was to do with Chinese repatriation and control of mining.



----------

Who cares

People who respond in this thread.

 

[jw2002]

In 2012, a buyback has no tax advantage over a qualified dividend.

For a long term buy and hold, it does have an advantage because current gains in the stock can continue instead of a portion getting taxed at 15%. A shareholder can attempt to get the benefit of a buyback by DRIPping their dividend back into the stock, but there is a 15% penalty there. Better to keep the original shares, let them grow, and let the shareholder pay the tax just one time when they make the sell decision.

 

[DisneyEcho]

Wirelessly posted (Mozilla/5.0 (iPhone; CPU iPhone OS 5_1 like Mac OS X) AppleWebKit/534.46 (KHTML, like Gecko) Version/5.1 Mobile/9B179 Safari/7534.48.3)

Apple's announcement about money tomorrow: I bet they now realize they have to spend more on things Siri needs. How lifelike... geeks not realizing at first how expensive having a girlfriend is!

 

[Rad99004]

Nintendo sounds like a good option. Would give Apple an inside game developer as well as a leg into the home console game.

Plus, Apple and Nintendo share that "Our way is the only correct way" mentality.

If thats the case I would say they would buy Sony. They would get TV and a console plus everything else Sony has including Media Content/Studios and record labels.

 

[jw2002]

Tax advantages aren't the only reasons to make a business decision.

Also, tax decisions should never be more than 2nd or 3rd tier in terms of making business decisions. The number one job of the business is to make money. Worry about taxes later. A gain is a gain.

It's not Apple's job to worry about their shareholders' taxes. They could never satisfy everyone anyways. The same goes for paying dividends. Apple doesn't care if some funds / institutions buy only dividend paying stocks. That doesn't affect Apple one way or another. That doesn't cause them to lose or gain customers or lose or gain profits.

 

[smulji]

Wirelessly posted (Mozilla/5.0 (iPhone; CPU iPhone OS 5_1 like Mac OS X) AppleWebKit/534.46 (KHTML, like Gecko) Version/5.1 Mobile/9B179 Safari/7534.48.3)

Apple's announcement about money tomorrow will be about money. I bet they now realize they have to spend more on things Siri needs. How lifelike... geeks not realizing at first how expensive having a girlfriend is!

With the amount of time they spend with their gadget, I didn't realize geeks could get girlfriends, that's why Siri was created.

 

[IJ Reilly]

That sounds low to me. With around 920 million shares outstanding each $ costs Apple almost a billion. So reducing the cash reserves by that amount would be only 16 billion a year and they are adding to cash reserves at a faster rate than that - the cash issue gets worse.

I guess we will know shortly...

I think it's in the expected range. Apple could easily do more but I doubt they will. They won't even be denting the reserves. For one thing, the dividend would be paid quarterly. For another, $16 billion annually can be paid out of cash flow. They'd probably still accumulate $40-50 billion more over and above in the next year.

 

[bobringer]

Is it just me... or is the level of discourse on this thread significantly elevated from the usual ridiculousness?

 

[MacinDoc]

True. To be fair to Michael Dell, he made that statement in 1997. If anyone else besides Steve Jobs were named CEO, that might well have been the best course of action. They had gone through 12 years of stagnation under Sculley, Spindler, and Amelio. Steve came back just in time. They were still solvent in 1997, but just barely.

It's a testament to Steve Jobs that he built up a great company 3 different times. He built Apple up the first time, then Pixar, then Apple the second time.

Yes, that is the context in which Michael Dell has said we should interpret his comment. I think 3N16MA was just trying to point out the irony of his comment when viewed in retrospect. And Dell certainly has good company among those dismissing Apple as insignificant. Steve Ballmer literally laughed at the iPhone, saying, "There's no chance that the iPhone is going to get any significant market share. No chance. It's a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I'd prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get." Bill Gates said that he did not wish that Microsoft had created the iPad. Ballmer said more than a year ago that Windows tablets were soon to "shame" the iPad.

I agree that it looks like Apple will likely pay a quarterly dividend, as others have said, to make it eligible for investments from certain pension funds. This may ultimately further increase the price of Apple's shares, providing that the dividend is not large enough to significantly reduce cash reserves.

 

[jw2002]

Nintendo sounds like a good option.

If Apple bought some ailing company like Nintendo or Sirius/Xm or TiVo, their share price would plummet. These companies don't offer up any really game changing technology or ideas.

 

[sennekuyl]

Is it just me... or is the level of discourse on this thread significantly elevated from the usual ridiculousness?

Finance/business geeks are out and on the prowl. Dreamers like me can barely get a word in edge-wise

 

[Speedyparker87]

Odds of what's announced tomorrow 1) dividend 2) stock re-purchase and an outside chance of 3) some sort of new foundation/fund

The announcement is from Tim Cook and the CFO. If it were more business/acquisition oriented, I think they'd announce it a different way and with some other executives. Plus, they put the focus on the cash in the announcement--looking like a dividend.

 

[Mackan]

With so much cash, they should take the opportunity to do something different than just dividends.

 

[Apple Big Mac]

Agreed. It will be disappointing if the only announcement is a dividend. I'm pro-dividend but I want to also see that Apple has a lot more up its sleeve than that.

 

[ombrenelcielo]

I really hope they won't announce dividends. That would be so wrong for once.