How come Apple spent so much of its money on buying back its own stocks?

Bankaimadness

macrumors 6502
Original poster
Jun 7, 2010
296
0
I am still a noobie in the business field, but can anyone tell me what their motives were?
 

jmantn

macrumors 6502
Mar 13, 2012
485
110
Tn
They're investing in themselves literally.

TL:DR:
it helps raise the price per share and they could sell those same shares later on for a huge profit.




There's no way someone could go through all the ins and outs in a single post that wouldn't be a snoozer to most but here's a quick attempt.

Every company traded has a certain amount of shares that are traded based upon market valuation, perceived worth, and a companies future progress...these are only some of the factors that go into determining the price per share for any company. Stocks can rise or fall based upon a lot of factors.

If you grasp that then...

After a company is listed on the stock exchange with X amount of shares a company can create and or sell shares as well as reduce the shares...this is truly oversimplification here and parts of this paragraph have pages upon pages of explanation on sites like investopedia but basically to cut to the chase when a company buys back its own shares it's at least in this case two fold, it helps raise the price per share and they could sell those same shares later on for a huge profit and depending on some loopholes (such as buy in one country, sell in another? Guessing here) may have some significant tax breaks associated.

Anytime a company does a buy back its great for investors like you or I and it also boosts investors confidence as any company that does one is basically saying we believe at these prices it's a steal.

I've personally made six figures with Apple in four years with an investment less than that of an annual wage of someone making minimum wage.

Investopedia is a good place to start learning but there's better places than this for stock talk.
 

ElectronGuru

macrumors 65816
Sep 5, 2013
1,492
360
Oregon, USA
There's also a paradoxical thing with their cash reserves.

The reason people invest in companies in the first place is that companies can do more with the money than the investors can. Put 100K into a machine that can itself produce 50K worth of parts per year and that machine will create a return of 50% per year.

Now take that same 100K and don't buy any machines and don't hire any employees and don't put any new marketing that increases sales. Instead buy bonds or something else and that same 100K is only making 5% per year. This is affectively what happens when you have more money than you know what to do with.

Now look at Apple's entire productivity portfolio (cash + resources, not stocks). The more new dollars are put in savings and other low yield investments, the fewer new dollars are put into machines and employees and marketing. Pretty soon apples profit per dollar starts to look less like a tech company more like a bank. Profit per dollar goes down, stock price goes down.

But the whole thing is rather silly. Many companies have massive stock valuation based on no profit at all. Based on the promise that someday maybe they'll actually make money. And that in the meantime the only thing that actually matters is marketshare. Just look at Amazon.
 

TechGod

macrumors 68040
Feb 25, 2014
3,163
840
New Zealand
There's also a paradoxical thing with their cash reserves.

The reason people invest in companies in the first place is that companies can do more with the money than the investors can. Put 100K into a machine that can itself produce 50K worth of parts per year and that machine will create a return of 50% per year.

Now take that same 100K and don't buy any machines and don't hire any employees and don't put any new marketing that increases sales. Instead buy bonds or something else and that same 100K is only making 5% per year. This is affectively what happens when you have more money than you know what to do with.

Now look at Apple's entire productivity portfolio (cash + resources, not stocks). The more new dollars are put in savings and other low yield investments, the fewer new dollars are put into machines and employees and marketing. Pretty soon apples profit per dollar starts to look less like a tech company more like a bank. Profit per dollar goes down, stock price goes down.

But the whole thing is rather silly. Many companies have massive stock valuation based on no profit at all. Based on the promise that someday maybe they'll actually make money. And that in the meantime the only thing that actually matters is marketshare. Just look at Amazon.
The first paragraph is discussing opportunity cost correct?
 

sanke1

macrumors 65816
Nov 9, 2010
1,066
430
Hat has this go to do with iOS?

Please use correct section please.