Apple, Buy Back This Stock

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Apple’s stock is doing very well and the company is sitting on a pile of cash. BusinessWeek wants to know what Apple plans on doing with all that money.

Shareholders certainly have shared in Apple's success over the years. The stock topped out at $199.83 on Dec. 28, an almost 19-fold increase over five years. Yet the growth in the company's cash hoard is starting to make people wonder, What exactly will Apple do with all that money?
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Sounds like apple is gearing up for a large purchase, buffering money for the weakning economy, or are planning on buying some shares back.
 
Ockie said:
Sounds like apple is gearing up for a large purchase, buffering money for the weakning economy, or are planning on buying some shares back.
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I would prefer the later. If Apple begins to declare dividends, they will establish an obligation that will consistently need to be met going forward. If management does not continue or increase the dividend over time, Wall Street and the speculators will see this as a sign of weakness. As a result of the weakness, Wall Street and speculators will sell off their positions causing havoc in the market. On the other hand, a share buyback is a one time event that must be completed by a set deadline. The buyback purchases shares in the open market, increasing value to existing shareholders without setting a future obligation.

A share buyback of $5-9 billion would be extremely beneficial to existing shareholders.
 
I agree. They should not post a dividend.

That massive cash hoard (this year at $15 billion, omg) is to keep them autonomous. They can do all their research, ride out economic downturns such as this one, basically do what they do without worrying if they can keep things running. As large as the company is they are still growing very fast. Why start paying out dividends now? Wait until that growth finally matures.

A stock buyback though, that would send the stock flying in the near term.
 
I think a dividend from itunes and ipods would not be so bad. Those markets are now fairly mature and while there is plenty of growth, they could be plenty conservative on the dividend.

This is just part of my grand idea to split up the whole ipod/iphone/itunes group, but perhaps a small dividend from these groups would not be a terrible idea.

1 time dividend would be okay too - or do it like international companies - pay based off of quarterly profits.
 
they should buy sun microsystems, consolidate solaris & osx platforms, release osx for the pc (like iatkos/osx86) which would take over the corporate desktop market from XP.

that would make them bigger than microsoft / oracle.

if they carry on developing trinkets for the retail market (iphones, ipods..) the stock is heading south.

:)
 
teck182 said:
I would prefer the later. If Apple begins to declare dividends, they will establish an obligation that will consistently need to be met going forward. If management does not continue or increase the dividend over time, Wall Street and the speculators will see this as a sign of weakness. As a result of the weakness, Wall Street and speculators will sell off their positions causing havoc in the market. On the other hand, a share buyback is a one time event that must be completed by a set deadline. The buyback purchases shares in the open market, increasing value to existing shareholders without setting a future obligation.

A share buyback of $5-9 billion would be extremely beneficial to existing shareholders.
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Not so sure there. It's not a bad thing for share holders, but it's not necessarily the BEST thing that apple could do with 5-9B worth of cash. They could use that to improve their tech, do R&D on the next great thing, etc.

All that buy back does is to remove stock from other investors and put it into Apples coffers. In this way, it makes it much more difficult to get bought out, especially if the share price is selling at a discount w.r.t the value of the company due to current market conditions.

If a company makes money, it should pass that on to investors. To me, this is what puts pressure on management to make the right decisions going forward to benefit the owners (stock holders) and not insiders.
 
sovs said:
they should buy sun microsystems, consolidate solaris & osx platforms, release osx for the pc (like iatkos/osx86) which would take over the corporate desktop market from XP.

that would make them bigger than microsoft / oracle.

if they carry on developing trinkets for the retail market (iphones, ipods..) the stock is heading south.

:)
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Interesting. But people love trinkets!
 
Apple's stock is heading down again. I'm sure it will be below $120 again in a few weeks. Possibly even around the $100. That would be a good time to buy.
 
SnapperDragon said:
If a company makes money, it should pass that on to investors. To me, this is what puts pressure on management to make the right decisions going forward to benefit the owners (stock holders) and not insiders.
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In the last few years Apple has made its investors a lot of money simply by increasing its share price at an insane rate. Part of that growth can be attributed to their lack of debt and cash hoard. It allows them to take lots of chances with product R&D, which leads to their innovative products, which leads to more growth. When growth flattens out for them, then they really need to start paying out a dividend, but right now it is still on a very fast track (one that benefits from all that cash on hand).
 
Serpico said:
In the last few years Apple has made its investors a lot of money simply by increasing its share price at an insane rate. Part of that growth can be attributed to their lack of debt and cash hoard. It allows them to take lots of chances with product R&D, which leads to their innovative products, which leads to more growth. When growth flattens out for them, then they really need to start paying out a dividend, but right now it is still on a very fast track (one that benefits from all that cash on hand).
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http://www.fool.com/investing/dividends-income/2008/02/29/dont-kill-our-dividends.aspx
 
SnapperDragon said:
http://www.fool.com/investing/dividends-income/2008/02/29/dont-kill-our-dividends.aspx
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I disagree, there is a time and place for dividends. For example, I have been telling all of my friends to buy BAC for the last two months. It is a huge company with solid books and management, despite short term fears with financials it is not going away, it is trading at a big discount, and it has a huge 6%+ dividend. Even if it trades flat you are still making 6% a year on it (and you are way ahead if you bought when it was $35 only a few weeks ago, when I was calling some of my investor friends yelling BUY NOW :) ). That said, a company like that should be paying out dividends.

Apple doesn't need to pay out dividends at this phase, not if it comes at the expense of continued growth and security. The rapid growth of its share price, partly made possible by cash hoarding, makes up for the lack of one.
 
On a side note, I used to subscribe to the newsletter that that article is shilling for. :)
 
What I find interesting is that this is EXACTLY what they kept saying about M$, who until the last couple of years had about 40B just sitting there.

However THAT money meant they were able to develop the XBOX+360 in house, and not implode had it failed.
Now that they are down to "only" 20B they are looking outside for the money for Yahoo etc.

Apple is in the same position (not that I expect a console from them) if there is something the need to plow money into to develop they can do it without digging into their core business (Ipods?) so if it fails they can still keep going with only a pr/name impact
 
ssratt said:
What I find interesting is that this is EXACTLY what they kept saying about M$, who until the last couple of years had about 40B just sitting there.

However THAT money meant they were able to develop the XBOX+360 in house, and not implode had it failed.
Now that they are down to "only" 20B they are looking outside for the money for Yahoo etc.

Apple is in the same position (not that I expect a console from them) if there is something the need to plow money into to develop they can do it without digging into their core business (Ipods?) so if it fails they can still keep going with only a pr/name impact
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Excellent point. That said, growth in Microsoft's stock was pretty much done by 2004, which is why they eventually had to start paying out a dividend. The same thing will eventually happen to current high growth stocks like Apple and Google at some point once they can't continue growth at the insane level that they have for the last several years.
 
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