4 ms·

Apple buys back a large amount of stock because that is the only way they can really get any return out of their stock (http://247wallst.com/technology-3/2016/0

by sna1l 11y ago

Apple buys back a large amount of stock because that is the only way they can really get any return out of their stock (http://247wallst.com/technology-3/2016/03/01/why-apple-may-spend-20-billion-in-stock-buybacks-in-2016-alone-or-more/ http://247wallst.com/technology-3/2016/03/01/why-apple-may-s...). Unfortunately due to the law of large numbers, for them to grow at even a 15-20%, would require billions and billions of dollars in revenue increases. Seems like the most prudent course of action for them and their investors. Albeit you could also argue that using that cash to buy other companies might be worthwhile.

nickpsecurity 11y ago
"Albeit you could also argue that using that cash to buy other companies might be worthwhile." BOOM! Especially HW and SW I.P. companies given Apple's market and legal strategy. Yet, it's the road not taken.
- brisance 11y ago
  Only problem is that a lot of research has been done that show that M&A deals typically leads to destruction of shareholder value. [1]http://www.efinancialnews.com/story/2012-01-24/large-mergers-acquisitions-destroy-value-mckinsey http://www.efinancialnews.com/story/2012-01-24/large-mergers... [2]http://www2.warwick.ac.uk/fac/soc/wbs/subjects/accountinggroup/eventsandseminars/richard_taffler_paper.pdf http://www2.warwick.ac.uk/fac/soc/wbs/subjects/accountinggro... [3]http://www.evancarmichael.com/library/stephen-warrilow/Merger-Failures-Value-Destruction-and-Cultural-Conflicts--and-How-to-Avoid-Them.html http://www.evancarmichael.com/library/stephen-warrilow/Merge...
  - joshdickson 11y ago
    No. The goal of M&A is to increase shareholder value, if the data said acquisitions generally do not do that, we would not have M&A. Your links simply show that some M&A scenarios (major acquisitions, acquisitions that are overpaid for, etc) lead to underperformance, not that M&A as an overarching thing "typically leads to the destruction of shareholder value." Nowhere do those articles say that.
    - eru 11y ago
      We have M&A because it leads to value creation for management. They like their empires to grow.
  - nickpsecurity 11y ago
    On top of other commenter's remarks, notice I specifically said to acquire companies holding monopolies over aspects of Apple's competition plus opportunities for expansions of current strategies. Hard to imagine a HP/Compaq failure scenario here. Just lost money which the company might loose anyway. Locking in long-term success more might be worth that, though.
joshdickson 11y ago
That's not the law of large numbers.
- wlievens 11y ago
  That one's more about returning to the mean, right?
- rdl 11y ago
  There are at least two widely used "law of large numbers" -- mean reversion is more popular outside finance, and firm size vs market size is probably more popular within finance.
  - joshdickson 11y ago
    It is used in both situations, but it very clearly only means the former and the latter is incorrect. "Begs the question" is almost always used incorrectly; that doesn't mean its definition has changed.

by sna1l 11y ago

nickpsecurity 11y ago

"Albeit you could also argue that using that cash to buy other companies might be worthwhile." BOOM! Especially HW and SW I.P. companies given Apple's market and legal strategy. Yet, it's the road not taken.

brisance 11y ago
Only problem is that a lot of research has been done that show that M&A deals typically leads to destruction of shareholder value. [1]http://www.efinancialnews.com/story/2012-01-24/large-mergers-acquisitions-destroy-value-mckinsey http://www.efinancialnews.com/story/2012-01-24/large-mergers... [2]http://www2.warwick.ac.uk/fac/soc/wbs/subjects/accountinggroup/eventsandseminars/richard_taffler_paper.pdf http://www2.warwick.ac.uk/fac/soc/wbs/subjects/accountinggro... [3]http://www.evancarmichael.com/library/stephen-warrilow/Merger-Failures-Value-Destruction-and-Cultural-Conflicts--and-How-to-Avoid-Them.html http://www.evancarmichael.com/library/stephen-warrilow/Merge...
- joshdickson 11y ago
  No. The goal of M&A is to increase shareholder value, if the data said acquisitions generally do not do that, we would not have M&A. Your links simply show that some M&A scenarios (major acquisitions, acquisitions that are overpaid for, etc) lead to underperformance, not that M&A as an overarching thing "typically leads to the destruction of shareholder value." Nowhere do those articles say that.
  - eru 11y ago
    We have M&A because it leads to value creation for management. They like their empires to grow.
- nickpsecurity 11y ago
  On top of other commenter's remarks, notice I specifically said to acquire companies holding monopolies over aspects of Apple's competition plus opportunities for expansions of current strategies. Hard to imagine a HP/Compaq failure scenario here. Just lost money which the company might loose anyway. Locking in long-term success more might be worth that, though.

joshdickson 11y ago

That's not the law of large numbers.

wlievens 11y ago
That one's more about returning to the mean, right?
rdl 11y ago
There are at least two widely used "law of large numbers" -- mean reversion is more popular outside finance, and firm size vs market size is probably more popular within finance.
- joshdickson 11y ago
  It is used in both situations, but it very clearly only means the former and the latter is incorrect. "Begs the question" is almost always used incorrectly; that doesn't mean its definition has changed.