7 ms·

Apple Conference Call

70 points by hawke 15y ago

cosjef 15y ago
Apple about to announce dividend program?
- copious 15y ago
  I think they'd be more likely to buy back stock than to start granting dividends.
  - objclxt 15y ago
    My two worthless cents: an acquisition. Who they'll acquire is anyone's guess...a carrier (probably not), a content provider (maybe), or something more technical (my insane guess: ARM). Not that I know more than anyone else, but I don't feel Apple really paying a dividend out. They've never really seemed too beholden to shareholders in the past (well, the Steve Jobs past anyway), and I think they'd rather invest the cash in something that would benefit the business more. It's not as if the share price is in a bad place, after all!
    - malay 15y ago
      Apple and Tim Cook have made it clear that they have more cash than what is required to run the business. Apple is spending billions on data infrastructure, manufacturing, pre-purchasing components and expanding retail operations; despite all these investments, they still have more cash than what they need. They will likely generate another $50B in cash this calendar year. Even if they want to maintain the $100B war chest, they could pay out ~$50/share/year. I think a share repurchase or dividend (whatever they think will return more value to the shareholders) is highly likely.
      - tlammens 15y ago
        You are assuming that the profits they reported this quarter will be the same next quarters, why?
        rdl 15y ago
        Revenue in the current quarter should be less than last quarter, but YOY growth is still insane. iPad 3 launch seems to have gone well, which will help the next quarter. It's reasonable to at least project the same growth for future quarters, year on year, as Apple got in their Q1 (which includes christmas, iPhone 4S launch, death of Steve Jobs, ...). This year should have a rev of most of the Mac line (hopefully Pro if they don't kill it, too, although it doesn't move the needle on revenue), iPad 3 selling an absurd number of units, and an iPhone 5. The big innovation I've seen with Apple in the past couple product cycles is keeping their older iOS products on sale at a reduced price point, so now you get to choose iPad 2 or iPhone 3GS/4 on price vs. any competitor (and still better), or iPad 3/iPhone 4S as absurdly better at about price parity. Makes more sense than trying to create low end and high end products simultaneously.
    - protomyth 15y ago
      Sprint is in their range (8.7 market-cap expect a premium on top of that), but they really gotta be committed for that. ARM's business model makes anything but a investment a waste. AMD or NVIDIA would be more interesting. I just don't know why a dividend would be more than a press release after markets closed.
  - blantonl 15y ago
    let's hope not, because stock buy backs can be interpreted as a signal that management thinks tremendous earnings growth is behind the company.
    - pospischil 15y ago
      Why? I've read that they offer few benefits, but I've never heard this explanation. I also don't see how it makes sense for a company in their position?
      - blantonl 15y ago
        Stock buy backs are used to reduce the number of outstanding shares available - which results in shares increasing in value due to earnings per share now increasing. It is one way to "mask" slowing growth.
    - karamazov 15y ago
      I think you're mixing up cause and effect here. Even if it's true that stock buy backs are frequently undertaken by companies which doubt their future growth potential (I have no idea if this is true), I don't think there's any danger of a buyback from Apple sending this signal. They're in a historically unique position, and whatever their decision, it's not going to be analyzed solely based on the status of other companies who have undertaken similar actions.
    - rdl 15y ago
      It's taken as a sign that the company doesn't have anything more productive to do with the cash than buy back its own stock. This could be a positive or a negative. If Apple had $5b in cash and decided to buy back stock, that would be a bit bearish -- they certainly can continue to make incremental cash investments (in supplier agreements, new products, etc.). $100b (which is actually probably $110-120b now, a month later) is way beyond that. Getting $50b returned to shareholders wouldn't be a sign of lack of investment options for Apple.
- rpledge 15y ago
  That's my guess. Or else they'll announce that they're starting a space program! My understanding is that ably $66 billion is offshore. I really expected them to sit on the cash until the US government gave them some sort of tax amnesty
  - uvTwitch 15y ago
    A space program is about the only worthwhile thing apple could do with that money. The world doesn't need any more novel distractions, or rich investors.
    - protomyth 15y ago
      Retirement funds might disagree.
    - SkyMarshal 15y ago
      Nitpick - the world needs all the rich investors it can get, just not any more rich speculators. (where investor = someone looking to finance innovation and long-term value/wealth creation; and speculator = someone looking to get rich quick on market volatility, pump & dump, etc.)
  - ojbyrne 15y ago
    Perhaps that's what they're going to announce. Some kind of understanding with the feds that lets them bring back money to the US.
  - ams6110 15y ago
    Don't rule out something completely boneheaded. Jobs isn't there anymore. Remember Netflix/Quikster
cobychapple 15y ago
Completely wild, uninformed, and ignorant guess: They'll buy Twitter or Intel.
- liamk 15y ago
  In some ways I wish you were right, but I think anti-competition watch dogs may not approve of them buying Intel.
  - cobychapple 15y ago
    Well, they could always use some of that cash to buy the anti-competition watch dogs too ;)
- krakensden 15y ago
  Intel's market cap is about twice their cash reserves, isn't it?
  - meastham 15y ago
    Less than twice, but still substantially more. Apple has $98bn [1] on hand and Intel's market cap is 138.54bn [2] [1] http://www.chicagotribune.com/business/sns-rt-us-applebre82f03n-20120315,0,3215847.story http://www.chicagotribune.com/business/sns-rt-us-applebre82f... [2] http://www.google.com/finance?q=intel http://www.google.com/finance?q=intel
    - philwelch 15y ago
      So they could easily afford a controlling share, not that they'd have anything interesting to do with it. As far as the Mac goes, Intel is doing more or less exactly what Apple would want them to do, and as far as iOS goes, Intel is already irrelevant.
- culturestate 15y ago
  The only major software company I can fathom Apple buying is Adobe, and even in that case there'd have to be a seismic shift in Apple's strategy.
trimbo 15y ago
Dividend, book it. Major shareholders are probably getting antsy about it. Just an example, if they paid out $50bn in a one time divvy, Fidelity would get around $2.6 billion.
- gwright 15y ago
  And the value of Fidelity's Apple stock would go down by $2.6 billion. The $100 billion in cash is currently factored into the share price. Dispurse the cash and the market will discount the share price to match. Personally I'm hoping for something more interesting than a special dividend. It does seem strange to have the announcement before the trading day begins though. I would think any big announcement would come after the close of trading. Edit: Clarified that it is Fidelity's Apple stock that would be revalued.
  - joshu 15y ago
    Apple's market cap would go down by the amount of the dividend but it doesn't follow that Fidelity's stock price would drop, as their market cap does not reflect the value of their holdings.
    - gwright 15y ago
      Yes. I was a bit ambiguous. I meant that the value of Apple stock that Fidelity owned would go down, not that Fidelity's own stock would drop in price.
      - joshu 15y ago
        I'm not sure what your point is? The Fidelity fund would go up in value by the dividend. They could just buy more AAPL...
        gwright 15y ago
        That is exactly my point. The people saying that a dividend is important seem to think that it is 'found money'. My point is that it is really just converting one asset into another (stock to cash). Another way to convert stock to cash is to sell it. I realize that there are tax considerations though that make this all a bit more complicated.
martingordon 15y ago
It's likely a dividend or a major infrastructure investment. If it were a major user-facing acquisition (such as a carrier or media company) or a new initiative they would have done an event for it.
- beatle 15y ago
  More likely a major share repurchase. check my other post below for an explanation.
startupcto 15y ago
Buy backs.
mrkmcknz 15y ago
I hold some AAPL options albeit 2013 ones but this is making me super nervous!
- runako 15y ago
  So you're holding 2013 puts? :-)
wilfra 15y ago
As this is being announced prior to the market open on a Monday you can be sure this is good news (at least to investors and Wall Street) and the stock will go up. Bad news is released after the markets close on a Friday.
shimon_e 15y ago
They are going to buy out foxconn. :P Well maybe not. Then again foxconn is supposed to add 1 million assembly robots. Maybe they will buy out their factories.
- malandrew 15y ago
  Buying a position in a company like Samsung (solid-state memory or screen tech), Foxconn (manufacturing), LG Display (screen tech) makes sense. Apple is a hardware company, so pretty much all their investments are in hardware or software that increases the value of or margins on their hardware (like chips designers and firms that increase the value of OS X or iOS, which in turn increases the value of Mac and iOS based devices) IMHO Foxconn makes more sense than any other investment because Apple is directly contributing or jointly inventing cutting edge manufacturing technology with Foxconn. An example of such technologies is the precision cut aluminum enclosures of the aluminum Macbooks. An investment in Foxconn would suggest that Apple has a desire for being the hardware basis for a lot more devices in a person's life than just a computer or smartphone device. Since the future is an internet of things, the best way to get a foothold in the premium end of the internet of things is to have a solid foothold in the largest and most capable manufacturer of electronic things. On the other hand, Foxconn has a $1.1 trillion market cap, so they could at most purchase a bit less than 10%. A sizable position in Foxconn could also virtually guarantee that Apple is the only company that will have access to manufacturing technology and quality in volume that is always 1-2 generations ahead of its peers. You can't compete with Apple on quality if you can't get access to the hardware manufacturing capabilities until after Apple abandons it and moves onto newer better technologies. It's the equivalent of a hardware checkmate.
  - liamk 15y ago
    I'm not sure where you've read that Foxconn has a 1.1 trillion market cap. According to Bloomberg they have a cap of 149.5B [1]. Which makes significantly more sense than Foxconn being worth way more than Apple! [1] http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=2354:TT http://investing.businessweek.com/research/stocks/snapshot/s...
dkrich 15y ago
I think a dividend is imminent because at the rate of inflation that is likely to occur over the next several years, holding that much cash is a huge mistake. If there isn't a use for it in the long-term, and they can reasonably expect to print more, I agree that they should start dispersing it to shareholders. Typically I would think the beginning of a dividend program to be a signal that the company has hit an innovation wall and doesn't know what to do with its cash. I think this doesn't really apply to Apple because cash is going to continue to flow freely into it a ridiculous rate for the foreseeable future. Hardware is extremely profitable, and they are still better positioned than anybody else to ride the shift to mobile. I still think Apple is a strong buy.
- beatle 15y ago
  >at the rate of inflation that is likely to occur over the next several years, holding that much cash is a huge mistake Actually majority of Apple's cash is invested in long-term and short-term securities so they are protected from inflation. I don't think Apple will pay a dividend. 1. the Massive increase in Apple's stock price is more than enough compensation for shareholders. A dividend will just be drop in the bucket compared to the capital gains investors are going to earn in the next months or years. Paying dividends at this stage is a waste of money. 2. Apple's PE is around 16. AAPL is still VERY cheap. Compared to Google(20) and Amazon(134), both companies not nearly as profitable as Apple. 3. There is still a lot of room for growth (TVs, China, NFC, etc.). 4. Stock buybacks is more tax-efficient compared to paying dividends since the investors will have to pay the 15% tax rate if they get paid dividends. 5. Share repurchase may FURTHER increase stock price since it will increase EPS, ROE (Return on Equity) and ROA (Return on Asset) and decrease PE. Improved financial ratios will make the stock look even more attractive to investors. CONCLUSION: Given these 5 factors. I believe Apple WILL NOT pay a dividend. Apple will instead perform a share repurchase.
  - apaprocki 15y ago
    Completely with you and I hope it is a repurchase. Given the tax situation I don't see how a dividend would really be an effective use of the cash.
  - 15y ago
jsz0 15y ago
I think part of this will be a major initiative to invest in education. We know Jobs was interested in re-inventing education and we also know he told President Obama he couldn't find enough qualified workers. The for-profit education market is booming right now. Could this be a sort of iSchool focused on engineering, computer science, design, etc? Apple could make a really good argument to their shareholders that they must invest in the next-generation of Apple workers to continue growing.
brisance 15y ago
My uninformed opinion is that Apple will either announce a dividend or a stock split. In theory a stock split/reverse-split has no impact on a stock's price movement, but those studies were done in the 90s. More recent studies on various stock exchanges have shown that splits/reverse splits have a statistically significant impact on price movement, with splits signaling a bullish move. Splits may also help in narrowing the bid-ask spread which improves price discovery. On the other hand, splitting a stock will increase transaction costs of delta-neutral hedged portfolios since strike prices of derivatives are closer and more delta are needed.
- bgentry 15y ago
  A stock split doesn't really have anything to do with their massive pile of cash, and they said that's all they'll be discussing on this call. A dividend, while not out of the question, has not been something they've acted willing to consider in the past. That would be quite the change in their stance.
  - brisance 15y ago
    You are right of course. I was thinking a split followed by the announcement of a dividend. In this way hedge funds and index funds can offload some of their AAPL exposure to retail investors who do seek a dividend. I think Apple under Tim Cook is quite different, and is taking shareholders' interests very seriously. Why else would they adopt the resolution to have Apple directors being voted in by majority in the last shareholder meeting?[1] [1] http://www.bloomberg.com/news/2012-02-23/apple-ceo-cook-says-iphone-maker-s-cash-more-than-what-s-needed-to-operate.html http://www.bloomberg.com/news/2012-02-23/apple-ceo-cook-says...
jaysonelliot 15y ago
Of all the speculation I've heard, my favorite is this bit of dreaming from TheNextWeb: "Then there is the chance that Apple has decided to do something insanely revolutionary with its cash: figure out a factory template that will allow it, and other tech companies, to bring manufacturing back to the U.S.. This is right up CEO Tim Cook’s alley, as COO, he completely reinvented Apple’s manufacturing and supply chain. It also fits with the legacy of Steve Jobs’ vision of the NeXT factory, making products on U.S. soil." http://thenextweb.com/apple/2012/03/19/acquire-reward-or-revolutionize-thoughts-on-what-apple-will-do-with-its-100b-in-cash-tomorrow/ http://thenextweb.com/apple/2012/03/19/acquire-reward-or-rev...
- beatle 15y ago
  That would be the best use of their cash. but not the most capital efficient. Wall Street won't like it.
  - marquis 15y ago
    Until the towns and cities that grown up around new industries bloom and generate wealth? I was listening to a radio interview where an the idea was discussed where GDP should be decommissioned for GDE: gross domestic environment, where wealth is determined on the general health of your people and natural resources. Then I would have no problem with day-traders making money hand over fist because a new forest preserve or public transport system was allocated.
    - twoodfin 15y ago
      A public transport system powered by rainbows, no doubt. I have no idea what you're suggesting, practically. Wealth isn't "determined" by some arbitrary choice of economic statistic. Wealth is a store of value to the person who owns it. If you value forest preserves there are organizations who will happily take your money to create and expand them for you.
      - marquis 15y ago
ksec 15y ago
Buying Back Stocks or Dividend doesn't do any good for Apple, Apart from its shareholders. I am thinking on Worldwide Data Carrier Network. But Apple doesn't own ANY frequency spectrum. And there isn't a single worldwide common Whitespace for them to use. Buying Intel isn't out of reach. You only need 51% of Intel Stocks. And Apple can afford that. IT fits them in many ways. And i think Intel is pretty cheap for its price in terms of investment. Although i doubt that is realistically possible.

70 points by hawke 15y ago

cosjef 15y ago

Apple about to announce dividend program?

copious 15y ago
I think they'd be more likely to buy back stock than to start granting dividends.
- objclxt 15y ago
  My two worthless cents: an acquisition. Who they'll acquire is anyone's guess...a carrier (probably not), a content provider (maybe), or something more technical (my insane guess: ARM). Not that I know more than anyone else, but I don't feel Apple really paying a dividend out. They've never really seemed too beholden to shareholders in the past (well, the Steve Jobs past anyway), and I think they'd rather invest the cash in something that would benefit the business more. It's not as if the share price is in a bad place, after all!
  - malay 15y ago
    Apple and Tim Cook have made it clear that they have more cash than what is required to run the business. Apple is spending billions on data infrastructure, manufacturing, pre-purchasing components and expanding retail operations; despite all these investments, they still have more cash than what they need. They will likely generate another $50B in cash this calendar year. Even if they want to maintain the $100B war chest, they could pay out ~$50/share/year. I think a share repurchase or dividend (whatever they think will return more value to the shareholders) is highly likely.
    - tlammens 15y ago
      You are assuming that the profits they reported this quarter will be the same next quarters, why?
      - rdl 15y ago
        Revenue in the current quarter should be less than last quarter, but YOY growth is still insane. iPad 3 launch seems to have gone well, which will help the next quarter. It's reasonable to at least project the same growth for future quarters, year on year, as Apple got in their Q1 (which includes christmas, iPhone 4S launch, death of Steve Jobs, ...). This year should have a rev of most of the Mac line (hopefully Pro if they don't kill it, too, although it doesn't move the needle on revenue), iPad 3 selling an absurd number of units, and an iPhone 5. The big innovation I've seen with Apple in the past couple product cycles is keeping their older iOS products on sale at a reduced price point, so now you get to choose iPad 2 or iPhone 3GS/4 on price vs. any competitor (and still better), or iPad 3/iPhone 4S as absurdly better at about price parity. Makes more sense than trying to create low end and high end products simultaneously.
  - protomyth 15y ago
    Sprint is in their range (8.7 market-cap expect a premium on top of that), but they really gotta be committed for that. ARM's business model makes anything but a investment a waste. AMD or NVIDIA would be more interesting. I just don't know why a dividend would be more than a press release after markets closed.
- blantonl 15y ago
  let's hope not, because stock buy backs can be interpreted as a signal that management thinks tremendous earnings growth is behind the company.
  - pospischil 15y ago
    Why? I've read that they offer few benefits, but I've never heard this explanation. I also don't see how it makes sense for a company in their position?
    - blantonl 15y ago
      Stock buy backs are used to reduce the number of outstanding shares available - which results in shares increasing in value due to earnings per share now increasing. It is one way to "mask" slowing growth.
  - karamazov 15y ago
    I think you're mixing up cause and effect here. Even if it's true that stock buy backs are frequently undertaken by companies which doubt their future growth potential (I have no idea if this is true), I don't think there's any danger of a buyback from Apple sending this signal. They're in a historically unique position, and whatever their decision, it's not going to be analyzed solely based on the status of other companies who have undertaken similar actions.
  - rdl 15y ago
    It's taken as a sign that the company doesn't have anything more productive to do with the cash than buy back its own stock. This could be a positive or a negative. If Apple had $5b in cash and decided to buy back stock, that would be a bit bearish -- they certainly can continue to make incremental cash investments (in supplier agreements, new products, etc.). $100b (which is actually probably $110-120b now, a month later) is way beyond that. Getting $50b returned to shareholders wouldn't be a sign of lack of investment options for Apple.
rpledge 15y ago
That's my guess. Or else they'll announce that they're starting a space program! My understanding is that ably $66 billion is offshore. I really expected them to sit on the cash until the US government gave them some sort of tax amnesty
- uvTwitch 15y ago
  A space program is about the only worthwhile thing apple could do with that money. The world doesn't need any more novel distractions, or rich investors.
  - protomyth 15y ago
    Retirement funds might disagree.
  - SkyMarshal 15y ago
    Nitpick - the world needs all the rich investors it can get, just not any more rich speculators. (where investor = someone looking to finance innovation and long-term value/wealth creation; and speculator = someone looking to get rich quick on market volatility, pump & dump, etc.)
- ojbyrne 15y ago
  Perhaps that's what they're going to announce. Some kind of understanding with the feds that lets them bring back money to the US.
- ams6110 15y ago
  Don't rule out something completely boneheaded. Jobs isn't there anymore. Remember Netflix/Quikster

cobychapple 15y ago

Completely wild, uninformed, and ignorant guess: They'll buy Twitter or Intel.

liamk 15y ago
In some ways I wish you were right, but I think anti-competition watch dogs may not approve of them buying Intel.
- cobychapple 15y ago
  Well, they could always use some of that cash to buy the anti-competition watch dogs too ;)
krakensden 15y ago
Intel's market cap is about twice their cash reserves, isn't it?
- meastham 15y ago
  Less than twice, but still substantially more. Apple has $98bn [1] on hand and Intel's market cap is 138.54bn [2] [1] http://www.chicagotribune.com/business/sns-rt-us-applebre82f03n-20120315,0,3215847.story http://www.chicagotribune.com/business/sns-rt-us-applebre82f... [2] http://www.google.com/finance?q=intel http://www.google.com/finance?q=intel
  - philwelch 15y ago
    So they could easily afford a controlling share, not that they'd have anything interesting to do with it. As far as the Mac goes, Intel is doing more or less exactly what Apple would want them to do, and as far as iOS goes, Intel is already irrelevant.
culturestate 15y ago
The only major software company I can fathom Apple buying is Adobe, and even in that case there'd have to be a seismic shift in Apple's strategy.

trimbo 15y ago

Dividend, book it. Major shareholders are probably getting antsy about it. Just an example, if they paid out $50bn in a one time divvy, Fidelity would get around $2.6 billion.

gwright 15y ago
And the value of Fidelity's Apple stock would go down by $2.6 billion. The $100 billion in cash is currently factored into the share price. Dispurse the cash and the market will discount the share price to match. Personally I'm hoping for something more interesting than a special dividend. It does seem strange to have the announcement before the trading day begins though. I would think any big announcement would come after the close of trading. Edit: Clarified that it is Fidelity's Apple stock that would be revalued.
- joshu 15y ago
  Apple's market cap would go down by the amount of the dividend but it doesn't follow that Fidelity's stock price would drop, as their market cap does not reflect the value of their holdings.
  - gwright 15y ago
    Yes. I was a bit ambiguous. I meant that the value of Apple stock that Fidelity owned would go down, not that Fidelity's own stock would drop in price.
    - joshu 15y ago
      I'm not sure what your point is? The Fidelity fund would go up in value by the dividend. They could just buy more AAPL...
      - gwright 15y ago
        That is exactly my point. The people saying that a dividend is important seem to think that it is 'found money'. My point is that it is really just converting one asset into another (stock to cash). Another way to convert stock to cash is to sell it. I realize that there are tax considerations though that make this all a bit more complicated.

martingordon 15y ago

It's likely a dividend or a major infrastructure investment. If it were a major user-facing acquisition (such as a carrier or media company) or a new initiative they would have done an event for it.

beatle 15y ago
More likely a major share repurchase. check my other post below for an explanation.

startupcto 15y ago

Buy backs.

mrkmcknz 15y ago

I hold some AAPL options albeit 2013 ones but this is making me super nervous!

runako 15y ago
So you're holding 2013 puts? :-)

wilfra 15y ago

As this is being announced prior to the market open on a Monday you can be sure this is good news (at least to investors and Wall Street) and the stock will go up. Bad news is released after the markets close on a Friday.

shimon_e 15y ago

They are going to buy out foxconn. :P Well maybe not. Then again foxconn is supposed to add 1 million assembly robots. Maybe they will buy out their factories.

malandrew 15y ago
Buying a position in a company like Samsung (solid-state memory or screen tech), Foxconn (manufacturing), LG Display (screen tech) makes sense. Apple is a hardware company, so pretty much all their investments are in hardware or software that increases the value of or margins on their hardware (like chips designers and firms that increase the value of OS X or iOS, which in turn increases the value of Mac and iOS based devices) IMHO Foxconn makes more sense than any other investment because Apple is directly contributing or jointly inventing cutting edge manufacturing technology with Foxconn. An example of such technologies is the precision cut aluminum enclosures of the aluminum Macbooks. An investment in Foxconn would suggest that Apple has a desire for being the hardware basis for a lot more devices in a person's life than just a computer or smartphone device. Since the future is an internet of things, the best way to get a foothold in the premium end of the internet of things is to have a solid foothold in the largest and most capable manufacturer of electronic things. On the other hand, Foxconn has a $1.1 trillion market cap, so they could at most purchase a bit less than 10%. A sizable position in Foxconn could also virtually guarantee that Apple is the only company that will have access to manufacturing technology and quality in volume that is always 1-2 generations ahead of its peers. You can't compete with Apple on quality if you can't get access to the hardware manufacturing capabilities until after Apple abandons it and moves onto newer better technologies. It's the equivalent of a hardware checkmate.
- liamk 15y ago
  I'm not sure where you've read that Foxconn has a 1.1 trillion market cap. According to Bloomberg they have a cap of 149.5B [1]. Which makes significantly more sense than Foxconn being worth way more than Apple! [1] http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=2354:TT http://investing.businessweek.com/research/stocks/snapshot/s...

dkrich 15y ago

I think a dividend is imminent because at the rate of inflation that is likely to occur over the next several years, holding that much cash is a huge mistake. If there isn't a use for it in the long-term, and they can reasonably expect to print more, I agree that they should start dispersing it to shareholders. Typically I would think the beginning of a dividend program to be a signal that the company has hit an innovation wall and doesn't know what to do with its cash. I think this doesn't really apply to Apple because cash is going to continue to flow freely into it a ridiculous rate for the foreseeable future. Hardware is extremely profitable, and they are still better positioned than anybody else to ride the shift to mobile. I still think Apple is a strong buy.

beatle 15y ago
>at the rate of inflation that is likely to occur over the next several years, holding that much cash is a huge mistake Actually majority of Apple's cash is invested in long-term and short-term securities so they are protected from inflation. I don't think Apple will pay a dividend. 1. the Massive increase in Apple's stock price is more than enough compensation for shareholders. A dividend will just be drop in the bucket compared to the capital gains investors are going to earn in the next months or years. Paying dividends at this stage is a waste of money. 2. Apple's PE is around 16. AAPL is still VERY cheap. Compared to Google(20) and Amazon(134), both companies not nearly as profitable as Apple. 3. There is still a lot of room for growth (TVs, China, NFC, etc.). 4. Stock buybacks is more tax-efficient compared to paying dividends since the investors will have to pay the 15% tax rate if they get paid dividends. 5. Share repurchase may FURTHER increase stock price since it will increase EPS, ROE (Return on Equity) and ROA (Return on Asset) and decrease PE. Improved financial ratios will make the stock look even more attractive to investors. CONCLUSION: Given these 5 factors. I believe Apple WILL NOT pay a dividend. Apple will instead perform a share repurchase.
- apaprocki 15y ago
  Completely with you and I hope it is a repurchase. Given the tax situation I don't see how a dividend would really be an effective use of the cash.
- 15y ago

jsz0 15y ago

I think part of this will be a major initiative to invest in education. We know Jobs was interested in re-inventing education and we also know he told President Obama he couldn't find enough qualified workers. The for-profit education market is booming right now. Could this be a sort of iSchool focused on engineering, computer science, design, etc? Apple could make a really good argument to their shareholders that they must invest in the next-generation of Apple workers to continue growing.

brisance 15y ago

My uninformed opinion is that Apple will either announce a dividend or a stock split. In theory a stock split/reverse-split has no impact on a stock's price movement, but those studies were done in the 90s. More recent studies on various stock exchanges have shown that splits/reverse splits have a statistically significant impact on price movement, with splits signaling a bullish move. Splits may also help in narrowing the bid-ask spread which improves price discovery. On the other hand, splitting a stock will increase transaction costs of delta-neutral hedged portfolios since strike prices of derivatives are closer and more delta are needed.

bgentry 15y ago
A stock split doesn't really have anything to do with their massive pile of cash, and they said that's all they'll be discussing on this call. A dividend, while not out of the question, has not been something they've acted willing to consider in the past. That would be quite the change in their stance.
- brisance 15y ago
  You are right of course. I was thinking a split followed by the announcement of a dividend. In this way hedge funds and index funds can offload some of their AAPL exposure to retail investors who do seek a dividend. I think Apple under Tim Cook is quite different, and is taking shareholders' interests very seriously. Why else would they adopt the resolution to have Apple directors being voted in by majority in the last shareholder meeting?[1] [1] http://www.bloomberg.com/news/2012-02-23/apple-ceo-cook-says-iphone-maker-s-cash-more-than-what-s-needed-to-operate.html http://www.bloomberg.com/news/2012-02-23/apple-ceo-cook-says...

jaysonelliot 15y ago

Of all the speculation I've heard, my favorite is this bit of dreaming from TheNextWeb: "Then there is the chance that Apple has decided to do something insanely revolutionary with its cash: figure out a factory template that will allow it, and other tech companies, to bring manufacturing back to the U.S.. This is right up CEO Tim Cook’s alley, as COO, he completely reinvented Apple’s manufacturing and supply chain. It also fits with the legacy of Steve Jobs’ vision of the NeXT factory, making products on U.S. soil." http://thenextweb.com/apple/2012/03/19/acquire-reward-or-revolutionize-thoughts-on-what-apple-will-do-with-its-100b-in-cash-tomorrow/ http://thenextweb.com/apple/2012/03/19/acquire-reward-or-rev...

beatle 15y ago
That would be the best use of their cash. but not the most capital efficient. Wall Street won't like it.
- marquis 15y ago
  Until the towns and cities that grown up around new industries bloom and generate wealth? I was listening to a radio interview where an the idea was discussed where GDP should be decommissioned for GDE: gross domestic environment, where wealth is determined on the general health of your people and natural resources. Then I would have no problem with day-traders making money hand over fist because a new forest preserve or public transport system was allocated.
  - twoodfin 15y ago
    A public transport system powered by rainbows, no doubt. I have no idea what you're suggesting, practically. Wealth isn't "determined" by some arbitrary choice of economic statistic. Wealth is a store of value to the person who owns it. If you value forest preserves there are organizations who will happily take your money to create and expand them for you.
    - marquis 15y ago

ksec 15y ago

Buying Back Stocks or Dividend doesn't do any good for Apple, Apart from its shareholders. I am thinking on Worldwide Data Carrier Network. But Apple doesn't own ANY frequency spectrum. And there isn't a single worldwide common Whitespace for them to use. Buying Intel isn't out of reach. You only need 51% of Intel Stocks. And Apple can afford that. IT fits them in many ways. And i think Intel is pretty cheap for its price in terms of investment. Although i doubt that is realistically possible.