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Statement by Apple
- cremnob 14y agoThis bodes well for shareholders. I imagine any additional return will be announced in March (when dividends/buybacks were announced last year).
- cllns 14y agoCan someone explain what this means and why it's happening?
- RyanZAG 14y agoSome shareholders want to sue Apple to force them to pay out more of Apple's cash to shareholders. This is a fairly legitimate claim, as companies are meant to pay out excess profits back to shareholders in the form of dividends/preference shares, and Apple is earning more money every quarter than they can use or are paying back. They are also sueing over a special term that allows Apple to create preference shares... not a big deal. This press release states that Apple is making plans to pay out more cash to shareholders, and that the special term does not exclude the board of directors from doing other things with preference shares in addition. Apple shares are likely to rise on this news in the short term, but may be a signal that Apple has no new healthy investments, and may lower share price in the long term. Nobody knows, share markets are volatile.
- jholman 14y ago"Some shareholders want to sue Apple to force them to pay out more of Apple's cash to shareholders.." From my reading of the news, I think this is wrong. Einhorn (of Greenlight) is not suing to force them to pay out. He's pressuring via normal shareholder activism. "They are also sueing over a special term that allows Apple to create preference shares.." Well, this is closer, but still not quite right. Apple has a proposal forward for shareholder vote. Einhorn/Greenlight claim that this proposal is really three proposals in one, and that SEC rules require these three proposals to be unbundled, and voted on seperately. They're therefore suing to force this unbundling. Even if his suit is 100% successful, Apple shareholders will still be able to vote in favour of the modification, which would, according to the summary by Apple and that by CalPERS, 'Eliminate “blank check” preferred stock'. Einhorn's choice of language implies that he is in favour of at least one of the other aspects of Proposal 2, which is part of why he's suing to unbundle. Here are some things I read to help me understand this: http://www.sec.gov/Archives/edgar/data/320193/000117152013000075/eps5041.htm http://www.sec.gov/Archives/edgar/data/320193/00011715201300... http://blogs.barrons.com/techtraderdaily/2013/02/07/aapl-is-fantastic-says-einhorn-its-utterly-mis-valued-but-give-us-our-preferred-shares/ http://blogs.barrons.com/techtraderdaily/2013/02/07/aapl-is-... and then after that, re-read TFA (the apple.com statement)
- cpeterso 14y agoIf a public company does not pay dividends, what is the motivation for an investor to buy their stock? As far as I can see, an investor can only make money by selling to a "greater fool" or waiting in anticipation that the company will pay a dividend.
- kbutler 14y agoThe motivation is the expectation that it will increase in value relative to other investment options (e.g., the company increases in market share, etc.). This doesn't mean a later buyer is a "greater fool", but rather that the fraction of the company is now worth more. "Buy low, sell high".
- gfodor 14y agothe company can also buy back shares. the point is that essentially that as long as the company is profitable and continuing to generate cash flow, some shareholder down the road will get his or her due, so the stock is worth some value of these projected cash flows.
- ipmb 14y agohttp://www.npr.org/templates/story/story.php?storyId=171370345 http://www.npr.org/templates/story/story.php?storyId=1713703...
- ctdonath 14y agoApple is sitting on somewhere close to $200,000,000,000 in _cash_ (or whatever equivalent billions of dollars are stored in). Seems Apple is getting sued by [a] stockholder(s) for hoarding cash to the tune of >$140/stock.
- swalsh 14y agoCan anyone here comment on what qualifies as cash?
- rednukleus 14y agoDefinitions vary (depending on context), but generally it refers to short term (usually 90 day or less), highly liquid investments such as Treasury bills, money market holdings and commercial paper.
- protomyth 14y agoShort term investments that can be liquidated quickly. Most of it is not in the US.
- twoodfin 14y agoI believe it's just about anything they own that's actually cash or that they could turn into cash on short notice. Cash, T-Bills, marketable securities.
- mynegation 14y agoHighly-liquid short term instruments with very high credit rating, such as actively traded stocks, US Treasury bills, banker acceptances, commercial paper.
- wiredfool 14y agoIt's more on the order of 120-140 billion, not 200. According to their 10k (which I received in paper yesterday): As of 9/29/2012, they had 121.3B in cash, cash equivalents and marketable securities. Of that, 10.7B in cash, 18.3B in short term marketable securities, and and 92B in Long term marketable securities. Cash + equivalents are highly liquid investments with maturities of 3 months or less at the date of purchase. Short term securities have a maturity of < 12 months, and long term are > 12 months. It's also broken down by holding (in $B): Money Market : 1.4 (cash) Mutual Funds : 2.4 (st) US Treasury : 20.1 (mixed, mostly lt) US Agency : 19.5 (mostly lt) Non US Gov : 5.6 (mostly lt) CDs : 2.2 (cash + lt) Commercial Paper: 2.1 (cash + st) Corporate : 46.8 (st + mostly lt) Munis : 5.6 (mostly lt) MortgageBacked : 12 (lt) (edit for formatting)
- antr 14y agoGreenlight (an investment fund) wants to push Apple to issue preferred stock. Why? Because, among other things, preferred stock, compared to ordinary issued shares, will receive a perpetual dividend (very much like a bond), but with no maturity. Pros for the investor: if you are corporation/qualified investor, rather than paying 35% capital gains tax in the U.S. they will pay 15%. Preferred also tends to be senior to ordinary equity. Cons for the investor: they will probably have little or no voting rights as preferred equity holders. Little decision making at the shareholders' meeting. Additionally, given that preferred equity does not participate in the growth of the company, the preferred shares and dividends will most certainly remain/trade like a bond, with little volatility compared to traditional equities (if Apple's revenues/cash continue to grow like crazy, preferred equity investor will not have that much an upside). Cons for Apple: preferred dividends are not tax-deductible (unlike debt). In theory, Apple's cost of capital will increase. They will also issue an instrument with no redemption date. Pros for Apple: they might be able to avoid paying any repatriation on cash held internationally. Preferred equity is great for defending a company from hostile takeovers (but this is rare in Apple's case given its size).
- crazygringo 14y ago> if you are corporation/qualified investor, rather than paying 35% capital gains tax in the U.S. they will pay 15%. Serious question: all else being equal, if you had to pay less taxes on gains from preferred stock, then wouldn't the market be expected to price it higher, since people are presumably investing, buying/selling based on their expected return post-taxes? Thus, in the end, making it a wash? Or are there other factors, like international investors etc., that prevent this?
- iyulaev 14y agoIn some ways this is a negative. Issuing dividends means a company thinks that an investor can get a higher return on the cash elsewhere. I.e. there is a lack of profitable opportunities for the company to invest their cash pile.
- roschdal 14y agoSo does this mean that it is likely to be profitable to buy Apple stock now?
- ars 14y agoNo, it means it WAS likely to be profitable to buy Apple stock. Now is too late.
- CamperBob2 14y agoTheir P/E is still ridiculously low, of course.
- mhb 14y agoWhy would it be? It's no secret how much cash is represented by each share of stock.
- fghh45sdfhr3 14y agoToo late.
- analyst74 14y agoIn a 100% rational market, all this excessive cash is accounted for in current stock price, and price of stock will drop as dividend is issued -- they most definitely will.
- benatkin 14y agoNo. The dividends are less than 1% of the share price. For it to be considered to be profitable on dividends alone I think it would need to pay 10% or more. I don't expect it to increase by 1000%. http://investor.apple.com/faq.cfm http://investor.apple.com/faq.cfm Edit: looks like I was wrong about the price. That seems to be the quarterly dividend. So it's 2% and it could go up. http://www.thestreet.com/dividends/leaders/index.html http://www.thestreet.com/dividends/leaders/index.html Edit 2: Here's a graph of Apple's dividend yield: http://ycharts.com/companies/AAPL/dividend_yield http://ycharts.com/companies/AAPL/dividend_yield
- mullingitover 14y ago
- ksherlock 14y agoPreferred Shares are more like bonds (in that they generally pay a higher dividend rate and are more immune to market swings). In the event of bankruptcy, preferred shares have more priority over common shares but less than bonds. Apple doesn't need the money so I'm not sure why they would want to issue them.
- cremnob 14y agoThe preferred shares would be issued to everyone that holds the common equity. They wouldn't be raising money if they followed Einhorn's plan.
- cstross 14y agoSome things Apple could buy, for cash: * SpaceX (market cap $10Bn, AIUI) * Dell (a mere $23Bn!) * Boeing * Ford * The entire global publishing industry (figures for the top 50 publishers' turnover are here: http://www.publishersweekly.com/pw/by-topic/industry-news/financial-reporting/article/52677-the-world-s-54-largest-book-publishers-2012.html http://www.publishersweekly.com/pw/by-topic/industry-news/fi... -- the largest only turns over $8.4Bn) * A year of Puerto Rico's GDP (roughly $100Bn) It is really hard to get your head around just how big Apple's cash pile is.
- hawkw 14y agoApple Space is something I'd be entirely behind.
- sliverstorm 14y agoI'm not sure I want to fly on a rocket that isn't user-servicable
- georgemcbay 14y agoAlso, if anything goes wrong with it you have to do a full restore on it by connecting it to a computer running iTunes.
- sliverstorm 14y agoDo you still have to use Firewire to do the restore? We might be hosed.
- Simucal 14y agoIt would be so damn beautiful though.
- Void_ 14y agoYou can get much faster rocket elsewhere for half the price.
- swalsh 14y agoI take this as good news, i found in the most unfortunate way how deceptively diversified I actually was compared to how much I thought I was. For the most part I was invested in an array of mutual funds, which I really haven't been watching closely for a while as I have been seeing fairly good return. However when Apple started dipping, I saw myself dipping too. Upon further investigation I found my exposure to Apple was quite significant :\
- WildUtah 14y agoThis letter looks like it exposes Apple to an enormous potential tax penalty. From http://www.irs.gov/publications/p542/ar02.html#en_US_2011_publink1000257893 http://www.irs.gov/publications/p542/ar02.html#en_US_2011_pu... "A corporation can accumulate its earnings for a possible expansion or other bona fide business reasons. However, if a corporation allows earnings to accumulate beyond the reasonable needs of the business, it may be subject to an accumulated earnings tax of 15%. If the accumulated earnings tax applies, interest applies to the tax from the date the corporate return was originally due, without extensions. "To determine if the corporation is subject to this tax, first treat an accumulation of $250,000 or less generally as within the reasonable needs of most businesses..... "In determining if the corporation has accumulated earnings and profits beyond its reasonable needs, value the listed and readily marketable securities owned by the corporation and purchased with its earnings and profits at net liquidation value, not at cost. "Reasonable needs of the business include the following. "Specific, definite, and feasible plans for use of the earnings accumulation in the business..... "The absence of a bona fide business reason for a corporation's accumulated earnings may be indicated by many different circumstances, such as a lack of regular distributions to its shareholders.... Good thing for Apple that the tax laws of the USA don't seem to apply to megacorps.
- bwilliams18 14y agoThe last quote there seems to indemnify them...they need cash to pay out "regular distributions to its shareholders" thus any amount of money they have is justified by the need for cash to pay dividends.
- pedalpete 14y agoIn a volatile industry like technology, where a competitors industry changing technology can destroy your profitability in a very short time (eg. Nokia, RIM, Yahoo!, etc) does it make sense for Apple to double down on research with this 'excess cash'? It seems Apple spends considerably less effort on the long-term research like Google and Microsoft. In Microsoft's case, it may be some of these longer range technologies which will keep it relevant, for Google, it seems their research may keep them growing.
- nirvana 14y agoApple is far more efficient than companies like Google or Microsoft when it comes to reasearch. In the last 15 years, they have produced the iPod, iPhone, iPad, radically different computer designs, OS X, Final Cut, and quite a few other products. Over the same period, google has produced PageRank. Microsoft has produced nothing innovative. Apple pays less of its revenue in R&D, but that's because its revenue is so big.
- rdouble 14y agoMicrosoft has produced nothing innovative. The Kinect was pretty cool.
- rednukleus 14y ago> Over the same period, google has produced PageRank. Microsoft has produced nothing innovative. What are you, an idiot? Seriously. EDIT: Downvote away, I stand by my comment - parent has got to be the dumbest thing I've read on HN for a while and deserves to be called out on it.
- jychang 14y agoIt's a very fanboyish argument, I agree. Self driving cars don't fund themselves.
- MichaelGG 14y agoWhere's Apple's equivalent to MSR[1]? I found ATG[2], but closed by Jobs in 97. Microsoft does a huge amount of research, and publishes tons of papers. Google publishes papers, too. Does Apple do that kind of stuff at all? Perhaps work on LLVM and stuff. Maybe you mean Apple's done a better job of bringing products to market, which is probably arguably true. 1: http://en.wikipedia.org/wiki/Microsoft_Research http://en.wikipedia.org/wiki/Microsoft_Research 2: http://en.wikipedia.org/wiki/Advanced_Technology_Group http://en.wikipedia.org/wiki/Advanced_Technology_Group
- mfringel 14y agoThis looks like a very tax-efficient way to repatriate cash.
- cremnob 14y agoThey actually don't touch the cash in this scheme.
- mfringel 14y agoAgreed, and they don't want to... Apple's cash is much more useful to Apple wherever it happens to be. It's the shareholders who want the cash, which in a lot of cases means repatriation.
- cremnob 14y agoI think you misunderstand me. The existing cash pile would remain untouched and therefore would not be subject to any taxes. The preferred shares would earn dividends from Apple which would be paid out from free cash flow. It's a tax efficient way to deliver shareholder value without taking the tax hit like they would if done in the traditional way of a regular dividend or buybacks. This is just one method of course, another way is to issue debt in the US and use that to repurchase shares/pay dividends. The board will determine what the best way to go about it is, as there are pros and cons to both.
- mckoss 14y agoWhy is Apple not just buying back it's shares? Would that not be the most tax efficient way of increasing shareholder value?
- dredmorbius 14y agoThat would transfer value only to those shareholders who sold shares. A special dividend benefits all shareholders. Both effectively accomplish the same thing (less money in the company, more among the shareholders), though a buyback would also inflate share price (fewer shares outstanding).
- capkutay 14y agoApple is learning that a record sales and established leadership in your market can still cause your stock to drop 40% over a quarter...So now they are working with hedge fund managers and wall street analysts to offer some complicated trading package. Now Wall street can take credit for AAPL's revival in the markets.
- eqreqeq 14y agoNow that Steve is gone they no longer know what to do with their money. The current management rather then reinvesting the money in the company will simply squander it away by giving it back to stock holders. I'm sure that in a couple of years, when Apple actually starts needing this money, everybody will realize how stupid it was to give away their war chest. Really, that the current CEO could not think of anything better than to give money back to the stock holders tells me that Apple is now doomed. The guy has no imagination. This move is so typical for a numbers guy. Steve would never have done that. At least not to this extent. Right now Apple is simply running on inertia but once the momentum is over I expect the entire company will collapse.
- nkohari 14y agoYou made about twenty leaps of logic there. And you're also ridiculously wrong. Even if Tim Cook is an awful CEO (which, come on, at least give him a chance to prove it)... well, Ballmer has had 12 years to run Microsoft into the ground and they're still ticking.
- mcguire 14y ago"Really, that the current CEO could not think of anything better than to give money back to the stock holders tells me that Apple is now doomed." And this, ladies and gentlemen, is why the stock market is a zero-sum game.
- hazov 14y agoIf management did not came with this the investors could "force" Apple to do as they please in an assembly as is their right, they can also vote to oust the CEO, Steve Jobs or any John Doe, if they wish, they are owners of the company after all and they're there for the money not generally for any love for the company.
- meric 14y agoIs that corporate-speak for "We don't have any new mind blowing products that will benefit from extra capital"?
- Judson 14y ago$120B (and growing) probably goes a bit above and beyond "extra capital".