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Apple More than Doubles Capital Return Program
- lkrubner 13y agoNothing says "We are out of ideas" quite as powerfully as a company that announces a big share repurchase program. Do you believe there are untold, unimagined technologies waiting to be invented? Do you believe that the future will be radically different than the present? Then you should be investing, heavily, in the future. Do you want to be ambushed by the new kid on the block? Do you want to be the overly-confident behemoth who is cut down by the upstart, just as IBM was cut down by Microsoft? Well, then don't invest in the future, just buy lots of your own shares.
- wmf 13y agoApple intentionally set up a management bottleneck where the CEO tracks all product development pretty closely to ensure everything is "insanely great". The downside is that they can only develop a few products at a time. At least they're now admitting that they'll never have time to spend the money so they might as well pay it out.
- DannoHung 13y agoWhat would you do if you were sitting on an enormous cash pile and one of the most ridiculous undervaluations ever?
- eru 13y agoShare buy back programmes are equivalent to dividends in all but tax treatment. Why should the market capitalization / valuation of the company factor into a decision to pay out to shareholders?
- cremnob 13y agoBecause when you repurchase shares beneath its intrinsic value it's accretive to shareholder value.
- eru 13y agoYes, but judging intrinsic value is something for investors to do. I want my companies to concentrate on what they are good at---and random companies are not good at playing the stock market. (See the other current discussion about Cooper Union (https://news.ycombinator.com/item?id=5599385 https://news.ycombinator.com/item?id=5599385).)
- fjarlq 13y agoI think Warren Buffett supports the move: http://blogs.barrons.com/techtraderdaily/2013/03/04/aapl-when-the-stock-is-down-ignore-critics-create-value-says-buffett/ http://blogs.barrons.com/techtraderdaily/2013/03/04/aapl-whe...
- cremnob 13y agoAbsolutely, and the best thing that can happen when a company is repurchasing its shares is for the shares to be as cheap as possible, so as to create the most value for shareholders.
- thingummywut 13y agoWarren Buffett recommended to buy it several years ago if Steve Jobs believed that the stock was underpriced at the time. Buffett was describing to Jobs the advantages and disadvantages of potential ways to spend extra cash. I'm re-iterating that this was several years ago! Warren Buffett also never said anything himself about the stock being underpriced. It was all contingent on Jobs's opinion. [Edit] Original transcript. Unfortunately pdf. Starts at "No, I've never bought Apple.". Stock was around 200 when Jobs talked to Buffett. http://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/2012/07/03/2012-02-27%20Ask%20Warren%20Transcript.pdf http://fm.cnbc.com/applications/cnbc.com/resources/editorial...
- deleted 13y ago[deleted]
- andrewljohnson 13y agoIBM is pretty much still as big as MSFT FWIW: http://finance.yahoo.com/quotes/MSFT,IBM http://finance.yahoo.com/quotes/MSFT,IBM
- cynicalkane 13y agoApple has 140 billion dollars in cash. Pray tell what you think they should do with it? Hire 70,000 engineers for ten years? Start an airline? Buy Wyoming? Before Steve Jobs took over they were doing what you think they should do--supporting every futuristic project that caught some executive's fancy. Spoiler alert: this was a bad strategy. Wasting excess cash is a common anti-pattern for big companies, such that it's a positive sign when they don't spend money.
- onedev 13y agoYour buy Wyoming idea is genius.
- nikhilsaraf9 13y agoMaybe they should build a superhuman army to take over the world, but then they'd have competition with Google! ;-)
- intended 13y agoIs it just me or are those some expensive engineers?
- vacri 13y agoPhilanthropy?
- pooriaazimi 13y agoIt's not their money to throw away (even to the noblest of causes), it's shareholders' money and should be used to further shareholders' interests. It would be absolutely unethical and wrong of them to donate more than the normal amount to charitable causes. Now, should those +$100M executives pay more to charity? I think absolutely yes. But Apple the company (or Google, or Microsoft, or any other company) is there to serve it's shareholders not the whole human race.
- nessus42 13y agoMany great companies have purchased their own stock when it has become cheap. A stock buyback often signals that a company thinks that the best investment there is for its cash is its own stock.
- outside1234 13y agoThat's what they want you to think but the data doesn't support this. Its usually used to offset stock compensation.
- nessus42 13y agoCertainly companies may often do things for appearance, rather than for the right reasons, but both Warren Buffet and Peter Lynch have written that one of the best things that a corporation can do with its excess cash is to buy back its own stock when the company is undervalued in the market.
- gfodor 13y agoIf you assume Tim Cook is a smart and competent CEO, jacking up a share repurchase program signals one thing: him and his advisors think that the most effective deployment of that capital for shareholders is to repurchase Apple shares. This could mean they are just shrugging and have no ideas of what they could possibly work on next, or it could mean that they see the market price of Apple stock as attractive enough to warrant a $100 billion purchase of it. One of these is an absurd proposition, one is backed by countless evidence. What do you think? :)
- lostlogin 13y agoCompared to a buy back a few months ago, and with Tim's shrewd ways, I'll back the latter - I'd bet that he sees now as a good time to buy, later as a bad time.
- hkmurakami 13y agoI'm so torn about this. As a shareholder, it's great news for me. But as a member of the tech industry and generally idealistic guy, it hurts to see them bending to the calls of the finance industry.
- spoiledOldGuy 13y agoI agree with you the fact that WallStreet continues to bend them for about a couple of weeks just so they could control the market. Maybe Apple needs to go private so there won't be anymore pressure from the so called finance industry and they could concentrate again to build awesome products.
- 1945 13y agoHow could they possibly raise roughly 250b (when you subtract their cash) to take the company private?
- kooshball 13y ago> Maybe Apple needs to go private so there won't be anymore pressure from the so called finance industry and they could concentrate again to build awesome products. This doesnt really make sense in Apple's case since they're at a such a gigantic size. The closing market cap 381B - cash 145B is a huge number. Who's going to pitch in to buy the rest of those shares? Good luck getting that done without any input from those you call the "finance industry".
- pilom 13y agoIt is not the finance industry which would push for this, it is the shareholders. When you take a company public, you give away some control of the company. Now some of those controlling interests think that Apple shouldn't sit on one of the largest cash reserves in history. If you don't like this, work with private companies.
- nikhilsaraf9 13y agoI agree with you that the shareholders control public companies (mainly by the stock price). In a free market this would mean that the stock holders have indirectly indicated that it is best for Apple to give back cash instead of hoarding it because they feel Apple has no better investment they can make. IMO Apple has so much in cash reserves that if they tried to invest most of it they would be very loose and would make not so lucrative investments, so it may just be best that they return some of it back the way they are, and also invest some more in R&D.
- ultimoo 13y agoI confess that I understand very little of this. Can someone explain what does this mean in layman terms? I did understand that Apple is going to invest more money in its own shares, as a result of which, the portion of Apple, Inc. owned by other investors will be reduced. However -- what does this imply? Is this a general pattern that companies follow at some point in their lifetime? Again, I apologize for my lack of knowledge in this domain.
- hkmurakami 13y agoIt's a way of "giving money back to shareholders" because buying their own shares on the open market means that they inflate the stock price on the market by buying the existing sell orders out there.
- AnthonyMouse 13y agoA buyback doesn't inherently increase the price of the shares. A buyback works like this: Start with a company with an operating business valued at $750M and a pile of cash in the amount of $250M. You own 100 shares out of 1000 (10%). Your shares are worth $1B * (100/1000) == $100M. The company now does a buyback of $50M. They buy 50 shares from other shareholders and cancel them. You now own 100 shares out of 950 of a company with an operating business valued at $750M and a pile of cash in the amount of $200M. Your shares are worth $950M * (100/950) == $100M. That doesn't mean the share price won't change in practice, but not because of the math, rather because of what investors make of the decision.
- MaysonL 13y agoWhat this means is that each share owned by the public will represent a (somewhat) larger share of Apple. If Apple buys back about 15% of the company (about what the $60B plan they announced represents at curren price) then what was previously 85% ownership of the company will now be 100%: about a 17.6% increase.
- pilom 13y agoI don't think you have it right. The buy-back doesn't make each share owned by the public worth more of Apple. What it does is makes the company own more of its own shares (i.e. more shares are owned privately instead of publicly). The easy way to understand it is to take it to the extreme. If Apple bought every share but one, that one shareholder would not own 100% of the company. If Apple bought every share that would be taking the company private.
- capkutay 13y agoI think this is a reaction to textbook Wall Street game-playing. A nice network of hedge managers went 5-6x on aapl, they sell it and bring the price down while "analysts" come up with all this bs about how Apple's record setting quarter doesn't meet their "expectations". At the same time, I think Tim Cook has to be a little more vocal. It may not be the Steve Jobs way, but I think its ok talk to the press solely for the purpose of inspiring confidence in your company as opposed to waiting for product releases .
- rdl 13y agoI am way happier with stock buyback vs. dividend right now, since the stock is so undervalued. There are also tax benefits to buyback. I would love to see Apple spend billions each (not tens of billions) on: 1) turning iCloud into something amazing -- an individual, small business, or enterprise framework to do device management, sync, etc. Everything Steve Jobs would have wanted as a consumer service, but also available as SAAS or on-premises, like BES, to manage the phones for a company. 2) Don't go into the enterprise software market, but buy a decent enterprise software company or talent just for talent, and get those guys to make Apple the way to develop enterprise software. Basically everything Microsoft does with MSDN, easy hooks to build for the enterprise, etc. 3) Invest in GitHub, either in equity, or just in first-class support. Integrate GitHub and Apple software development and ideally some app development tool like Parse, so it's easy for power users, enterprise IT, and third party developers to build apps for the ecosystem. 4) Use security as a competitive advantage; build platform security like on iOS for OSX, but even better than the best option out there today (ChromeOS). Great management tools for individuals, companies, developers to do MDM, ERM, etc. Make using Apple devices with Apple-blessed apps and Apple-blessed services actually safe. 5) Make i18n/l10n for the Apple ecosystem better and easier than for anything else. (disclaimer: I have what for me is a fairly huge open call position in apple options over the next 2 years, so I'm pretty "invested" in Apple's success)
- outside1234 13y agoMost of those things involve communicating and partnering with external folks. Apple has no idea how to do that.
- threeseed 13y agoHow do you think Apple makes its products ? Magic ? They have to communicate and partner with lots of suppliers from small to large around the world. They also have content partnerships with Twitter, Yahoo, Facebook, Tom Tom, Yelp etc. And the there is the huge array of media partnerships in the iTunes Store. Seems like a LOT of partnerships actually.
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- maxprogram 13y agoHacker News readers who are interested in how share buybacks work and how they can be a very good idea (even in the tech industry) should read up on Henry Singleton & Teledyne: http://en.wikipedia.org/wiki/Henry_Earl_Singleton http://en.wikipedia.org/wiki/Henry_Earl_Singleton http://observer.com/2003/04/the-brain-behind-teledyne-a-great-american-capitalist/ http://observer.com/2003/04/the-brain-behind-teledyne-a-grea... Think of it as a way to reinvest in the future of your current business without having to actually expand it (which, in the case of a company at Apple's size/stage, would likely be wasted on low-returning incremental investments). Apple returning capital is a good thing -- it's how businesses should work.