Buffett: I Told Jobs to Buy Back Apple Stock

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Apple co-founder Steve Jobs asked Berkshire Hathaway CEO Warren Buffett about two years what he should do with his company’s growing cash pile. Mr. Buffett said Apple should buy back some of its stock — advice Mr. Jobs never took.

Buffett to Jobs: Buy back some stockBuffett to Jobs: Buy back some stock

Mr. Jobs was still Apple’s CEO when he called Mr. Buffett to talk about his company’s cash reserve. Mr. Buffett said he offered Mr. Jobs four options: stock buybacks, dividends, acquisitions, or holding onto the money, according to CNBC.

“I would use it for buybacks if I thought my stock was undervalued,” Mr. Buffett told Mr. Jobs, and Mr. Jobs agreed that Apple’s stock was undervalued. At the time, the company’s stock was sitting up over over US$200. Today it’s above $520.

“[Steve] didn’t do anything, and of course, he didn’t want to do anything,” Mr. Buffett said. “He just liked having the cash.”

As of Apple’s fist quarter earnings report in January, the company has over $97 billion in cash. While Apple still hasn’t bought back any of its stock, it has at least made an acquisition recently with the purchase of Chomp.

Chomp is an app and service that offers an arguably easier way to discover new titles on the iOS App Store compared to Apple’s own search system.

Of course, Apple could decide to buy back stock at any time, although for now it looks like the company will stick with the occasional acquisition despite Mr. Buffett’s advice.

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Comments

Bosco (Brad Hutchings)

Really horrible advice. Of the four options, buying back stock is the absolute weakest because it tells the market that you’re out of ideas for how to spend the money. And if you’re out of ideas, you’re clearly out of motivation to make more. With this pile of cash, a dividend is probably the strongest statement. It immediately turns a continuing speculative play into a value stock, would significantly diversify holding, and would provide better guidance to investors going forward than lowball numbers from management or screwball numbers from analysts.

skipaq

Couldn’t agree more, Brad.

Louis Hecht

Brad - +1 on the dividend. In fact, a small snippet in yesterday’s NYT suggested the the Apple BoD is reconsidering their earlier decision about paying out a dividend. All us stockholders would see that as a step in the right direction.

Substance

I told Steve that he should give me an teeny tiny fraction of Apple’s value a couple years ago, but he ignored me too.  Idiot.  I’d be rich if we would have only listened to me.

BurmaYank

Couldn?t agree less, Brad.

“Of the four options, buying back stock ... tells the market that you?re out of ideas for how to spend the money. And if you?re out of ideas, you?re clearly out of motivation to make more.

- Buying back stock is IMO the second best of the four options (although at Apple’s current prices, it would be an extravagance of questionable benefit).
- Yes, buying back stock might very well “...tell(s) the market that you?re out of ideas for how to spend the money…”, but so what?  Having no ”...ideas for how to spend the money…” in no way implies or even suggests having “no ideas” in any other area of Apples’s operations - what a specious non-sequitur that idea that would be. Moreover, the idea that anyone in the real world would imagine that Apple suffered from having “no ideas” is obviously utterly delusional and/or abysmally ignorant.
- And while we’re speaking of specious delusional/ignorant non-sequiturs, from what dark dank place did you drag your silly notion that somehow ”...if you?re out of ideas, you?re clearly out of motivation to make more…” money? That idea that anyone in the real world would imagine that Apple suffered from any lack of ”...motivation to make more…” money is obviously utterly delusional and/or abysmally ignorant.  Whyever would you embarrass yourself so by suggesting something like that?


And, “(-)1” on the dividend:

”... a dividend ... would provide better guidance to investors going forward than lowball numbers from management or screwball numbers from analysts.” and ”... a dividend ... immediately turns a continuing speculative play into a value stock…

I really don’t see how it could benefit Apple if its investors were better-guided.  What need whatsoever could Apple, with its Scrooge MacDuck mountain of gold, possibly have to use/exploit the value or prestige of its stock, since in the foreseeable decade(s), surely, Apple will never need to borrow money to finance anything. So, how could it really matter to Apple whether or not its stock value is up or down, stable or volatile, or whether or not it is seen as a ”...continuing speculative play…” versus a ”... a value stock…” (whatever that might goofy label mean, other than some figment in the agenda-ed imagination of the beholding stock speculator)?

”... a dividend ... would significantly diversify holding…

I also don’t see how it could benefit Apple if its investors were more diversified; I see no inherent value for Apple in it, but I do see how it might instead jeopardize Apple’s unique ability to continue making such extraordinarily good longterm decisions as we see everywhere along Apple’s track record (since the iMac). Apple clearly has been (and why shouldn’t it always be?) much better off with as little influence from its investors as is possible, and if huge investment houses begin finding too much incentive to stop keeping their massive hands off Apple stock, their crude short-term WallStreet (masterbatory) prioritizations and circular-thought false dogmas will inevitably begin poisoning Apple’s policy decision-makings, making Apple no longer as free to keep deciding what it thinks is best for itself, as it has done so well for so long.  Apple will be much better off excluding (any way it can for as long as it can) all investors except those primarily interested in making insanely great Applethings instead of short/medium-term returns.

Bosco (Brad Hutchings)

@BurmaYank: tl;dr.

SteveP

@Burma Yank:
Well said!

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