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Cash Hoard Usage
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Sorry if this has been posted elsewhere, I don’t think so…
http://www.cnbc.com/id/43823595?__source=yahoo|headline|quote|text|&par=yahoo
?I chatted with the CFO , and you know, the commentary has changed,? Brian Marshall, an analyst at Gleacher & Company, told me this morning on ?Worldwide Exchange.? He said that Apple is looking at uses of cash all across the board, discussing buybacks and maybe even share repurchases. But they have yet to do either.”
Buyback or dividend coming? I’ve been thinking about this in the last 24 hours - by Jan earnings we’ll be within touching distance of $100B cash, at that point the noise in the market will rise to a cacophony and I suspect PO knows it…
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Cash horde usage could be divided into these realms:
1. Acquisitions ( or internal expansion of course) to help consumer experience at a visible level with core products. iLife, FCP, Lion, iOS.
2. Acquisition for behind the scenes user experience. One example is the CPU design. Another could be be internet tubes.
3. Higher risk investment in securities.
4. Stock repurchase or dividends.
5. Entirely new product areas.
6. New stores and remodelling.
7. Cupertino spaceship.
8. .... -
John Molloy
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CNBC were banging on about this all morning….
I think one way the cash is being used it to loan manufacturers cash to build bigger factories…
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1) Apple isn’t gathering this money by accident. There are plenty of ways they could be spending this money. They are doing this on purpose and they have a plan.
2) I would rather trust the decision of how to use this money with Apple than with any one else. Present company included.
CNBC can go “bang their drum” on their collective heads for all I care. They’ve got a lot of nerve trying to tell the most successful company of our age how to run their business*. Instead of giving Apple advice, they should be asking: “What does Apple know, that I don’t?”
*After all, that’s what I’m here for.
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>>There are plenty of ways they could be spending this money.
Really? 86b by this qauqrter’s end, going to $126 by next September…I doubt there are any real practical options other than stock buyback and divdends.
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>>There are plenty of ways they could be spending this money.
Really? 86b by this qauqrter’s end, going to $126 by next September…I doubt there are any real practical options other than stock buyback and divdends.
Really.
If Apple had wanted to, they could have spent the money instead of accumulating it. You don’t think they accumulated 10 billion dollars in a quarter because they couldn’t think of any way to spend it, do you? The fact that Apple is continuing to accumulate money - and in HUGE chunks - is the best evidence available that they are doing this very purposefully. To assume otherwise is to assume that Apple’s management team is made up of clueless incompetents.
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danthemason
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When you’re on the board you get some say, as a shareholder, just who do you think you are?
Enjoy the ride. Don’t worry they won’t lend it to Obama and the gang that can’t spend right.
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As an 2013 Leap holder:
A Share buybacks would be great,
A one off special dividend would be horrible.A regular dividend I would be indifferent to, but could be good if it was high enough ($10 billion a quarter). I imagine $40 billion a year in dividends valued at 5% yield would give us an instant company valuation of $800 billion. Is that a feasible valuation based purely on the dividend? or is the 5% yield to unlikely?
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Full Disclosure:
- Long Apple
- Pro: Apple HDTV, iPhone Air, Stock split, Consumer robotics -
Lorenzo3500
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AAPL call holders need to consider that dividend distributions are only paid to shareholders, and the distribution amount is directly deducted from the stock price on the ex-div date.
In general if you are long calls, you don’t want to see a company announce the initiation of regular dividends, increase of regular dividend amount or a special dividend.
The only way a call holder could collect the distribution is to exercise the calls early (the day before the stock goes ex-div), but he would then forfeit any extrinsic value in the option. This only makes sense if the distribution amount is greater than the call’s extrinsic value.
There is also the possibility that if the special dividend is large enough, the OCC would adjust the options to deliver 100 shares plus the special div amount, resulting in neither a net gain or loss.
Obviously this doesn’t take into consideration the market’s reaction to any dividend announcement.
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You know, I’m usually pretty laid back about Wall Street’s underestimation of Apple, or the journalists’ coverage of the company, or the media’s portrayal of Steve Jobs, and so on—but I just watched a few videos and read some articles on the cash issue, and it really makes me angry.
It makes me angry because they’re wasting all this airspace and beating the dead horse with a stick over, and over, and over, and over again. As Steve said last summer (in response to a different incident), “enough is enough”! This is even worse then the SJ health issue! At least there are some concerns people have there about an overnight evaporation of their earnings due to a market shock, but all I hear in regards to cash is people whining about “shareholders’ rights”... Gimme a break!!!
It’s really easy:
1) Apple came back from a near-death experience less than 15 years ago. They’ve become the most valuable tech company since then, but they will ALWAYS remember the place they were in! You don’t think it was a bitter pill for Steve to swallow when he needed to take that cash infusion for Bill Gates, his then arch-nemesis? And to stand in front a room Apple loyalists booing him?!
2) Apple is working on a new plane that no company has before. Henry Ford of the 21st century? I don’t know! THEY don’t know!!! But now they’re coming up to a runrate of 100M iPhones a year, NOBODY knows what they might need the cash for! Build factories? Buy wireless spectrum? Bail out their partners after natural disasters?
3) People are dumb and short-sighted in thinking a dividend or stock buyback or a large acquisition (I keep hearing NFLX suggested lately, what an expensive error that would be) would move their stock higher. Do some research! There’s extensive research that says these actions do nothing, or are detrimental to shareholder value in the long run (for growing companies; dividend-paying mature companies are another story. But then why not buy a utility instead?)
In general if you are long calls, you don’t want to see a company announce the initiation of regular dividends, increase of regular dividend amount or a special dividend.
Just one of the downside effects, but thank you for pointing out concisely the core of the issue. As someone levered through calls well into 2013 (and planning on 2014), I want to bang the gimme-a-dividend crowd on their heads.
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How do you really feel?
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AAPL: to boldly go where no stock has gone before
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How do you really feel?
Hehe, I knew someone would say that
No, but really!
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To hell with dividends and buybacks!
In this kind of economy, and at any time of year, with this kind of company on a growth tear, cash is the friggin’ king.
To those who don’t get it, whatever.
Amazingly, the better Apple does, the safer an investment AAPL gets. We’re at very, very low P/E levels (15.3!?) and the cash pile just keeps ballooning.
Where there’s a knowledge/understanding gap, there’s opportunity to be had. _We_ won’t miss out, at least.
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The Summer of AAPL is here. Enjoy it (responsibly) while it lasts.
AFB Night Owl Team™
Thanks, Steve. -
I think a buyback is a great thing if a company is undervalued (not a good idea for overvalued companies). An even better option is to combine a share buyback with a stock split (for instance buyback 10% of apple & do a 9 for 1 share split).
Regular dividends of course do not benefit call holders directly, but if the dividend is high enough then the corresponding share price rise benefits call holders.
For instance if AAPL started paying a $50 billion annual dividend, at a 10% yieldthe company would be valued at $500 billion overnight, or heaven forbid at a 5% yield we would be at $1 trillion valuation. We already know AAPL is undervalued and should be worth north of $500 a share, maybe a high dividend will get us there faster…
alternatively I’m happy for the cash pile to sit there and accumulate forever, like others have said, every dollar kept adds to the defensive position within the share price.
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Full Disclosure:
- Long Apple
- Pro: Apple HDTV, iPhone Air, Stock split, Consumer robotics -
I want to comment soooo bad, but the hell with it. The only thing I will say is that Apple continues to dilute this stock every qtr and at the rate of earnings this is costing shareholders a lot of value.
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Adversity does not just build character, it reveals it.
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You know, I’m usually pretty laid back about Wall Street’s underestimation of Apple, or the journalists’ coverage of the company, or the media’s portrayal of Steve Jobs, and so on—but I just watched a few videos and read some articles on the cash issue, and it really makes me angry.
It makes me angry because they’re wasting all this airspace and beating the dead horse with a stick over, and over, and over, and over again….all I hear in regards to cash is people whining about “shareholders’ rights”... Gimme a break!!!
Roman (and everybody else) you’re probably already on top of this, but if you haven’t listened to the July 3, 2011 edition of Horace Dedieu’s podcast, “The Critical Path”, you need to stop and listen to it as soon as possible. Horace goes through all of the traditional ways that Apple could use their cash and then proposes some novel ideas.
This is the link: http://feeds.feedburner.com/criticalpath
I drew two things from the podcast. Apple may already be using their money in the most advantageous way possible. Apple may be re-inventing how to run a corporation just the way they’ve re-invented most everything else they’ve touched.
Your comment about Apple being the next Henry Ford motor company rang true for me. As much as I admire Apple, I would never have pictured them re-inventing retail. It seems completely out of their area of expertise. And perhaps with the way Apple is collecting and using this huge cash hoard, Apple is schooling us once again. As I so often say, instead of us spending our time telling Apple what they are doing wrong, perhaps we should be spending our time trying to learn what they are doing right.
[ Edited: 20 July 2011 10:45 PM by FalKirk ]
