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.
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."
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.
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
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.
> at the rate of inflation that is likely to occur over the next several years
Do you have a reliable source on this?
> 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.
Apple's been building up this cash stockpile for so long that it's pretty clear they've long had more than they know what to do with. Having a cash position isn't really necessary either--at this point in time Apple could easily borrow at rates much lower than their expected return on investment anyway.
at the rate of inflation that is likely to occur over the next several years, holding that much cash is a huge mistake
Market expectations for inflation are usually factored into interest rates already. While the market could be wrong, Apple probably shouldn't get into the business of speculating on inflation rates.
>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.
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.
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.
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.
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.
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.
If anything Apple seems to be moving away from Intel chips and emphasizing their own ARM designs. Much more likely they will release an ARM-based laptop.
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.
[+] [-] martingordon|14 years ago|reply
[+] [-] beatle|14 years ago|reply
[+] [-] jaysonelliot|14 years ago|reply
"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-rev...
[+] [-] jonhendry|14 years ago|reply
[+] [-] beatle|14 years ago|reply
[+] [-] trimbo|14 years ago|reply
Just an example, if they paid out $50bn in a one time divvy, Fidelity would get around $2.6 billion.
[+] [-] gwright|14 years ago|reply
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.
[+] [-] cosjef|14 years ago|reply
[+] [-] copious|14 years ago|reply
[+] [-] rpledge|14 years ago|reply
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
[+] [-] dkrich|14 years ago|reply
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.
[+] [-] philwelch|14 years ago|reply
Do you have a reliable source on this?
> 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.
Apple's been building up this cash stockpile for so long that it's pretty clear they've long had more than they know what to do with. Having a cash position isn't really necessary either--at this point in time Apple could easily borrow at rates much lower than their expected return on investment anyway.
[+] [-] DavidSJ|14 years ago|reply
Market expectations for inflation are usually factored into interest rates already. While the market could be wrong, Apple probably shouldn't get into the business of speculating on inflation rates.
[+] [-] beatle|14 years ago|reply
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.
[+] [-] brisance|14 years ago|reply
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|14 years ago|reply
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.
[+] [-] ksec|14 years ago|reply
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.
[+] [-] shimon_e|14 years ago|reply
Then again foxconn is supposed to add 1 million assembly robots.
Maybe they will buy out their factories.
[+] [-] malandrew|14 years ago|reply
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.
[+] [-] jsz0|14 years ago|reply
[+] [-] cobychapple|14 years ago|reply
[+] [-] culturestate|14 years ago|reply
[+] [-] krakensden|14 years ago|reply
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[+] [-] dkrich|14 years ago|reply
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