I hate to say this is a bad idea, but dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere.
Combining a stock buyback plan is smart at least because perhaps they can balance the two and counteract the dividend effect by buying up shares.
In reality Apple could probably just become a private company by buying back most/all the public shares, but I doubt they want to do that. There are obvious PR benefits to being the "most valuable" or "most profitable" public company in the world.
Also, as far as space travel and exploration, that makes no sense for Apple. Apple is not a company that invests huge in R&D projects that won't pay off for decades. It would ruin their incredible focus on what they are doing now and for the next 5 or so years. If you get too far out ahead, you build things the world isn't ready for yet or you stop executing on the here and now products and services.
Apple's still got a ton of room for potential growth on phones, pc's, and tv's. There are also a whole slew of "post pc" computing interfaces and devices that haven't even been dreamed up yet. Space travel would be a distraction.
> dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere
this is exactly what they're trying to signal because its true. what's wrong with that? they've been extremely profitable while not spending the $45 billion they're giving back to shareholders, and they can continue to be profitable without it.
> In reality Apple could probably just become a private company by buying back most/all the public shares
no it couldn't. it's market cap is 550B. it's cash reserve is 100B.
more generally, a company cannot buy itself because the shareholders actually own the cash the company holds. generally, if a company has $X dollars of cash reserves, then the market cap on that company would be > $X.
I disagree with your assessment of dividends vs. share buybacks. My opinion mirrors that of Mark Cuban. A few choice quotes from [1]:
Dividends offer _true_ returns:
They send a message to shareholders that you want them to stay as shareholders and are rewarding them for their committment to your company. Its a reminder to shareholders that the business investments you have made have actually worked and the reward is that cash can be returned to shareholders . That profits are more important to shareholders over the long term than trying to convince wall street to increase your PE [via buybacks].
Meanwhile... buybacks just perpetuate insider dilution:
Companies continuously issue new shares to their managers without asking their existing shareholders. Those managers then leak that stock to the market a little at a time. It’s unlimited dilution of existing shareholders’ stakes, death by a thousand dilutive cuts. If that isn’t a scam, I don’t know what is. Individual shareholders have nothing but the chance to sell it to the next sucker. A mutual fund buys one million shares of a company with your and your coworkers’ money. You own 1 percent of the company. Six weeks later you own less, and all that money went to insiders, not to the company. And no one asked your permission, and you didn’t know you got diluted or by how much till 90 days after the fact if that soon.
Without either dividends or a stock buyback plan, stocks are no more an investment than baseball cards. The point of not paying dividends is so you can reinvest your cash to increase the dividends you can pay later, and Apple's dividend is so low that they're clearly planning to reinvest the vast majority of their cash even with these dividends.
I don't get the criticism that Apple has no better way to spend its money. It's been building a cash stockpile for years, so obviously they've had this "problem" for years. They're a public company that has to report the size of their cash stockpile every quarter; having a growing cash stockpile already signals they haven't found a way to somehow reinvest their cash. Paying a dividend, especially such a small one, hardly lets the cat out of the bag at this point.
Furthermore, interest rates are still rock-bottom. If Apple suddenly needed a whole bunch of cash to invest, it wouldn't be at all difficult for them to borrow at much, much lower rates than their rate of return. It might be more risky and costly than simply spending a war chest, which is a good reason to keep 55 billion around (plus whatever they pull in over the next three years) while distributing the other 45 billion.
Apple's cash reserves grew about $30B last year, they're announcing that they're going to spend $45B over the course of 3 years. Assuming the current cash reserve growth continues at the same rate, I really don't think the market will look at the dividends as not knowing how to spend their money...
Both dividends and repurchasing are ways to distribute money to shareholders, and are from the point of view of the Miller--Modigiani theorem equivalent: from this abstract viewpoint, neither should affect the value of shares.
The differences are
1. Buybacks are usually more tax efficient, because with dividends, profits are realised at the point of sale;
2. Buybacks tend to be procyclical, since companies get a bargain when their shares are undervalued and overpay when they are overvalued. There is some evidence that overall, companies do not get good value for their shareholders from share buybacks. Also, many stock options have the effect that buybacks reward shareholders better than dividends.
I think a mixed dividend and buyback policy is wise. Apple shouldn't be hoarding the cash, and they shouldn't make poor value acquisitions.
To take themselves off the stock exchange, they would need to issue bonds valuing around $500 million, and so become a highly indebted company. This would be tricky, and it is not obvious why this would be in Apple's interest.
There are institutions, e.g. pension funds, that only invest in equities that provide a dividend. By offering a dividend, Apple is making its stock more widely available => more buyers => more shareholder value.
It isn't uncommon for management to partner up and take a company private when they are already large shareholders. In the case of Apple, this is not the case. Jobs owned more of Disney (almost 8% via the Pixar deal) than Apple on a percentage basis (less than 1%).
What are their other options other than simply accumulating cash and not being able to spend it versus a dividend. Having a war chest is nice, but at a certain point it's being wasted if you could basically buy any company on earth tomorrow if you wanted.
That's how I saw it, however I think the remaining ~$40 billion is sufficient to continue a dominant position in where they excel. Things only evolve so fast, and unless they were planning on extending into specializing into other markets, there's only so much money that can be spent in one area before you'll potentially extend yourself into other areas too much and dilute expertise/focus. Apple's brand can't dilute too much either, though there are some areas I can see them being able to excel in - but they might not have the total foresight or incentives needed to maintain dominance in those areas, as experts already exist in those fields and they'd be competing for human resources - they do have ~$40 billion left + will surely make many more billions to use however they please.
>"dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere."
In Apple's case, what it signals may be a little worse - i.e. that they have given up on trying to find those better ways despite having had several years to work on it as the cash accumulated.
If Apple had announced dividends a year ago, before Jobs' death, it would look like Apple had a long term vision - and there was certainly opportunity to have provided dividends.
More importantly, there was opportunity to spend the money. If Apple couldn't figure out how to make a dent in $30 billion or $50 billion or $70 billion, it doesn't look like their problem has gotten any easier.
It's pretty simple when you think about it. Apple has a certain hurdle rate for their projects that is extremely high, when compared to other companies. The only projects that can make it are ones that can draw on their existing resources. For them to go into something completely new would aberrate from their investment philosophy that has made them the most valuable company. On the new product front, I have more confidence in Apple knowing that they plan to think things through rather than announce something just for the sake of spending their hard earned cash.
"I was talking recently to someone who knew Apple well, and I asked him if the people now running the company would be able to keep creating new things the way Apple had under Steve Jobs. His answer was simply "no." I already feared that would be the answer. I asked more to see how he'd qualify it. But he didn't qualify it at all. No, there will be no more great new stuff beyond whatever's currently in the pipeline."
Looks like they probably won't be dreaming up innovative devices anyway unless a new Steve Jobs takes over.
"In reality Apple could probably just become a private company by buying back most/all the public shares, but I doubt they want to do that."
They can't use the shareholders' money (which is what this is) to take themselves private. You can't buy something from someone with their own money.
EDIT: Any of these downvoters care to explain themselves? Apple can't buy back most/all of the public shares using this pile of cash, because it belongs to Apple, which belongs to its shareholders. (Even if they could afford to do it, which they can't)
> I hate to say this is a bad idea, but dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere.
The ever-present notion that the leadership team of what is now one of the largest companies in the world has no real idea what they are doing is fascinating to me. Perhaps they deserve a bit of credit.
I was right about Apple's plans to repurchase its own stock. I guess I was a little surprised by the quarterly dividend and the amount of money it plans to spend ($45b over 3 years).
Then I realized Apple earned $13b profit last quarter and it's only going to grow. $15b x 4 quarters = $60b PROFIT PER YEAR.
Not all of their profit will be used for the share buy back/dividend, but Apple can easily afford it and still have MORE cash (specially after you factor in cash inflow from its investing activities).
I am in no position to tell Apple how they should spend their money but after reading the articles about Elon Musk today I can't help but imagine how the world could be changed to become a better place with all this money.
And I don't mean that Apple should give money away to charities.
Why not invest in space exploration , electric cars, self-driving cars, medical devices, green energy,... It is not Apple's core business, but "phones" have not been the business of "Apple Computer" as well.
Apple has moved humanity forward with the personal computer and mobile phones. I don't want them to stop with computers, smartphones, tablets or TVs.
I want Apple to aim for more than just consumer electronics - but I guess we won't see that happening.
"Why not invest in space exploration , electric cars, self-driving cars, medical devices, green energy"
Why should they? Just throwing money at something doesn't guarantee success, and deviating from a company's core competencies can become a distraction that drags down the parts of a company that are succeeding. The dividend puts money back into the hands of investors that can choose to either re-invest back into Apple stock, or invest in companies whose core competency is space exploration, electric cars, or some of the other areas that wouldn't be in Apple's expected domain.
I would say this is quite a lot of hyperbole. They have refined what others have made but they have not moved humanity forward.
The Haber-Bosch process, Norman Borlaug, the space race, the production of a silicon chip etc have al moved humanity forward. Apple in comparison made some trinkets.
Maybe Apple doesn't feel they can be successful in areas other than consumer electronics. Trying to get into another line of business would be a HUGE distraction for management as well as the employees.
As for your green energy comment: I think Apple can do far more to promote green energy by being a customer and driving partners to produce better products than designing their own green business. For example, by buying a shitload of fuel cells for their datacenters, Apple funds Bloom's (or others') R&D efforts. Same with solar panels and other alternatives.
Because Apple's duty is not to pursue community goals. Furthermore, they don't have the competence to make those sorts of investments. Apple is not a philanthropic organization, and it would be to everyone's detriment if they were to act like one.
Apple has been successful so far with a very careful strategy: they focus on just a few markets at a time, only enter new markets if they have a big competitive advantage in those markets and only release new products if those products are a big improvement on the prior status quo.
If they were to spread management attention more thinly by starting separate divisions to do the sorts of entirely unrelated things you describe, Apple could easily turn into IBM or Microsoft. At its heart, Apple is a small company. The main way Apple helps all those other industries is by training engineers to think in the Apple way who then go off and found start-ups of their own. And by making lots of millionaires to fund those start-ups.
(Apple's also investing in some of those industries as a customer. For instance, they invest in "green energy" by buying solar panels for its new HQ building.)
At some level it's necessary for a company as tight and as focused as Apple is to maintain a cohesion in its corporate expanse. They could easily spend their money on growing the company in a myriad of ways. They could invest in pharmaceuticals or unicycles, but the farther afield they get from their core competencies the less likely they are to succeed, and the less likely they are to remain a single, cohesive company.
At the end of the day the key question remains: what is Apple other than just a big ol' wad of money? If Apple is something other than just an amalgam of various profitable enterprises then they should keep on being that instead of trying to be something they're not.
> but "phones" have not been the business of "Apple Computer" as well.
I don't think of the iPhone as a phone at all. It's a computer I always have with me.
Now, the main reason I always have it with me is because, rather than being an additional thing I need to carry in my pocket and always remember, it replaced a thing I need to carry in my pocket and always remember, but the "Phone" feature is the least used feature of my iPhone by far.
This is how Apple approached the iPhone, too. It was initially thought of as an iPod that had the sweet feature that it could replace your phone rather than require you to carry an extra device.
I guess we can ask which other sectors they could disrupt.
Education seems like a perfect fit. They could start their own publishing house to author first-rate dynamic textbooks for the iPad. The content could be better than it is in current books, and it would sell iPads to boot.
With $100B in the bank, I keep thinking that Apple could do a lot more to disrupt of lot of industries.
They could afford to build an entirely new wireless carrier, from scratch (I understand spectrum might be an issue). They could create an entire newly kind of music label that redefines how artists are compensated and how labels make money. Or they could create their own new book publishing company that breaks with the traditions of the big publishers to make e-Books the focus and more affordable. They could probably buy up most of their entire supply chain.
So they must have good reasons for not wanting to use those funds to distrupt those other industries more than they already have. I'm sure they don't want to get out of their core competencies, but setting up subsidiary businesses would seem like a good way to get what they want.
Not exactly surprising or bold, i.e. it is the easiest way to deal with the surplus of cash. However, it could be seen as an indicator that Apple's management cannot figure out how to use all that cash to continue the company's growth. In that sense, the announcement of a dividend is a bellwether moment.
A big acquisition could just end up being a distraction from their core businesses. There is probably only so much you can spend on improving the current supply chain, $100 billion+ is a crazy large amount. What if they feel they can continue growth without spending every last cent?
A more positive way to see this is that Apple has become so profitable that they can continue funneling huge amounts of cash into everything that they want, and still have lots left over.
But I agree with your sentiment. It's a bit sad that Apple seems to have maxed out their ability to use money on themselves.
Or that is dosent need all of 100 billion dollars in cash to continue its growth.. If you look at the details, they will use 45 bil over 3 years, so in 2015 I believe they'll still have about 100 billion in cash.
As the world's largest corporation, they are now under intense scrutiny by the US Government, which prefers to leash all massive corporations.
Apple is not allowed to spend its $100 billion buying companies, even if it wanted to. For example, they could buy HP and Dell and shut them down (maybe all PC manufacturers in fact, just with cash); such would not pass anti-trust concerns. They could buy Facebook with cash + stock; again, that wouldn't make it through anti-trust review. And so on.
Even though they're not formally regulated under anti-trust just yet as, say, Microsoft was - their actions are indeed strictly limited by what the government will allow them to do.
Everyone here is missing the real goal of this dividend: removing uncertainty;
In much the same way that the stock was held back while Steve was alive because there was so much uncertainty about his health, but since his death the stock has been on a $200+ rampage. There's been speculation about what Apple might do with it's cash hoard for so long and the uncertainty has always been weighing on some investor's minds. By actually doing something with some of it, they've laid a path and removed the uncertainty.
I don't know much about stock and companies with money, but people on this thread are implying that Apple must get rid of it's cash? Why? Surely cash is good? Safety net? What if the sales plummet you don't go out of business, etc. etc.?
They make more money every quarter than they plan to pay out with dividends or stock repurchases - so their cash hoard will continue to grow...just more slowly now.
This is a strategic shift to turn the apple shareholder basis from a hedgefund hotel to a dividend fund stock. Very smart as in a deflationary shock hedge fund liquidate profitable assets first. With the recent AAPL performance the stock is probably on top of the list. Most interesting fact of the call: "Apple had a record weekend" Tim Cook (referring to sales start of the new ipad.)
The best part of this is that it is leadership for the rest of S&P 500 to start paying a dividend when they can't effectively invest parts of their income stream.
The alternative is something like Microsoft, which couldn't invest the money but still tried with all sorts of terrible acquisitions. This is a better alternative for shareholders.
The expectation of a larger dividend is what has been driving the share price up recently (which is why it will probably fall today).
I don't know where that expectation came from. First Apple had the problem of repatriating international funds, so this was never going to be a $30, $50 or $100 (some crazy estimate) dividend.
Second all precedent from similar companies issuing a first dividend (well not first for Apple, but first for the 'new' Apple) such as Microsoft and Cisco is 1-2%.
I don't think the buyback will be very effective, not against the bigger dividend expectation.
1.8% is about par. I am surprised they didn't split the stock. Question now is how far the stock will fall today before picking back up again later on as yield-focused funds buy into the new action.
My intuition doesn't feel good about this. Whatever Tim Cook says, if apple draw attention away from product innovation into optimizing for financial markets and pleasing shortsighted loyalty-less public market investors, it would no longer be the Apple that we have come to know over the past decade.
Although it's not part of their core business, from the news that's leaked about Steve Jobs' discussions with a CBS exec who refused to license CBS content because he felt he would be cannibalizing their profits, perhaps Apple could purchase one of these stations to spur the adoption of a new model for TV watching. It might cost them a pretty penny at first, but if it forces the other broadcasters to fall in line, it would be worth it.
Another obvious "lateral" purchase would be a cellular company. It doesn't make sense to keep pandering to the desires of the likes of AT&T and Verizon (4 GB data limit on LTE iPad WTF?) when there's so much more potential that could be realized with a good data plan for iDevices.
The only time Apple had a dividend before was the time when Jobs was not there and innovation left (87-mid 90s). Let's hope this does not signal that.
As a shareholder I'd preferred if they just kept and invested the money in new products. Why not use that money to speed up the real Apple TV? Screen tech? Storage? There are still lots of advancements left in handheld and this levels the playing field a bit. Apple hoarding cash was intimidating to competitors.
Jobs would not have done this. It was the first thing they did when he left in the late '80s and the first thing he ended when taking back over in the mid 90's.
It makes sense - this isn't a dividend to lure investors, it's an effort to reduce their cash reserves to a more sane level. There's nothing out there right now that Apple has use for that they can't buy, so why not reduce their reserves a bit?
iOS still sucks in many ways. I hope they are not content with themselves. By the way, why not reduce the share they get from app developers if they are so rich now? Apparently it would be in better hands.
[+] [-] programminggeek|14 years ago|reply
Combining a stock buyback plan is smart at least because perhaps they can balance the two and counteract the dividend effect by buying up shares.
In reality Apple could probably just become a private company by buying back most/all the public shares, but I doubt they want to do that. There are obvious PR benefits to being the "most valuable" or "most profitable" public company in the world.
Also, as far as space travel and exploration, that makes no sense for Apple. Apple is not a company that invests huge in R&D projects that won't pay off for decades. It would ruin their incredible focus on what they are doing now and for the next 5 or so years. If you get too far out ahead, you build things the world isn't ready for yet or you stop executing on the here and now products and services.
Apple's still got a ton of room for potential growth on phones, pc's, and tv's. There are also a whole slew of "post pc" computing interfaces and devices that haven't even been dreamed up yet. Space travel would be a distraction.
[+] [-] andylei|14 years ago|reply
this is exactly what they're trying to signal because its true. what's wrong with that? they've been extremely profitable while not spending the $45 billion they're giving back to shareholders, and they can continue to be profitable without it.
> In reality Apple could probably just become a private company by buying back most/all the public shares
no it couldn't. it's market cap is 550B. it's cash reserve is 100B.
more generally, a company cannot buy itself because the shareholders actually own the cash the company holds. generally, if a company has $X dollars of cash reserves, then the market cap on that company would be > $X.
edit: a factor of 10
[+] [-] beambot|14 years ago|reply
Dividends offer _true_ returns:
They send a message to shareholders that you want them to stay as shareholders and are rewarding them for their committment to your company. Its a reminder to shareholders that the business investments you have made have actually worked and the reward is that cash can be returned to shareholders . That profits are more important to shareholders over the long term than trying to convince wall street to increase your PE [via buybacks].
Meanwhile... buybacks just perpetuate insider dilution:
Companies continuously issue new shares to their managers without asking their existing shareholders. Those managers then leak that stock to the market a little at a time. It’s unlimited dilution of existing shareholders’ stakes, death by a thousand dilutive cuts. If that isn’t a scam, I don’t know what is. Individual shareholders have nothing but the chance to sell it to the next sucker. A mutual fund buys one million shares of a company with your and your coworkers’ money. You own 1 percent of the company. Six weeks later you own less, and all that money went to insiders, not to the company. And no one asked your permission, and you didn’t know you got diluted or by how much till 90 days after the fact if that soon.
[1] http://blogmaverick.com/2006/07/22/executive-pay-and-stock-p...
[+] [-] philwelch|14 years ago|reply
I don't get the criticism that Apple has no better way to spend its money. It's been building a cash stockpile for years, so obviously they've had this "problem" for years. They're a public company that has to report the size of their cash stockpile every quarter; having a growing cash stockpile already signals they haven't found a way to somehow reinvest their cash. Paying a dividend, especially such a small one, hardly lets the cat out of the bag at this point.
Furthermore, interest rates are still rock-bottom. If Apple suddenly needed a whole bunch of cash to invest, it wouldn't be at all difficult for them to borrow at much, much lower rates than their rate of return. It might be more risky and costly than simply spending a war chest, which is a good reason to keep 55 billion around (plus whatever they pull in over the next three years) while distributing the other 45 billion.
[+] [-] Me1000|14 years ago|reply
[+] [-] chalst|14 years ago|reply
The differences are
1. Buybacks are usually more tax efficient, because with dividends, profits are realised at the point of sale;
2. Buybacks tend to be procyclical, since companies get a bargain when their shares are undervalued and overpay when they are overvalued. There is some evidence that overall, companies do not get good value for their shareholders from share buybacks. Also, many stock options have the effect that buybacks reward shareholders better than dividends.
I think a mixed dividend and buyback policy is wise. Apple shouldn't be hoarding the cash, and they shouldn't make poor value acquisitions.
To take themselves off the stock exchange, they would need to issue bonds valuing around $500 million, and so become a highly indebted company. This would be tricky, and it is not obvious why this would be in Apple's interest.
[+] [-] ANH|14 years ago|reply
[+] [-] eugenegamma|14 years ago|reply
[+] [-] ohashi|14 years ago|reply
[+] [-] loceng|14 years ago|reply
[+] [-] brudgers|14 years ago|reply
In Apple's case, what it signals may be a little worse - i.e. that they have given up on trying to find those better ways despite having had several years to work on it as the cash accumulated.
If Apple had announced dividends a year ago, before Jobs' death, it would look like Apple had a long term vision - and there was certainly opportunity to have provided dividends.
More importantly, there was opportunity to spend the money. If Apple couldn't figure out how to make a dent in $30 billion or $50 billion or $70 billion, it doesn't look like their problem has gotten any easier.
[+] [-] orky56|14 years ago|reply
[+] [-] zukhan|14 years ago|reply
"I was talking recently to someone who knew Apple well, and I asked him if the people now running the company would be able to keep creating new things the way Apple had under Steve Jobs. His answer was simply "no." I already feared that would be the answer. I asked more to see how he'd qualify it. But he didn't qualify it at all. No, there will be no more great new stuff beyond whatever's currently in the pipeline."
Looks like they probably won't be dreaming up innovative devices anyway unless a new Steve Jobs takes over.
[+] [-] marbletiles|14 years ago|reply
They can't use the shareholders' money (which is what this is) to take themselves private. You can't buy something from someone with their own money.
EDIT: Any of these downvoters care to explain themselves? Apple can't buy back most/all of the public shares using this pile of cash, because it belongs to Apple, which belongs to its shareholders. (Even if they could afford to do it, which they can't)
[+] [-] ScotterC|14 years ago|reply
[+] [-] monochromatic|14 years ago|reply
[+] [-] funkah|14 years ago|reply
The ever-present notion that the leadership team of what is now one of the largest companies in the world has no real idea what they are doing is fascinating to me. Perhaps they deserve a bit of credit.
[+] [-] beatle|14 years ago|reply
Then I realized Apple earned $13b profit last quarter and it's only going to grow. $15b x 4 quarters = $60b PROFIT PER YEAR.
Not all of their profit will be used for the share buy back/dividend, but Apple can easily afford it and still have MORE cash (specially after you factor in cash inflow from its investing activities).
[+] [-] bbhacker|14 years ago|reply
And I don't mean that Apple should give money away to charities.
Why not invest in space exploration , electric cars, self-driving cars, medical devices, green energy,... It is not Apple's core business, but "phones" have not been the business of "Apple Computer" as well.
Apple has moved humanity forward with the personal computer and mobile phones. I don't want them to stop with computers, smartphones, tablets or TVs.
I want Apple to aim for more than just consumer electronics - but I guess we won't see that happening.
[+] [-] uptown|14 years ago|reply
Why should they? Just throwing money at something doesn't guarantee success, and deviating from a company's core competencies can become a distraction that drags down the parts of a company that are succeeding. The dividend puts money back into the hands of investors that can choose to either re-invest back into Apple stock, or invest in companies whose core competency is space exploration, electric cars, or some of the other areas that wouldn't be in Apple's expected domain.
[+] [-] tptacek|14 years ago|reply
[+] [-] celticninja|14 years ago|reply
I would say this is quite a lot of hyperbole. They have refined what others have made but they have not moved humanity forward.
The Haber-Bosch process, Norman Borlaug, the space race, the production of a silicon chip etc have al moved humanity forward. Apple in comparison made some trinkets.
[+] [-] maukdaddy|14 years ago|reply
As for your green energy comment: I think Apple can do far more to promote green energy by being a customer and driving partners to produce better products than designing their own green business. For example, by buying a shitload of fuel cells for their datacenters, Apple funds Bloom's (or others') R&D efforts. Same with solar panels and other alternatives.
[+] [-] dereg|14 years ago|reply
[+] [-] glenra|14 years ago|reply
If they were to spread management attention more thinly by starting separate divisions to do the sorts of entirely unrelated things you describe, Apple could easily turn into IBM or Microsoft. At its heart, Apple is a small company. The main way Apple helps all those other industries is by training engineers to think in the Apple way who then go off and found start-ups of their own. And by making lots of millionaires to fund those start-ups.
(Apple's also investing in some of those industries as a customer. For instance, they invest in "green energy" by buying solar panels for its new HQ building.)
[+] [-] InclinedPlane|14 years ago|reply
At some level it's necessary for a company as tight and as focused as Apple is to maintain a cohesion in its corporate expanse. They could easily spend their money on growing the company in a myriad of ways. They could invest in pharmaceuticals or unicycles, but the farther afield they get from their core competencies the less likely they are to succeed, and the less likely they are to remain a single, cohesive company.
At the end of the day the key question remains: what is Apple other than just a big ol' wad of money? If Apple is something other than just an amalgam of various profitable enterprises then they should keep on being that instead of trying to be something they're not.
[+] [-] furyofantares|14 years ago|reply
I don't think of the iPhone as a phone at all. It's a computer I always have with me.
Now, the main reason I always have it with me is because, rather than being an additional thing I need to carry in my pocket and always remember, it replaced a thing I need to carry in my pocket and always remember, but the "Phone" feature is the least used feature of my iPhone by far.
This is how Apple approached the iPhone, too. It was initially thought of as an iPod that had the sweet feature that it could replace your phone rather than require you to carry an extra device.
[+] [-] tomkinstinch|14 years ago|reply
Education seems like a perfect fit. They could start their own publishing house to author first-rate dynamic textbooks for the iPad. The content could be better than it is in current books, and it would sell iPads to boot.
[+] [-] Osiris|14 years ago|reply
They could afford to build an entirely new wireless carrier, from scratch (I understand spectrum might be an issue). They could create an entire newly kind of music label that redefines how artists are compensated and how labels make money. Or they could create their own new book publishing company that breaks with the traditions of the big publishers to make e-Books the focus and more affordable. They could probably buy up most of their entire supply chain.
So they must have good reasons for not wanting to use those funds to distrupt those other industries more than they already have. I'm sure they don't want to get out of their core competencies, but setting up subsidiary businesses would seem like a good way to get what they want.
[+] [-] brudgers|14 years ago|reply
[+] [-] robryan|14 years ago|reply
[+] [-] mbateman|14 years ago|reply
But I agree with your sentiment. It's a bit sad that Apple seems to have maxed out their ability to use money on themselves.
[+] [-] sithwarrior|14 years ago|reply
[+] [-] shingen|14 years ago|reply
Apple is not allowed to spend its $100 billion buying companies, even if it wanted to. For example, they could buy HP and Dell and shut them down (maybe all PC manufacturers in fact, just with cash); such would not pass anti-trust concerns. They could buy Facebook with cash + stock; again, that wouldn't make it through anti-trust review. And so on.
Even though they're not formally regulated under anti-trust just yet as, say, Microsoft was - their actions are indeed strictly limited by what the government will allow them to do.
[+] [-] allwein|14 years ago|reply
In much the same way that the stock was held back while Steve was alive because there was so much uncertainty about his health, but since his death the stock has been on a $200+ rampage. There's been speculation about what Apple might do with it's cash hoard for so long and the uncertainty has always been weighing on some investor's minds. By actually doing something with some of it, they've laid a path and removed the uncertainty.
Investor psychology is a really crazy thing.
[+] [-] rmc|14 years ago|reply
I don't know much about stock and companies with money, but people on this thread are implying that Apple must get rid of it's cash? Why? Surely cash is good? Safety net? What if the sales plummet you don't go out of business, etc. etc.?
[+] [-] bluedevil2k|14 years ago|reply
[+] [-] themichael|14 years ago|reply
[+] [-] outside1234|14 years ago|reply
The alternative is something like Microsoft, which couldn't invest the money but still tried with all sorts of terrible acquisitions. This is a better alternative for shareholders.
[+] [-] nikcub|14 years ago|reply
I don't know where that expectation came from. First Apple had the problem of repatriating international funds, so this was never going to be a $30, $50 or $100 (some crazy estimate) dividend.
Second all precedent from similar companies issuing a first dividend (well not first for Apple, but first for the 'new' Apple) such as Microsoft and Cisco is 1-2%.
I don't think the buyback will be very effective, not against the bigger dividend expectation.
1.8% is about par. I am surprised they didn't split the stock. Question now is how far the stock will fall today before picking back up again later on as yield-focused funds buy into the new action.
[+] [-] tonyx|14 years ago|reply
[+] [-] w1ntermute|14 years ago|reply
Another obvious "lateral" purchase would be a cellular company. It doesn't make sense to keep pandering to the desires of the likes of AT&T and Verizon (4 GB data limit on LTE iPad WTF?) when there's so much more potential that could be realized with a good data plan for iDevices.
[+] [-] drawkbox|14 years ago|reply
As a shareholder I'd preferred if they just kept and invested the money in new products. Why not use that money to speed up the real Apple TV? Screen tech? Storage? There are still lots of advancements left in handheld and this levels the playing field a bit. Apple hoarding cash was intimidating to competitors.
Jobs would not have done this. It was the first thing they did when he left in the late '80s and the first thing he ended when taking back over in the mid 90's.
[+] [-] bdz|14 years ago|reply
[+] [-] laconian|14 years ago|reply
[+] [-] infiniteburp|14 years ago|reply
[+] [-] debacle|14 years ago|reply
[+] [-] wildster|14 years ago|reply
[+] [-] chj|14 years ago|reply
[+] [-] joelmaat|14 years ago|reply