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Comment by patrickk | Hacker News Reader

I'm re-reading Peter Lynch's classic "One up on Wall Street" at the moment. He's a big advocate of share buybacks over dividends (unless Apple can some up with something else to do with the cash.) Warren Buffett is also.

Buybacks reduce the number of shares outstanding in the market and thereby increase earnings per share, which boosts the share price, rewarding existing investors. So we may see Apple engage in buybacks.

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We probably won't see buybacks and dividends any time soon. Apple remembers the days when they almost went bankrupt and that has set the tone for how they manage financially. They are very conservative with their cash.

They have made it very clear that they are reserving that cash for a big acquisition. IMHO that means that they are waiting for the moment when someone innovates in a way that threatens them and they can bring the talent and assets aboard. Like the Google process, except you pay with cash.

Buybacks are much preferable, IMO. They only create a tax liability for the shareholder when the shares are sold, as opposed to dividends which are taxed the year they're disbursed.

That's the idea of buybacks but there's no guarantee it will result in an increased share price. Take Cisco for example, by the end of this year they will have made around $82 Billion in buybacks while their stock has remained flat over the past 10 years.

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