Apple Conference Call
apple.com
apple.com
"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...
I have no idea what you're suggesting, practically. Wealth isn't "determined" by some arbitrary choice of economic statistic. Wealth is a store of value to the person who owns it. If you value forest preserves there are organizations who will happily take your money to create and expand them for you.
Which is presently accurately measured by our fiat system? Were the Dutch crazy to base their early stock market on tulip bulbs? Considering a historical perspective I don't see what's so different about choosing 'how many trees I have in my forest' vs. 'how much gold I have'. There are perfectly measurable elements in a human/humane society to base wealth off, especially as measuring technology improves. Maybe I should get better interest returns if I go for a decent 20 minute jog every day? I don't see why our future can't be one of measuring wealth on something else entirely (and yes I am being glib about using forests and jogging as an example but I think we're all clever enough to figure something out).
If you want to start a bank that pays people better interest rates for running every day, what's stopping you?
Just an example, if they paid out $50bn in a one time divvy, Fidelity would get around $2.6 billion.
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.
Another way to convert stock to cash is to sell it.
I realize that there are tax considerations though that make this all a bit more complicated.
For example, look at the historical stock prices for Microsoft in 2004 when they issued a $3.08/share dividend: http://finance.yahoo.com/q/hp?s=MSFT&a=10&b=1&c=...
You can see that the difference between the close on Nov 12 and the open on Nov 15 is $2.63 where the difference in the surrounding days in about 20 times less.
That's not what happened with Microsoft did a one-time dividend of $30bn. On July 19th, 2004, their stock price was 27.94. They announced it on July 20, 2004. The stock closed on 28.86 on July 21. The stock ran up to almost $30, and the day of the dividend dropped to 27.39.
On July 19th, their value was $301.7bn
On November 15th, it was $297.8bn.
(Numbers computed by Wolfram Alpha.. kaching!)
Believe it or not, there is value in ongoing dividends that makes "Fidelity's Apple stock would go down by $2.6" incorrect. Income funds, for example, would not buy Apple right now because it's not a "yield" stock. If they pay a dividend, those funds can then buy it under their prospectus. This opens up the overall pool of buyers for the stock and can stabilize and even raise the value over time.
(edit: formatting)
I see that the market cap for Microsoft dropped by about $30bn on the ex-dividend day.
Not that I know more than anyone else, but I don't feel Apple really paying a dividend out. They've never really seemed too beholden to shareholders in the past (well, the Steve Jobs past anyway), and I think they'd rather invest the cash in something that would benefit the business more. It's not as if the share price is in a bad place, after all!
They will likely generate another $50B in cash this calendar year. Even if they want to maintain the $100B war chest, they could pay out ~$50/share/year. I think a share repurchase or dividend (whatever they think will return more value to the shareholders) is highly likely.
It's reasonable to at least project the same growth for future quarters, year on year, as Apple got in their Q1 (which includes christmas, iPhone 4S launch, death of Steve Jobs, ...).
This year should have a rev of most of the Mac line (hopefully Pro if they don't kill it, too, although it doesn't move the needle on revenue), iPad 3 selling an absurd number of units, and an iPhone 5. The big innovation I've seen with Apple in the past couple product cycles is keeping their older iOS products on sale at a reduced price point, so now you get to choose iPad 2 or iPhone 3GS/4 on price vs. any competitor (and still better), or iPad 3/iPhone 4S as absurdly better at about price parity. Makes more sense than trying to create low end and high end products simultaneously.
I just don't know why a dividend would be more than a press release after markets closed.
I've read that they offer few benefits, but I've never heard this explanation. I also don't see how it makes sense for a company in their position?
If Apple had $5b in cash and decided to buy back stock, that would be a bit bearish -- they certainly can continue to make incremental cash investments (in supplier agreements, new products, etc.). $100b (which is actually probably $110-120b now, a month later) is way beyond that. Getting $50b returned to shareholders wouldn't be a sign of lack of investment options for Apple.
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
(where investor = someone looking to finance innovation and long-term value/wealth creation; and speculator = someone looking to get rich quick on market volatility, pump & dump, etc.)
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.
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.
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.
Actually that is not true. Historically Interest rates on currency-based investments have not caught up with inflation and taxes. Majority of Apple's cash is invested in long-term securities though so their investment is protected from inflation.
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.
Yes- it's called the Federal Budget. When the US continually runs a deficit and prints money to make up the difference, that cash goes into the economy without any real output in GDP. That causes currency devaluation, and in turn, inflation.
Towards the end of 2008, $700 billion dollars were injected into the economy while the US was in the midst of running a multi-trillion dollar deficit. Taxes weren't raised, so that money came (an continues to come) from thin air. There is virtually no chance inflation does not steadily increase in the coming years. I can confidently say that because I see no reason to believe that there will either be a sudden burst in GDP to increase tax revenues, a reduction in spending, or an increase in tax rates sufficient to make up the difference. Remember, economic effects tend to lag. The mortgage crisis occurred after several years of irresponsible borrowing and lending.
Also, I'd be curious as to why you think this didn't happen in Japan, and what are the critical differences in the US that will cause inflation here.
I'm curious because I hear the "inflation must come" argument often, but I haven't heard it squared against Krugman and Japan. I'm not an expert, so any guidance would help my understanding.
Here's the thing- there is a fundamental law in economics called supply and demand. Nobody, not the US, nor Japan is immune to it. If you increase the supply of something, and there is not a corresponding increase in demand, that thing becomes less valuable. In the US there has been an enormous increase in the money supply with no corresponding increase in real output. That makes the money circulating in the economy less valuable. Whether the costs of goods go up today, tomorrow, next week, or three years from now is somewhat immaterial. All of the evidence is in place that at some point the costs of goods will almost certainly go up, unless there is a shift in demand or a decrease in the money supply.
EDIT: Now we see that Apple is going to be dumping $45 billion into the economy. Not a good signal of strength for the dollar.
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 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.
I think Apple under Tim Cook is quite different, and is taking shareholders' interests very seriously. Why else would they adopt the resolution to have Apple directors being voted in by majority in the last shareholder meeting?[1]
[1] http://www.bloomberg.com/news/2012-02-23/apple-ceo-cook-says...
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.
Then again foxconn is supposed to add 1 million assembly robots.
Maybe they will buy out their factories.
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.
[1] http://investing.businessweek.com/research/stocks/snapshot/s...
[1] http://www.chicagotribune.com/business/sns-rt-us-applebre82f...
“Adobe has made a decisive choice to move away from traditional enterprise software markets and to focus on digital marketing and media. It will also shift aggressively to a cloud delivery model. These moves follow an August 2011 message to customers that Adobe would no longer update LiveCycle Content Services ES2. These actions signal that LiveCycle Process Management ES2 and LiveCycle Content Services ES2 are no longer important to the company’s strategic direction.” http://www.gartner.com/id=1850714
"I'm dying to do a blog on ADBE stock but can't do so now (we're in a quiet period). Maybe Monday, after earnings."
https://twitter.com/#!/kasthomas/status/180773095903207425
And the tweet right before that one:
"AAPL still cheap at $585. If you believe in next year's earnings == $50/share and a P/E multiple of 15, the stock should be at 750."
I don't see any upsides for them in an Intel acquisition.