I don't think the dividend is required. Dividends are for stocks that are not growth stocks. As long as Apple is a growth company, and its stock grows in value, then a dividend serves no purpose. The recession, which started in the forth quarter of 2007 has hurt Apple's stock (as well as everyone else's), but other than that, it was growing, and is again.
I'd rather Apple keep making profits on the stash, which they won't if they give a big chunk away. I'd also like to think that they have some long term plans for it rather than just giving a big portion of it away. And this is coming from someone who has a fair amount of stock.
It's never required, but in this case, it would be a very good idea. The question isn't whether the company is a growth investment, it's whether sitting on massive supplies of cash is good business practice. For one, declaring a dividend would be taken as a vote of confidence in the future. For another, Apple is not a bank, so they don't need huge cash reserves. If they can't find a legitimate way to use this capital to grow their business, then they should be giving some of it back to the stockholders. They should cut down on the ridiculous rate of cash accumulation.
It's never required, but in this case, it would be a very good idea. The question isn't whether the company is a growth investment, it's whether sitting on massive supplies of cash is good business practice. For one, declaring a dividend would be taken as a vote of confidence in the future. For another, Apple is not a bank, so they don't need huge cash reserves. If they can't find a legitimate way to use this capital to grow their business, then they should be giving some of it back to the stockholders. They should cut down on the ridiculous rate of cash accumulation.
I don't agree with that. Exactly what would a one time give-out do, except make people happy for a week? That's not important.
Without knowing what Apple has in mind, we can't say that having this money isn't good. If Apple is getting a good rate of return, that is good. Giving it away simply limits that return, and limits whatever they may have planned for the future.
I think that giving a dispersion would do the opposite of what you think. It would show that Apple is concerned that investors are getting impatient with their plans, and want some profits now. This is what happened with Microsoft.
If MS hadn't given that money back, they could have bought Yahoo for cash, and had an additional $20 billion left in reserve, rather than having to make an offer of part cash, part stock, and that also would have required them to make the first major borrowing in their company's history. So the deal fell through. I've spoken to people who told me that if MS had had the cash, they would have just spent it then.
There are companies with larger cash positions than Apple. In the tech sector, there is Cisco for an example that comes to mind.
I don't agree with that. Exactly what would a one time give-out do, except make people happy for a week? That's not important.
Without knowing what Apple has in mind, we can't say that having this money isn't good. If Apple is getting a good rate of return, that is good. Giving it away simply limits that return, and limits whatever they may have planned for the future.
I think that giving a dispersion would do the opposite of what you think. It would show that Apple is concerned that investors are getting impatient with their plans, and want some profits now. This is what happened with Microsoft.
If MS hadn't given that money back, they could have bought Yahoo for cash, and had an additional $20 billion left in reserve, rather than having to make an offer of part cash, part stock, and that also would have required them to make the first major borrowing in their company's history. So the deal fell through. I've spoken to people who told me that if MS had had the cash, they would have just spent it then.
There are companies with larger cash positions than Apple. In the tech sector, there is Cisco for an example that comes to mind.
I'm not talking about a one-time dividend, but a regular quarterly dividend. Even if it was only $1.00/year, which would be quite generous for a tech company, they'd still be accumulating cash at the absurd rate of $8-9 billion a year. Simply accumulating cash for no apparent reason is not a sign of confidence in the future, but quite the opposite. What are they saving for, their retirement?
At some point you must ask yourself what other reason they might have. If you think it's for an acquisition of the scale of Microsoft's proposed takeover of Yahoo, then I'm even more worried, because that was an act of pure desperation on Microsoft's part, and its likelihood of success was not high. So please, name for me an acquisition that makes sense for Apple that would cost anywhere in the neighborhood of $30 billion, that wouldn't scare the living daylights out of me. Good luck with that, since high dollar corporate takeovers almost invariably become long nightmares.
BTW, this time next year, Apple could easily have $40 billion on hand. Would that be enough?
I'm not talking about a one-time dividend, but a regular quarterly dividend. Even if it was only $1.00/year, which would be quite generous for a tech company, they'd still be accumulating cash at the absurd rate of $8-9 billion a year. Simply accumulating cash for no apparent reason is not a sign of confidence in the future, but quite the opposite. What are they saving for, their retirement?
That's even worse. It's been proposed several times over the past few years, but growth based companies simply don't do that. It's considered to be enough that the stock price is growing. Old line companies that don't have much stock growth do have dividends. The amount of money in the bank isn't a deciding factor. As I say, they're making good profits on that. It's not as though it's just sitting under their beds.
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At some point you must ask yourself what other reason they might have. If you think it's for an acquisition of the scale of Microsoft's proposed takeover of Yahoo, then I'm even more worried, because that was an act of pure desperation on Microsoft's part, and its likelihood of success was not high. So please, name for me an acquisition that makes sense for Apple that would cost anywhere in the neighborhood of $30 billion, that wouldn't scare the living daylights out of me. Good luck with that, since high dollar corporate takeovers almost invariably become long nightmares.
BTW, this time next year, Apple could easily have $40 billion on hand. Would that be enough?
I'll tell you again that neither I, nor anyone else out of that loop knows what they have planned. That's one reason why I don't want to tell them, as a stockholder, to disperse some of that cash.
I just used the MS situation to show that giving up a lot of cash can be a bad thing. It doesn't matter why MS wanted to deal, it's the fact that not having the cash when they needed it, scuttled it.
Apple could be interested in several mid sized companies. I don't know. Maybe they have some major future expansion plans that require a vast amount of capital. Why pay for capital when you can have your own that's making money for you meanwhile?
I understand what you are saying, but I think it does matter why Microsoft wanted that deal. Did you watch how MSFT investors reacted? It wasn't pretty. It was read, properly, as a huge risk with limited upside.
There's no rule in any book that says growth companies don't pay dividends. The profit a company accumulates is their capital. That money is supposed to be reinvested in growing the business. If they can't grow the business fast enough to reinvest their capital, then some of those profits should be returned to the owners of the company, i.e., the stockholders. It's a pretty basic principle.
The question about how Apple could/should spend their cash is a serious one. If you know of any company that would require that much cash to acquire, then name it. Then we could discuss whether it makes sense or has much prospect of succeeding. For that kind of money, it would be a big company.
BTW, I've been asking this question since Apple had a lot less money on hand. As a stockholder, I want to know the answer, because if I though Apple was planning that kind of acquisition, I'd sell right away.
The question about how Apple could/should spend their cash is a serious one. If you know of any company that would require that much cash to acquire, then name it. Then we could discuss whether it makes sense or has much prospect of succeeding. For that kind of money, it would be a big company.
There are plenty. Adobe, Sun (well, not anymore), Avid, NetFlix, Dell (why I dunno), Twitter, EA etc. Not very likely though. Apple just doesn't do that sorta thing.
It's a lot of cash in one sense but not a lot in others. It gives Apple huge flexibility that many other companies do not enjoy. They just spent half a billion on flash. They spent a lot to jumpstart their retail stores. They can afford a couple duds like aTV.
They could threaten to do a few things to shake up certain industries...like Google did with threatening to buy spectrum. Verizon bid 9.4B for 700Mhz, AT&T bid 6.6B. Google made a "minimum" bid of 4.6B to gain open access.
Google bought a huge amount of dark fiber in 2005-2008ish...some say $1B worth. Why? They sunk half a billion into ClearWire.
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BTW, I've been asking this question since Apple had a lot less money on hand. As a stockholder, I want to know the answer, because if I though Apple was planning that kind of acquisition, I'd sell right away.
Unless I've mis-interpreted the numbers reported by AI, Gartner's recent report giving Apple 8.7% US market share was a huge over-estimate.
Using their 16,351,000 total shipments, that gives Apple a 1.147/16.351 = 7%. However, the total includes their over-estimate of Apple's units, making it more like 1.147/16.076 = 7.1%.
I new there was something wrong with that 1.147 M figure!
Americas - 1.147
Retail ---- 0.492
Total ---- 1.639 million Macs
Now I am pretty sure that "Americas includes South America and Canada.
And retail will include stores outside the US.
Wild guess would be about 1.34M Macs sold in the US. (?)
I new there was something wrong with that 1.147 M figure!
Americas - 1.147
Retail ---- 0.492
Total ---- 1.639 million Macs
Now I am pretty sure that "Americas includes South America and Canada.
And retail will include stores outside the US.
Wild guess would be about 1.34M Macs sold in the US. (?)
Thanks for that. It didn't seem right to me, either. I guess there's no way for us to accurately figure what the U.S. sales were. At least we know the total so we know the worldwide market share looks like 3.5% - going up but still not where I'd like to see it. OS X is still too marginalised for my liking and I'd prefer a 10 - 20 % global share. Might happen one day...
I understand what you are saying, but I think it does matter why Microsoft wanted that deal. Did you watch how MSFT investors reacted? It wasn't pretty. It was read, properly, as a huge risk with limited upside.
It didn't matter in the context of the example I was using it for. I know the deal would have stunk for MS (and so I was so much hoping they would do it!).
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There's no rule in any book that says growth companies don't pay dividends. The profit a company accumulates is their capital. That money is supposed to be reinvested in growing the business. If they can't grow the business fast enough to reinvest their capital, then some of those profits should be returned to the owners of the company, i.e., the stockholders. It's a pretty basic principle.
You're right. There is no such "rule", other than the unwritten one.
It's not a basic principle. If the company is making a profit on its investments, that profit goes to raise the price of the stock still further, and so the investor is benefiting by the investments, and more so than by getting that dividend.
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The question about how Apple could/should spend their cash is a serious one. If you know of any company that would require that much cash to acquire, then name it. Then we could discuss whether it makes sense or has much prospect of succeeding. For that kind of money, it would be a big company.
It is a serious question. but so far I'm not seeing any serious movement towards getting Apple to divest itself of its portfolio.
You're making the incorrect assumption that any one of us should have information that Apple's board would have about a major investment. If I did, I'd put my entire portfolio into the stock of that company.
I've said it several times; We don't know what's on the minds of those running Apple.
We can't even guess what their next product update will be, how are we expected to guess what they're planning with $31.1 billion?
Pretty much everything they do is a surprise.
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BTW, I've been asking this question since Apple had a lot less money on hand. As a stockholder, I want to know the answer, because if I though Apple was planning that kind of acquisition, I'd sell right away.
That's you. I feel differently.
Besides, as I've said before, there's nothing that says they have to make one big one.
It didn't matter in the context of the example I was using it for. I know the deal would have stunk for MS (and so I was so much hoping they would do it!)..
So then why would you want Apple to have the potential to make a similar mistake?
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Originally Posted by melgross
You're right. There is no such "rule", other than the unwritten one.
The reason why growth companies do not pay dividends is that they typically calculate they can make a better return for the company's shareholders by putting the cash back into new investment, rather than passing it out in dividends. That clearly isn't the case with Apple's $31B
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Originally Posted by melgross
It's not a basic principle. If the company is making a profit on its investments, that profit goes to raise the price of the stock still further, and so the investor is benefiting by the investments, and more so than by getting that dividend.
No way! Like someone pointed out earlier in the thread, even if you assumed that *all* of the non-operating income was from investing, Apple is only getting 2.5% on the cash hoard. Flip that around and it's equivilent to a 40x P/E- higher than Apple's overall P/E. So the cash hoard depresses the price of the stock (vs handing it out), and the investor is worse off, and would be better to get the dividend.
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Originally Posted by melgross
It is a serious question. but so far I'm not seeing any serious movement towards getting Apple to divest itself of its portfolio.
You're making the incorrect assumption that any one of us should have information that Apple's board would have about a major investment. If I did, I'd put my entire portfolio into the stock of that company.
I agree that none of us know what Apple's management is going to do with the cash, which to me is the major reason that the shareholders should be pressing to have the cash disbursed
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Originally Posted by melgross
Besides, as I've said before, there's nothing that says they have to make one big one.
Yeah, but if you aren't going to make a big acquisition, and there's no way for you to invest $30B into the existing businesses, then it doesn't make sense to sit on the cash. To me, this is sub-optimal financial planning that is just a symptom of the old, harder years- like a person who lives through the Depression, and then sits on all his cash, refusing to do any estate planning and leaving his heirs with a big tax bill. The current team made the money, so certainly they have the right to hold onto it and do with it what they want. That doesn't mean they are right or smart to do so...
Yeah, but if you aren't going to make a big acquisition, and there's no way for you to invest $30B into the existing businesses, then it doesn't make sense to sit on the cash. To me, this is sub-optimal financial planning that is just a symptom of the old, harder years- like a person who lives through the Depression, and then sits on all his cash, refusing to do any estate planning and leaving his heirs with a big tax bill. The current team made the money, so certainly they have the right to hold onto it and do with it what they want. That doesn't mean they are right or smart to do so...
This is pretty much how I would have answered these comments, so I won't repeat. But I do want to echo this last observation though, because I think it's the psychological downside of Apple's extremely conservative thinking when it comes to their cash reserves. I does give off the smell of worry about the future, of a return to the bad old days of the 1990s when they were burning through their cash reserves in a hurry. That's why I asked rhetorically if they were saving it for their retirement.
The fact is, companies like Apple aren't banks -- they may have some cash on hand (a good thing) but if they are building their cash reserves steadily, and using it for income purposes rather than reinvesting it in their business, then they are weighing down the stock, not bolstering it. Having a mountain of cash sitting around gathering dust is not good for stockholders. If they were really confident in the future, then the correct gesture would be to give some, even small part of it, back to the stockholders.
So as an AAPL shareholder for over 12 years, I think it's entirely fair to ask the company what they plan to do with their enormous and steadily growing cash hoard. They do get asked at every stockholder's meeting, and the stockholders get opaque answers every time. This has become Apple's fiscal elephant in the room -- way too conspicuous to ignore.
So then why would you want Apple to have the potential to make a similar mistake?
Simplistic thinking on your part. The fact that this would have been a bad deal for MS has nothing to do with any othr deal any other company may make on their own. Do you understand why this would have been a bad deal for MS? I don't think so. For you to be so naive as to think that every big deal is bad shows that you don't understand business.
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The reason why growth companies do not pay dividends is that they typically calculate they can make a better return for the company's shareholders by putting the cash back into new investment, rather than passing it out in dividends. That clearly isn't the case with Apple's $31B
Again, you have no idea of what's going on at Apple.
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No way! Like someone pointed out earlier in the thread, even if you assumed that *all* of the non-operating income was from investing, Apple is only getting 2.5% on the cash hoard. Flip that around and it's equivilent to a 40x P/E- higher than Apple's overall P/E. So the cash hoard depresses the price of the stock (vs handing it out), and the investor is worse off, and would be better to get the dividend.
Again, you don't know what Apple's investments are, whether they are all taxed, and what Apple's future plans are.
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I agree that none of us know what Apple's management is going to do with the cash, which to me is the major reason that the shareholders should be pressing to have the cash disbursed
Well then, that sums up the value of you complaints, doesn't it?
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Yeah, but if you aren't going to make a big acquisition, and there's no way for you to invest $30B into the existing businesses, then it doesn't make sense to sit on the cash. To me, this is sub-optimal financial planning that is just a symptom of the old, harder years- like a person who lives through the Depression, and then sits on all his cash, refusing to do any estate planning and leaving his heirs with a big tax bill. The current team made the money, so certainly they have the right to hold onto it and do with it what they want. That doesn't mean they are right or smart to do so...
Why do you assume that Apple has to make one big acquisition?
Simply because interest rates are low does not mean banks should give quarter of a million dollar loans to anyone with a heart beat and a signature. I'm sure the Fed expected graduates of Harvard and Yale business schools to exercise better judgement.
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Originally Posted by fulldecent
Interest rates in America are set by our central economic planners. This planning committee is staffed by representatives of our private sector banks. The ensuing situation was low interest rates and infinite cash available for banks to lend, which necessarily resulted in poor lending decisions being made.
Why do you assume that Apple has to make one big acquisition?
Does anyone assume that? I don't. But I think you're not fully appreciating the amount of cash Apple has accumulated, and the rate at which they continue to do so, about $10 billion a year and accelerating. They'd have to spend like drunken sailors to even make a serious dent in that much cash. Do you want them to do that? I don't.
Another factor I think you are not fully appreciating is that if Apple were to acquire another public company, this does not require a full cash outlay because the larger part of the cost is covered by stock swaps. Just talking in roundish numbers, with the amount of cash Apple has now, they could conceivably buy a public company worth in the neighborhood of $50 billion without leveraging at all. Or several smaller ones adding up to that much. Is this not a mind-boggling thought? It is to me.
I find it odd the resistance I'm getting to the idea that maybe accumulating cash at "only" $8-9 billion a year would be wrong or bad in some way. I just don't see the argument against it.
Does anyone assume that? I don't. But I think you're not fully appreciating the amount of cash Apple has accumulated, and the rate at which they continue to do so, about $10 billion a year and accelerating. They'd have to spend like drunken sailors to even make a serious dent in that much cash. Do you want them to do that? I don't.
It costs a lot of money to make game changing moves. Having a lot of money allows Apple and Google to do so, or even better...threaten to do so.
Does anyone assume that? I don't. But I think you're not fully appreciating the amount of cash Apple has accumulated, and the rate at which they continue to do so, about $10 billion a year and accelerating. They'd have to spend like drunken sailors to even make a serious dent in that much cash. Do you want them to do that? I don't.
Another factor I think you are not fully appreciating is that if Apple were to acquire another public company, this does not require a full cash outlay because the larger part of the cost is covered by stock swaps. Just talking in roundish numbers, with the amount of cash Apple has now, they could conceivably buy a public company worth in the neighborhood of $50 billion without leveraging at all. Or several smaller ones adding up to that much. Is this not a mind-boggling thought? It is to me.
I find it odd the resistance I'm getting to the idea that maybe accumulating cash at "only" $8-9 billion a year would be wrong or bad in some way. I just don't see the argument against it.
We can argue these points forever and not get anywhere.
I'm willing to let Apple's people make these decisions.
As we all admit that we have no idea what Apple's up to, we can't say what they're doing is right or wrong.
I'm not going into the specifics of how one company acquires another, because there are a myriad of ways depending on the particular situation, and the financing available.
700 Mhz spectrum. Verizon bid $9.4B after Google threatened to take the spectrum. Google's bid was a mere $4.6B. AT&T spend $6.6B. The cost of developing that spectrum will be billions as well. There's a billion in Clearwire.
Because Google had billions in the bank it could threaten telcos with taking away the spectrum unless they didn't block open access on the networks. It was a purely defensive move to make sure that Google continued to have access in a growing mobile market.
Google purchased $1B+ in dark fiber...just in case. Mostly used to connect Google data centers and for peering arrangements. But also, with Google's warchest, a significant deterrent from ISPs deciding net neutrality is passe.
Now consider what Apple could do if it ever decides that aTV isn't a hobby.
Even ignoring net neutrality, the amount of bandwidth required to push ONE 1080p TV show to 10M+ users is measured in petabytes. There's no backbone provider with that much excess capacity. Few, if any, have that capability.
To make it "not a hobby" Apple would have to build or buy access from a Content Delivery Network to feed aTVs configured in a reliable P2P distribution chain from the initial nodes.
Akamai is $3.6B and it's too small. You'll need to throw a few more billions at it in terms of additional fiber and provisioning.
That's not even considering content creation.
As a game changer, what if Apple significantly increased distribution access AND funding for independent artists and movie makers? How many James Camerons can you discover for $10B?
How many do you need before the studios capitulate before getting run over by a new distribution model? Zero. Just the ability to do it is a potent weapon.
We can argue these points forever and not get anywhere.
I was hoping for a discussion... which for me doesn't have to get anywhere to be of interest.
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I'm willing to let Apple's people make these decisions.
As we all admit that we have no idea what Apple's up to, we can't say what they're doing is right or wrong.
Apple is a public corporation, which means they are owned by the stockholders. So they aren't a complete black box about which can know and ask nothing. As stockholders we not only have the right but we have a responsibility to question corporate financial policies if they seem unwise to us.
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Originally Posted by melgross
What do you think Cisco is planning to do with theirs?
That's of no interest to me, but if you're pointing out one example of poor corporate management in order to justify another, then the comparison carries no weight.
Comments
I don't think the dividend is required. Dividends are for stocks that are not growth stocks. As long as Apple is a growth company, and its stock grows in value, then a dividend serves no purpose. The recession, which started in the forth quarter of 2007 has hurt Apple's stock (as well as everyone else's), but other than that, it was growing, and is again.
I'd rather Apple keep making profits on the stash, which they won't if they give a big chunk away. I'd also like to think that they have some long term plans for it rather than just giving a big portion of it away. And this is coming from someone who has a fair amount of stock.
It's never required, but in this case, it would be a very good idea. The question isn't whether the company is a growth investment, it's whether sitting on massive supplies of cash is good business practice. For one, declaring a dividend would be taken as a vote of confidence in the future. For another, Apple is not a bank, so they don't need huge cash reserves. If they can't find a legitimate way to use this capital to grow their business, then they should be giving some of it back to the stockholders. They should cut down on the ridiculous rate of cash accumulation.
It's never required, but in this case, it would be a very good idea. The question isn't whether the company is a growth investment, it's whether sitting on massive supplies of cash is good business practice. For one, declaring a dividend would be taken as a vote of confidence in the future. For another, Apple is not a bank, so they don't need huge cash reserves. If they can't find a legitimate way to use this capital to grow their business, then they should be giving some of it back to the stockholders. They should cut down on the ridiculous rate of cash accumulation.
I don't agree with that. Exactly what would a one time give-out do, except make people happy for a week? That's not important.
Without knowing what Apple has in mind, we can't say that having this money isn't good. If Apple is getting a good rate of return, that is good. Giving it away simply limits that return, and limits whatever they may have planned for the future.
I think that giving a dispersion would do the opposite of what you think. It would show that Apple is concerned that investors are getting impatient with their plans, and want some profits now. This is what happened with Microsoft.
If MS hadn't given that money back, they could have bought Yahoo for cash, and had an additional $20 billion left in reserve, rather than having to make an offer of part cash, part stock, and that also would have required them to make the first major borrowing in their company's history. So the deal fell through. I've spoken to people who told me that if MS had had the cash, they would have just spent it then.
There are companies with larger cash positions than Apple. In the tech sector, there is Cisco for an example that comes to mind.
I don't agree with that. Exactly what would a one time give-out do, except make people happy for a week? That's not important.
Without knowing what Apple has in mind, we can't say that having this money isn't good. If Apple is getting a good rate of return, that is good. Giving it away simply limits that return, and limits whatever they may have planned for the future.
I think that giving a dispersion would do the opposite of what you think. It would show that Apple is concerned that investors are getting impatient with their plans, and want some profits now. This is what happened with Microsoft.
If MS hadn't given that money back, they could have bought Yahoo for cash, and had an additional $20 billion left in reserve, rather than having to make an offer of part cash, part stock, and that also would have required them to make the first major borrowing in their company's history. So the deal fell through. I've spoken to people who told me that if MS had had the cash, they would have just spent it then.
There are companies with larger cash positions than Apple. In the tech sector, there is Cisco for an example that comes to mind.
I'm not talking about a one-time dividend, but a regular quarterly dividend. Even if it was only $1.00/year, which would be quite generous for a tech company, they'd still be accumulating cash at the absurd rate of $8-9 billion a year. Simply accumulating cash for no apparent reason is not a sign of confidence in the future, but quite the opposite. What are they saving for, their retirement?
At some point you must ask yourself what other reason they might have. If you think it's for an acquisition of the scale of Microsoft's proposed takeover of Yahoo, then I'm even more worried, because that was an act of pure desperation on Microsoft's part, and its likelihood of success was not high. So please, name for me an acquisition that makes sense for Apple that would cost anywhere in the neighborhood of $30 billion, that wouldn't scare the living daylights out of me. Good luck with that, since high dollar corporate takeovers almost invariably become long nightmares.
BTW, this time next year, Apple could easily have $40 billion on hand. Would that be enough?
I'm not talking about a one-time dividend, but a regular quarterly dividend. Even if it was only $1.00/year, which would be quite generous for a tech company, they'd still be accumulating cash at the absurd rate of $8-9 billion a year. Simply accumulating cash for no apparent reason is not a sign of confidence in the future, but quite the opposite. What are they saving for, their retirement?
That's even worse. It's been proposed several times over the past few years, but growth based companies simply don't do that. It's considered to be enough that the stock price is growing. Old line companies that don't have much stock growth do have dividends. The amount of money in the bank isn't a deciding factor. As I say, they're making good profits on that. It's not as though it's just sitting under their beds.
At some point you must ask yourself what other reason they might have. If you think it's for an acquisition of the scale of Microsoft's proposed takeover of Yahoo, then I'm even more worried, because that was an act of pure desperation on Microsoft's part, and its likelihood of success was not high. So please, name for me an acquisition that makes sense for Apple that would cost anywhere in the neighborhood of $30 billion, that wouldn't scare the living daylights out of me. Good luck with that, since high dollar corporate takeovers almost invariably become long nightmares.
BTW, this time next year, Apple could easily have $40 billion on hand. Would that be enough?
I'll tell you again that neither I, nor anyone else out of that loop knows what they have planned. That's one reason why I don't want to tell them, as a stockholder, to disperse some of that cash.
I just used the MS situation to show that giving up a lot of cash can be a bad thing. It doesn't matter why MS wanted to deal, it's the fact that not having the cash when they needed it, scuttled it.
Apple could be interested in several mid sized companies. I don't know. Maybe they have some major future expansion plans that require a vast amount of capital. Why pay for capital when you can have your own that's making money for you meanwhile?
There's no rule in any book that says growth companies don't pay dividends. The profit a company accumulates is their capital. That money is supposed to be reinvested in growing the business. If they can't grow the business fast enough to reinvest their capital, then some of those profits should be returned to the owners of the company, i.e., the stockholders. It's a pretty basic principle.
The question about how Apple could/should spend their cash is a serious one. If you know of any company that would require that much cash to acquire, then name it. Then we could discuss whether it makes sense or has much prospect of succeeding. For that kind of money, it would be a big company.
BTW, I've been asking this question since Apple had a lot less money on hand. As a stockholder, I want to know the answer, because if I though Apple was planning that kind of acquisition, I'd sell right away.
The question about how Apple could/should spend their cash is a serious one. If you know of any company that would require that much cash to acquire, then name it. Then we could discuss whether it makes sense or has much prospect of succeeding. For that kind of money, it would be a big company.
There are plenty. Adobe, Sun (well, not anymore), Avid, NetFlix, Dell (why I dunno), Twitter, EA etc. Not very likely though. Apple just doesn't do that sorta thing.
It's a lot of cash in one sense but not a lot in others. It gives Apple huge flexibility that many other companies do not enjoy. They just spent half a billion on flash. They spent a lot to jumpstart their retail stores. They can afford a couple duds like aTV.
They could threaten to do a few things to shake up certain industries...like Google did with threatening to buy spectrum. Verizon bid 9.4B for 700Mhz, AT&T bid 6.6B. Google made a "minimum" bid of 4.6B to gain open access.
Google bought a huge amount of dark fiber in 2005-2008ish...some say $1B worth. Why? They sunk half a billion into ClearWire.
BTW, I've been asking this question since Apple had a lot less money on hand. As a stockholder, I want to know the answer, because if I though Apple was planning that kind of acquisition, I'd sell right away.
Yah right, like they're going to tell you that.
Unless I've mis-interpreted the numbers reported by AI, Gartner's recent report giving Apple 8.7% US market share was a huge over-estimate.
Using their 16,351,000 total shipments, that gives Apple a 1.147/16.351 = 7%. However, the total includes their over-estimate of Apple's units, making it more like 1.147/16.076 = 7.1%.
I new there was something wrong with that 1.147 M figure!
Americas - 1.147
Retail ---- 0.492
Total ---- 1.639 million Macs
Now I am pretty sure that "Americas includes South America and Canada.
And retail will include stores outside the US.
Wild guess would be about 1.34M Macs sold in the US. (?)
I new there was something wrong with that 1.147 M figure!
Americas - 1.147
Retail ---- 0.492
Total ---- 1.639 million Macs
Now I am pretty sure that "Americas includes South America and Canada.
And retail will include stores outside the US.
Wild guess would be about 1.34M Macs sold in the US. (?)
Thanks for that. It didn't seem right to me, either. I guess there's no way for us to accurately figure what the U.S. sales were. At least we know the total so we know the worldwide market share looks like 3.5% - going up but still not where I'd like to see it. OS X is still too marginalised for my liking and I'd prefer a 10 - 20 % global share. Might happen one day...
I understand what you are saying, but I think it does matter why Microsoft wanted that deal. Did you watch how MSFT investors reacted? It wasn't pretty. It was read, properly, as a huge risk with limited upside.
It didn't matter in the context of the example I was using it for. I know the deal would have stunk for MS (and so I was so much hoping they would do it!).
There's no rule in any book that says growth companies don't pay dividends. The profit a company accumulates is their capital. That money is supposed to be reinvested in growing the business. If they can't grow the business fast enough to reinvest their capital, then some of those profits should be returned to the owners of the company, i.e., the stockholders. It's a pretty basic principle.
You're right. There is no such "rule", other than the unwritten one.
It's not a basic principle. If the company is making a profit on its investments, that profit goes to raise the price of the stock still further, and so the investor is benefiting by the investments, and more so than by getting that dividend.
The question about how Apple could/should spend their cash is a serious one. If you know of any company that would require that much cash to acquire, then name it. Then we could discuss whether it makes sense or has much prospect of succeeding. For that kind of money, it would be a big company.
It is a serious question. but so far I'm not seeing any serious movement towards getting Apple to divest itself of its portfolio.
You're making the incorrect assumption that any one of us should have information that Apple's board would have about a major investment. If I did, I'd put my entire portfolio into the stock of that company.
I've said it several times; We don't know what's on the minds of those running Apple.
We can't even guess what their next product update will be, how are we expected to guess what they're planning with $31.1 billion?
Pretty much everything they do is a surprise.
BTW, I've been asking this question since Apple had a lot less money on hand. As a stockholder, I want to know the answer, because if I though Apple was planning that kind of acquisition, I'd sell right away.
That's you. I feel differently.
Besides, as I've said before, there's nothing that says they have to make one big one.
It didn't matter in the context of the example I was using it for. I know the deal would have stunk for MS (and so I was so much hoping they would do it!)..
So then why would you want Apple to have the potential to make a similar mistake?
You're right. There is no such "rule", other than the unwritten one.
The reason why growth companies do not pay dividends is that they typically calculate they can make a better return for the company's shareholders by putting the cash back into new investment, rather than passing it out in dividends. That clearly isn't the case with Apple's $31B
It's not a basic principle. If the company is making a profit on its investments, that profit goes to raise the price of the stock still further, and so the investor is benefiting by the investments, and more so than by getting that dividend.
No way! Like someone pointed out earlier in the thread, even if you assumed that *all* of the non-operating income was from investing, Apple is only getting 2.5% on the cash hoard. Flip that around and it's equivilent to a 40x P/E- higher than Apple's overall P/E. So the cash hoard depresses the price of the stock (vs handing it out), and the investor is worse off, and would be better to get the dividend.
It is a serious question. but so far I'm not seeing any serious movement towards getting Apple to divest itself of its portfolio.
You're making the incorrect assumption that any one of us should have information that Apple's board would have about a major investment. If I did, I'd put my entire portfolio into the stock of that company.
I agree that none of us know what Apple's management is going to do with the cash, which to me is the major reason that the shareholders should be pressing to have the cash disbursed
Besides, as I've said before, there's nothing that says they have to make one big one.
Yeah, but if you aren't going to make a big acquisition, and there's no way for you to invest $30B into the existing businesses, then it doesn't make sense to sit on the cash. To me, this is sub-optimal financial planning that is just a symptom of the old, harder years- like a person who lives through the Depression, and then sits on all his cash, refusing to do any estate planning and leaving his heirs with a big tax bill. The current team made the money, so certainly they have the right to hold onto it and do with it what they want. That doesn't mean they are right or smart to do so...
Yeah, but if you aren't going to make a big acquisition, and there's no way for you to invest $30B into the existing businesses, then it doesn't make sense to sit on the cash. To me, this is sub-optimal financial planning that is just a symptom of the old, harder years- like a person who lives through the Depression, and then sits on all his cash, refusing to do any estate planning and leaving his heirs with a big tax bill. The current team made the money, so certainly they have the right to hold onto it and do with it what they want. That doesn't mean they are right or smart to do so...
This is pretty much how I would have answered these comments, so I won't repeat. But I do want to echo this last observation though, because I think it's the psychological downside of Apple's extremely conservative thinking when it comes to their cash reserves. I does give off the smell of worry about the future, of a return to the bad old days of the 1990s when they were burning through their cash reserves in a hurry. That's why I asked rhetorically if they were saving it for their retirement.
The fact is, companies like Apple aren't banks -- they may have some cash on hand (a good thing) but if they are building their cash reserves steadily, and using it for income purposes rather than reinvesting it in their business, then they are weighing down the stock, not bolstering it. Having a mountain of cash sitting around gathering dust is not good for stockholders. If they were really confident in the future, then the correct gesture would be to give some, even small part of it, back to the stockholders.
So as an AAPL shareholder for over 12 years, I think it's entirely fair to ask the company what they plan to do with their enormous and steadily growing cash hoard. They do get asked at every stockholder's meeting, and the stockholders get opaque answers every time. This has become Apple's fiscal elephant in the room -- way too conspicuous to ignore.
So then why would you want Apple to have the potential to make a similar mistake?
Simplistic thinking on your part. The fact that this would have been a bad deal for MS has nothing to do with any othr deal any other company may make on their own. Do you understand why this would have been a bad deal for MS? I don't think so. For you to be so naive as to think that every big deal is bad shows that you don't understand business.
The reason why growth companies do not pay dividends is that they typically calculate they can make a better return for the company's shareholders by putting the cash back into new investment, rather than passing it out in dividends. That clearly isn't the case with Apple's $31B
Again, you have no idea of what's going on at Apple.
No way! Like someone pointed out earlier in the thread, even if you assumed that *all* of the non-operating income was from investing, Apple is only getting 2.5% on the cash hoard. Flip that around and it's equivilent to a 40x P/E- higher than Apple's overall P/E. So the cash hoard depresses the price of the stock (vs handing it out), and the investor is worse off, and would be better to get the dividend.
Again, you don't know what Apple's investments are, whether they are all taxed, and what Apple's future plans are.
I agree that none of us know what Apple's management is going to do with the cash, which to me is the major reason that the shareholders should be pressing to have the cash disbursed
Well then, that sums up the value of you complaints, doesn't it?
Yeah, but if you aren't going to make a big acquisition, and there's no way for you to invest $30B into the existing businesses, then it doesn't make sense to sit on the cash. To me, this is sub-optimal financial planning that is just a symptom of the old, harder years- like a person who lives through the Depression, and then sits on all his cash, refusing to do any estate planning and leaving his heirs with a big tax bill. The current team made the money, so certainly they have the right to hold onto it and do with it what they want. That doesn't mean they are right or smart to do so...
Why do you assume that Apple has to make one big acquisition?
Interest rates in America are set by our central economic planners. This planning committee is staffed by representatives of our private sector banks. The ensuing situation was low interest rates and infinite cash available for banks to lend, which necessarily resulted in poor lending decisions being made.
Why do you assume that Apple has to make one big acquisition?
Does anyone assume that? I don't. But I think you're not fully appreciating the amount of cash Apple has accumulated, and the rate at which they continue to do so, about $10 billion a year and accelerating. They'd have to spend like drunken sailors to even make a serious dent in that much cash. Do you want them to do that? I don't.
Another factor I think you are not fully appreciating is that if Apple were to acquire another public company, this does not require a full cash outlay because the larger part of the cost is covered by stock swaps. Just talking in roundish numbers, with the amount of cash Apple has now, they could conceivably buy a public company worth in the neighborhood of $50 billion without leveraging at all. Or several smaller ones adding up to that much. Is this not a mind-boggling thought? It is to me.
I find it odd the resistance I'm getting to the idea that maybe accumulating cash at "only" $8-9 billion a year would be wrong or bad in some way. I just don't see the argument against it.
Does anyone assume that? I don't. But I think you're not fully appreciating the amount of cash Apple has accumulated, and the rate at which they continue to do so, about $10 billion a year and accelerating. They'd have to spend like drunken sailors to even make a serious dent in that much cash. Do you want them to do that? I don't.
It costs a lot of money to make game changing moves. Having a lot of money allows Apple and Google to do so, or even better...threaten to do so.
In that context $30B isn't a lot of money.
It costs a lot of money to make game changing moves. Having a lot of money allows Apple and Google to do so, or even better...threaten to do so.
Such as?
In that context $30B isn't a lot of money.
It's a ton by any measure, except maybe in the federal budget.
Does anyone assume that? I don't. But I think you're not fully appreciating the amount of cash Apple has accumulated, and the rate at which they continue to do so, about $10 billion a year and accelerating. They'd have to spend like drunken sailors to even make a serious dent in that much cash. Do you want them to do that? I don't.
Another factor I think you are not fully appreciating is that if Apple were to acquire another public company, this does not require a full cash outlay because the larger part of the cost is covered by stock swaps. Just talking in roundish numbers, with the amount of cash Apple has now, they could conceivably buy a public company worth in the neighborhood of $50 billion without leveraging at all. Or several smaller ones adding up to that much. Is this not a mind-boggling thought? It is to me.
I find it odd the resistance I'm getting to the idea that maybe accumulating cash at "only" $8-9 billion a year would be wrong or bad in some way. I just don't see the argument against it.
We can argue these points forever and not get anywhere.
I'm willing to let Apple's people make these decisions.
As we all admit that we have no idea what Apple's up to, we can't say what they're doing is right or wrong.
I'm not going into the specifics of how one company acquires another, because there are a myriad of ways depending on the particular situation, and the financing available.
It's a ton by any measure, except maybe in the federal budget.
What do you think Cisco is planning to do with theirs?
Such as?
700 Mhz spectrum. Verizon bid $9.4B after Google threatened to take the spectrum. Google's bid was a mere $4.6B. AT&T spend $6.6B. The cost of developing that spectrum will be billions as well. There's a billion in Clearwire.
Because Google had billions in the bank it could threaten telcos with taking away the spectrum unless they didn't block open access on the networks. It was a purely defensive move to make sure that Google continued to have access in a growing mobile market.
Google purchased $1B+ in dark fiber...just in case. Mostly used to connect Google data centers and for peering arrangements. But also, with Google's warchest, a significant deterrent from ISPs deciding net neutrality is passe.
Now consider what Apple could do if it ever decides that aTV isn't a hobby.
Even ignoring net neutrality, the amount of bandwidth required to push ONE 1080p TV show to 10M+ users is measured in petabytes. There's no backbone provider with that much excess capacity. Few, if any, have that capability.
To make it "not a hobby" Apple would have to build or buy access from a Content Delivery Network to feed aTVs configured in a reliable P2P distribution chain from the initial nodes.
Akamai is $3.6B and it's too small. You'll need to throw a few more billions at it in terms of additional fiber and provisioning.
That's not even considering content creation.
As a game changer, what if Apple significantly increased distribution access AND funding for independent artists and movie makers? How many James Camerons can you discover for $10B?
How many do you need before the studios capitulate before getting run over by a new distribution model? Zero. Just the ability to do it is a potent weapon.
We can argue these points forever and not get anywhere.
I was hoping for a discussion... which for me doesn't have to get anywhere to be of interest.
I'm willing to let Apple's people make these decisions.
As we all admit that we have no idea what Apple's up to, we can't say what they're doing is right or wrong.
Apple is a public corporation, which means they are owned by the stockholders. So they aren't a complete black box about which can know and ask nothing. As stockholders we not only have the right but we have a responsibility to question corporate financial policies if they seem unwise to us.
What do you think Cisco is planning to do with theirs?
That's of no interest to me, but if you're pointing out one example of poor corporate management in order to justify another, then the comparison carries no weight.