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Notes of interest from Apple's Q1 2010 conference call

post #1 of 44
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The first quarter of Apple's 2010 fiscal year was another record breaking three-month frame for the company, which sold more Macs and iPhones than ever before. Monday, the company conducted a financial conference call with analysts and the press, and notes of interest follow.

On Monday, Apple revealed the results of its fiscal 2010 first quarter, which ended Dec. 26, 2009. The company posted revenue of $15.68 billion and a net quarterly profit of $3.38 billion, or $3.67 per diluted share. That's an increase from revenue of $11.88 billion and net quarterly profit of $2.26 billion, or $2.50 per diluted share, in the year-ago frame.

Apple's blowout quarter surpassed its previous quarterly record by almost $3.5 billion.

Participating on Monday's call were Apple Chief Financial Officer Peter Oppenheimer and Chief Operating Officer Tim Cook.

Apple's regional business segments

The real standout in Apple's worldwide business breakdown was the fact that international sales accounted for 58 percent of the company's revenue. The largest overseas slice came from Europe, which accounted for $5.024 billion in revenue, partially from sales of 1.068 million Macs.

Mac sales in Italy, France, Switzerland and Spain all grew more than 40 percent. Australia up over 70 percent, China up almost 100 percent.

Apple Americas garnered $6.092 billion in total from the U.S., including sales of 1.187 million Macs. In all, 3.362 million Macs were sold in the quarter.

Asia Pacific accounted for $1.183 billion, including sales of 313,000 Macs. And Japan was $783 million, selling 105,000 computers.

Apple's "Other Music Related Products and Services" segment was responsible for $1.164 billion in revenue. Apple's "Peripherals and Other Hardware" added $469 million in revenue.

The company's "iPhone and related products and services" accounted for $5.578 billion in revenue, based on sales of 8.737 million units. Apple's "Software, Service and Other Sales" segment produced $631 million.

$39.8B in cash at the end of the Dec. quarter, an increase of 5 billion from the previous quarter.

Apple's Mac business

Mac sales were broken down into 2.128 million portables, and 1.234 million desktops. Desktop sales were up 70 percent year-over-year, and saw a 60 percent increase in revenue. They also spiked 57 percent in sales from the previous quarter. Customers are thrilled with the new iMacs, officials said.

Portable sales were also up 18 percent in sales year over year, and 9 percent in revenue. However, the notebook market was down 6 percent in units and 5 percent in revenue from the previous quarter. Mac and MacBook sales were up 16 percent year over year in education. New December records for K-12 and high-ed channels.

Cook said that represented the best growth rate for education since before the recession began.

"Our whole education business is based on we really understand teaching and learning and student achievement at a deep level, we think we're the only company that really gets it, we do more than sell boxes like other companies do," he said. "I think we can continue to do well and was thrilled to see the results from last quarter."

Previous Mac record was set in September quarter, Apple beat it this quarter by almost 300K. Grew more than 30 percent year over year.

"We are extremely proud of this result and believe our Mac hardware and software are providing outstanding software and innovation that our customers really love," Oppenheimer said.

Apple's iPhone and Apple TV businesses

Record 8.7 million iPhones sold Revenue for iPhone handset sales, accessories, and carrier payments was $5.58 billion.

Average Selling Price of about $620 for the iPhone during the quarter. Added 17 new carriers during the quarter. iPhone distribution now in 86 countries.

Business carriers ranked the iPhone No. 1 in JD Power's customer satisfaction survey in the second year in a row. Business adoption is strong.

Over 70 percent of the Fortune 100 deploying iPhone. Penetration doubled since the iPhone 3GS first shipped this last summer. However, Cook declined to comment on whether the "halo" effect applied to iPod use in the consumer markets could lead to Mac adoption in the corporate world.

More than 200,000 iPhones have been sold in China with carrier China Unicom. Cook said Apple is concentrating now on the customer experience and point of sales.

"We would prefer to move slow because we're building the brand for the long term and we're very much focused on the long-term of the market, because we think there is significant potential there," Cook said. He declined to forecast where sales could go.

Cook also defended the company's approval process for the App Store, noting that more than 90 percent of software submitted is approved within 14 days of submission. He said some rejections are to prevent inappropriate content, like pornography.

"Most of the rejections, however, are actually bugs in the code itself," Cook said. "This is protecting the customer and the developer to a great extent, because they don't want customers who are unhappy with the app."

Apple's iPod business

Sold almost 21 million iPods. iPod average selling price increased 9 percent, revenue increased 1 percent. Share remains at almost 70 percent. iPod is the top-selling MP3 player, and gains share internationally. Year to year sales dropped, as expected, and the iPhone continues to cannibalize that market.

iPod touch sales in particular were strong, up 55 percent.

iTunes store had a record breaking quarter with strong sales of music, video and apps. iTunes has 8,000 Hollywood films, 10,000 music videos, and 50,000 TV episodes.

Apple's retail business

Apple's retail locations accounted for 689,000 Mac sales, and produced $1.971 billion in revenue. About half of sales during the December quarter were to customers who never owned a Mac before. About 10 new stores opened during the quarter.

There are 62 stores outside of the U.S., and the company is on track to open between 40 and 50 stores in its 2010 fiscal year, half of which will be international. Ten new stores opened last quarter, including one at the Louvre in Paris, France, and one on New York's Upper West Side.

Apple ended the quarter with 283 stores in 10 countries.

Average revenue per store was $7.1 million, compared to $7 million a year ago.

Stores saw a record 50.9 million visitors in the quarter.

Apple added 280,000 One to One membership subscriptions during the quarter.

Apple's next (Q2 2010) fiscal quarter

Officials provided a range of guidance under the new accounting principals. Apple has forecast revenues between $11 billion and $11.4 billion compared to $9.1 billion in the March quarter last year under old principles.

Expect gross margin to be about 39 percent, and operating expenditures about $1.64 billion, including $190 million related to stock-based compensation. Expect the tax rate to be about 29 percent. EPS of about $2.06 to $2.18, compared to $1.79 in the year ago quarter.

"We are incredibly excited about our new product pipeline," Oppenheimer said.
post #2 of 44
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Originally Posted by AppleInsider View Post

$39.8B in cash at the end of the Dec. quarter, an increase of 5 billion from the previous quarter.

That's over $40 million a day, folks.
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post #3 of 44
21% of their market cap in cash!? Can we please have a dividend?

TTM P/E after deducting cash is 17! Wow... we should see $275 before too long as the P/E ramps up to ~25 (without cash).
post #4 of 44
Wonder how much Microsoft is worth, they should buy them.
post #5 of 44
Quote:
Originally Posted by rbonner View Post

Wonder how much Microsoft is worth, they should buy them.

Why would Apple waste their cash?
post #6 of 44
Average cost of a Mac in Europe is $4,704 based on the above data.

Average cost of a Mac in the U.S. is $5,132 based on the above data.

Average cost of a Mac in Japan is $7,457 based on the above data.


WTF?
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post #7 of 44
As good as only Apple can do. A good all-around company, with good products. Nothing short of perfection. Keep it up!
post #8 of 44
Quote:
Originally Posted by aaarrrgggh View Post

21% of their market cap in cash!? Can we please have a dividend?

Please, no. I don't want the value decreased by a dividen. With the tech industry I don't think that is excessive. It's exceedingly health for 2010, but with start ups being bought for billions for having a potentially pofitable idea I don't think $40B is huge to weather any potential economic perfect storm that may arise in the future, especially when Apple is growing rapidly and needing to pay more and more vendors up front for choice deal on components or risk staling growth.


Quote:
Originally Posted by rbonner View Post

Wonder how much Microsoft is worth, they should buy them.

MS worth more. Apple couldn't buy MS even if they could afford them.
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post #9 of 44
Quote:
Originally Posted by rbonner
Wonder how much Microsoft is worth, they should buy them.

Why? so they can fire everybody and burn all their factories? that's one way to take out your competition.
Edit: that quote failed >.>
post #10 of 44
Quote:
Originally Posted by aaarrrgggh View Post

21% of their market cap in cash!? Can we please have a dividend?

I was watching CNBC a few minutes ago and they said something about a rumor that Apple might start repurchasing shares at a rate of $1 billion per quarter. Would you prefer a dividend to that?
post #11 of 44
Quote:
Originally Posted by quinney View Post

I was watching CNBC a few minutes ago and they said something about a rumor that Apple might start repurchasing shares at a rate of $1 billion per quarter. Would you prefer a dividend to that?

I think share repurchase makes more sense than a dividend. Unless Apple have a strategy for using the money, I would imagine some institutional investors wanting them to give some of their money back.
post #12 of 44
Quote:
Originally Posted by quinney View Post

I was watching CNBC a few minutes ago and they said something about a rumor that Apple might start repurchasing shares at a rate of $1 billion per quarter. Would you prefer a dividend to that?

Either way is fine by me. I have about 65% of my share count in options, so a re-purchase is best short-term. Long-term, I think closer to 10-15% of market cap is reasonable to keep as cash, plus a little as acquisitions require.

It's just hard to see what AAPL can purchase with the money right now. They do pretty well with their pile-o-cash, I just hate it that it obscures their multiplier.
post #13 of 44
Quote:
Originally Posted by MacTripper View Post

Average cost of a Mac in Europe is $4,704 based on the above data.

Average cost of a Mac in the U.S. is $5,132 based on the above data.

Average cost of a Mac in Japan is $7,457 based on the above data.


WTF?

Each region's total revenue numbers includes Mac unit sales. IOW - revenue from iPods and iPhone are included in each region's total revenue and not that each region's total revenue is accounted from just Mac sales alone.

They could have expressed it better in the article.
post #14 of 44
Quote:
Originally Posted by PaulMJohnson View Post

I think share repurchase makes more sense than a dividend. Unless Apple have a strategy for using the money, I would imagine some institutional investors wanting them to give some of their money back.

A share repurchase makes no sense, unless Apple thinks that the stock is DEEPLY undervalued. Even with all of the bullishness around Tablet, of which I am a believer, I can see no logical scenario where they think that that's the best use of their cash reserves. Apple, after all, isn't about financial mechanics.

That's also the same reason you won't see a dividend any time soon. Companies in heavy R&D mode, like Apple, need to keep their reserves at the ready for both capital investment and the surrounding M&A to fill in the gaps.

Plus, rainy days do come, and they hardly have a monopoly position to print money, despite their burgeoning market position.
post #15 of 44
Quote:
Originally Posted by hypermark View Post

A share repurchase makes no sense, unless Apple thinks that the stock is DEEPLY undervalued. Even with all of the bullishness around Tablet, of which I am a believer, I can see no logical scenario where they think that that's the best use of their cash reserves. Apple, after all, isn't about financial mechanics.

That's also the same reason you won't see a dividend any time soon. Companies in heavy R&D mode, like Apple, need to keep their reserves at the ready for both capital investment and the surrounding M&A to fill in the gaps.

Plus, rainy days do come, and they hardly have a monopoly position to print money, despite their burgeoning market position.

Paying a dividend or repurchasing shares to the extent that it depleted their cash reserves entirely would indeed be irresponsible. Returning value to shareholders in some manner at a cost much lower than the amount of cash it is adding to its reserve in each quarter is a different story. Say for example that they returned $1 billion and added $5 billion (as they did in the quarter just reported). Neither R&D, capital investment, M&A, or rainy day contingencies need be impacted for Apple to demonstrate to the market that they consider their company a good investment. To the contrary, not returning value to shareholders may persuade the general market to evaluate Apple more on the basis of its lack of interest in financial mechanics.
post #16 of 44
Quote:
Originally Posted by rbonner View Post

Wonder how much Microsoft is worth, they should buy them.

Nooo someone has to make the OS for the trolls
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post #17 of 44
Quote:
Originally Posted by aaarrrgggh View Post

21% of their market cap in cash!? Can we please have a dividend?

TTM P/E after deducting cash is 17! Wow... we should see $275 before too long as the P/E ramps up to ~25 (without cash).

That would be nice for sure, I am deep and long in AAPL. I once read that companies that do pay dividends don't ultimately do as well as those that don't ... what do the experts say on this? I would not want to see anything that hurt Apple happen.

What would it mean to share value if Apple start buying back shares?
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post #18 of 44
Quote:
Originally Posted by quinney View Post

Paying a dividend or repurchasing shares to the extent that it depleted their cash reserves entirely would indeed be irresponsible. Returning value to shareholders in some manner at a cost much lower than the amount of cash it is adding to its reserve in each quarter is a different story. Say for example that they returned $1 billion and added $5 billion (as they did in the quarter just reported). Neither R&D, capital investment, M&A, or rainy day contingencies need be impacted for Apple to demonstrate to the market that they consider their company a good investment. To the contrary, not returning value to shareholders may persuade the general market to evaluate Apple more on the basis of its lack of interest in financial mechanics.

To be clear, I am not specifically disagreeing with the goodness of a company looking out for its investors or voting with its precious reserves about the long-term view of the value of their stock, I am just saying that that's not how Apple has historically rolled, and given how much R&D and M&A spend I could see them making in the year ahead, it's not unreasonable that that would be their continued position.

One simple scenario is Apple deciding to go big into the media space, and buying a Comcast-sized entity ($45B market cap), as a way of gaining distribution and footprint to materially re-shape the media landscape.

Unlikely, sure? Out of the question, no, given where I think they are headed in coming year, relative to Tablet and Apple TV.
post #19 of 44
Quote:
Originally Posted by hypermark View Post

One simple scenario is Apple deciding to go big into the media space, and buying a Comcast-sized entity ($45B market cap), as a way of gaining distribution and footprint to materially re-shape the media landscape.

Unlikely, sure? Out of the question, no, given where I think they are headed in coming year, relative to Tablet and Apple TV.

Why would Apple want a middle man like Comcast? Their strategy, it seems to me, is to offer content from creators i.e. the networks, directly via iTunes as on demand programming. The only value Comcast would have would their stake in NBC but I suspect Apple might not want to get involved in owning a content provider.
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post #20 of 44
Quote:
Originally Posted by hypermark View Post

To be clear, I am not specifically disagreeing with the goodness of a company looking out for its investors or voting with its precious reserves about the long-term view of the value of their stock, I am just saying that that's not how Apple has historically rolled, and given how much R&D and M&A spend I could see them making in the year ahead, it's not unreasonable that that would be their continued position.

One simple scenario is Apple deciding to go big into the media space, and buying a Comcast-sized entity ($45B market cap), as a way of gaining distribution and footprint to materially re-shape the media landscape.

Unlikely, sure? Out of the question, no, given where I think they are headed in coming year, relative to Tablet and Apple TV.

I am not disagreeing with you, but when you say "how Apple historically rolled" it made me think of a really historical answer.

A: Probably their own, and most definitely NOT in the garage of Steve's parents house.
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post #21 of 44
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Originally Posted by digitalclips View Post

Why would Apple want a middle man like Comcast? Their strategy, it seems to me, is to offer content from creators i.e. the networks, directly via iTunes as on demand programming. The only value Comcast would have would their stake in NBC but I suspect Apple might not want to get involved in owning a content provider.

It's absolutely a fair push-back, and I am not sure whether I believe that's a 1+1=3 either, but the argument is that Apple needs a surplus of content to make their media ambitions a success, and there is a much great entanglement of TV and film libraries than with Music (i.e., Apple could have a harder time securing a big enough library to truly own TV anywhere).

Comcast has the leverage of existing deals in place, has a ton of media assets and a large subscriber base that could use some loving in terms of better technology, multi-device integration and the like.

Plus, based upon the recent acquisition of NBC Universal by them (Comcast), it's clear that they have a natural chokepoint with both media cos and subscribers, something that Apple groks relative to fortifying their own end to end story across device, desktop, living room, retail and beyond.

In other words, Apple is the one company that might see themselves as able to "fix" the broadcast/pay TV malaise in the same way I believe they are immediately going to pursue print media starting Wednesday.
post #22 of 44
Quote:
Originally Posted by justflybob View Post

I am not disagreeing with you, but when you say "how Apple historically rolled" it made me think of a really historical answer.

A: Probably their own, and most definitely NOT in the garage of Steve's parents house.

Took me a second to get that joke. ;-)
post #23 of 44
Quote:
Originally Posted by digitalclips View Post

That would be nice for sure, I am deep and long in AAPL. I once read that companies that do pay dividends don't ultimately do as well as those that don't ... what do the experts say on this? I would not want to see anything that hurt Apple happen.

What would it mean to share value if Apple start buying back shares?

The conventional wisdom is that companies in rapid growth mode should horde cash to fund their expansion, while companies in stable markets have no effective need for the cash and should return it to shareholders. So, saying that companies that pay dividends "do worse" looks at a different part of their life cycle, and isn't really a great comparison. It is rare to find companies that both pay a (meaningful) dividend and have significant share value appreciation over time.

If Apple has better return on investment than their average shareholder, then it makes sense to keep the cash for everyone.

Apple could easily pay a 2% yield without hurting their cash reserves. The advantage of doing this is that it makes it harder for the shorts to manipulate the stock... a share is more than a (virtual) piece of paper.
post #24 of 44
Quote:
Originally Posted by hypermark View Post

One simple scenario is Apple deciding to go big into the media space, and buying a Comcast-sized entity ($45B market cap), as a way of gaining distribution and footprint to materially re-shape the media landscape.

But, as a shareholder, would you prefer that to be a cash transaction, leveraged, or dilutional. Using that example (with an understanding that it is just that), I would think they have passed their prime if they wanted to absorb a company 20% their size. I would think that they are destine to repeat the mistakes of HP buying and destroying companies for no increase in shareholder value.
post #25 of 44
Quote:
Originally Posted by digitalclips View Post

Why would Apple want a middle man like Comcast? Their strategy, it seems to me, is to offer content from creators i.e. the networks, directly via iTunes as on demand programming. The only value Comcast would have would their stake in NBC but I suspect Apple might not want to get involved in owning a content provider.

Right. You should never consider buying your own customers only your vendors or your competitor's vendors.

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post #26 of 44
Quote:
Originally Posted by aaarrrgggh View Post

But, as a shareholder, would you prefer that to be a cash transaction, leveraged, or dilutional. Using that example (with an understanding that it is just that), I would think they have passed their prime if they wanted to absorb a company 20% their size. I would think that they are destine to repeat the mistakes of HP buying and destroying companies for no increase in shareholder value.

I have less of an opinion, as a long term shareholder, on the preferred method of Apple paying for the deal than whether it's the right deal/company/opportunity. After all, their balance sheet is golden and their financial acumen is conservatively sound.

Your latter point is core, though, inasmuch as the history of material M&A deals is SO poor in terms of it resulting in a 1+1=<2 outcome (BAD: HP-Compaq, AOL Time Warner, Nortel with anyone; GOOD: Cisco-Stratacom) that the ONLY reason to pursue it if you are Apple is if it's a game changer relative to core strategy, there is cultural fit and a clean integration plan.

I don't believe for a second that Apple would ever pursue a brain dead, bolt-on acquisition, such as Adobe, for example. That's just not their DNA, IMHO.
post #27 of 44
Great thread guys. One of the best I've read on AI.
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post #28 of 44
Quote:
Originally Posted by digitalclips View Post

Why would Apple want a middle man like Comcast? Their strategy, it seems to me, is to offer content from creators i.e. the networks, directly via iTunes as on demand programming. The only value Comcast would have would their stake in NBC but I suspect Apple might not want to get involved in owning a content provider.

Not middle man but last mile ownership. The middle men are the real long haul providers...

Not that I expect them to buy Comcast, NBC or not. If they want content they're better of trying to buy Time Warner. WTH they'd do that is beyond me. Maybe if all the media companies denied them content or something.

But there are many things that potentially costs $$$ that are unlikely for apple to pursue but still not out of the question. Say a fully automated factory in the US or something like Steve built for NeXT.
post #29 of 44
Quote:
Originally Posted by aaarrrgggh View Post

The conventional wisdom is that companies in rapid growth mode should horde cash to fund their expansion, while companies in stable markets have no effective need for the cash and should return it to shareholders. So, saying that companies that pay dividends "do worse" looks at a different part of their life cycle, and isn't really a great comparison. It is rare to find companies that both pay a (meaningful) dividend and have significant share value appreciation over time.

If Apple has better return on investment than their average shareholder, then it makes sense to keep the cash for everyone.

Apple could easily pay a 2% yield without hurting their cash reserves. The advantage of doing this is that it makes it harder for the shorts to manipulate the stock... a share is more than a (virtual) piece of paper.

Thank you for the insight. Can you shed light on the potential effect on stock holders if Apple start buying back their own stock. I assume it is good news for existing stock holders if they do.
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post #30 of 44
Quote:
Originally Posted by aaarrrgggh View Post

The conventional wisdom is that companies in rapid growth mode should horde cash to fund their expansion, while companies in stable markets have no effective need for the cash and should return it to shareholders.

I disagree when it comes to CE companies. This is coming from someone who lives off of dividends, yet I dont want them from my highly volatile tech companies.
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post #31 of 44
Issuing dividends gives the shareholder a short term gain. Hard to resist. Pressure builds as cash accumulates. Microsoft started paying dividends when they ran out of ideas.

Stock buy backs fit in the same class except that driving share price up helps management make money via options.

Cash is better used to fund growth. It would be better to buy another company, like Adobe. I bet that there is an Apple think tank at work on this.
post #32 of 44
Quote:
Originally Posted by westech View Post

Issuing dividends gives the shareholder a short term gain. Hard to resist. Pressure builds as cash accumulates. Microsoft started paying dividends when they ran out of ideas.

Exactly. The difference is that Apple hasn't run out of ideas. Compared to the diversity of Apple initiatives, Microsoft has been little more than a one-trick pony.

I'd go along with hypermark about an acquisition like Adobe - Shmadobe. A dead end - a blind alley.

The luxury of so much cash, solid growth and strong management performance actually insulates Apple from itself being an acquisition target. It also has the effect of reducing the sense of urgency and panic that can force bad business decisions. What freedom! For example, let the stars come into alignment for various types of content (publishing, broadcast, etc.), and Apple may have the resources to remake more of the content universe.

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post #33 of 44
Quote:
Originally Posted by quinney View Post

Paying a dividend or repurchasing shares to the extent that it depleted their cash reserves entirely would indeed be irresponsible. Returning value to shareholders in some manner at a cost much lower than the amount of cash it is adding to its reserve in each quarter is a different story. Say for example that they returned $1 billion and added $5 billion (as they did in the quarter just reported). Neither R&D, capital investment, M&A, or rainy day contingencies need be impacted for Apple to demonstrate to the market that they consider their company a good investment. To the contrary, not returning value to shareholders may persuade the general market to evaluate Apple more on the basis of its lack of interest in financial mechanics.

post #34 of 44
Quote:
Originally Posted by quinney View Post

Paying a dividend or repurchasing shares to the extent that it depleted their cash reserves entirely would indeed be irresponsible. Returning value to shareholders in some manner at a cost much lower than the amount of cash it is adding to its reserve in each quarter is a different story. Say for example that they returned $1 billion and added $5 billion (as they did in the quarter just reported). Neither R&D, capital investment, M&A, or rainy day contingencies need be impacted for Apple to demonstrate to the market that they consider their company a good investment. To the contrary, not returning value to shareholders may persuade the general market to evaluate Apple more on the basis of its lack of interest in financial mechanics.

Agreed. Paying a dividend that depleted their cash reserves entirely would not only be irresponsible, it would be bloody impossible. A very generous $1.00 dividend could be paid out of free cash flow, about a whole two weeks worth per year, at the present rate of accumulation (which continues to accelerate).
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post #35 of 44
Quote:
Originally Posted by hypermark View Post

A share repurchase makes no sense, unless Apple thinks that the stock is DEEPLY undervalued. Even with all of the bullishness around Tablet, of which I am a believer, I can see no logical scenario where they think that that's the best use of their cash reserves. Apple, after all, isn't about financial mechanics.

That's also the same reason you won't see a dividend any time soon. Companies in heavy R&D mode, like Apple, need to keep their reserves at the ready for both capital investment and the surrounding M&A to fill in the gaps.

Plus, rainy days do come, and they hardly have a monopoly position to print money, despite their burgeoning market position.

Agree somewhat with the first part, not at all with the second. Apple could not possibly spend any substantial fraction of $40 billion for R&D. It is simply inconceivable. Consider also that at the current rate of accumulation, that today's $40 billion will turn into $60 billion by this time next year. Is that enough yet? For what?

Funny, but every quarter we have this exact, same debate. The fans of Apple's hoarding keep talking about all the opportunity having so much cash gives Apple, but year after year, they just keep growing the pile larger and larger, and it becomes even more difficult to justify.

A rainy day fund? Any company that holds that much cash in reserve isn't worrying about a rainy day, they are planning for Armageddon. Tell me the again the pretty story about how this builds investor confidence. I like fairytales.
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post #36 of 44
Quote:
Originally Posted by Dr Millmoss View Post

Agree somewhat with the first part, not at all with the second. Apple could not possibly spend any substantial fraction of $40 billion for R&D. It is simply inconceivable. Consider also that at the current rate of accumulation, that today's $40 billion will turn into $60 billion by this time next year. Is that enough yet? For what?

Funny, but every quarter we have this exact, same debate. The fans of Apple's hoarding keep talking about all the opportunity having so much cash gives Apple, but year after year, they just keep growing the pile larger and larger, and it becomes even more difficult to justify.

A rainy day fund? Any company that holds that much cash in reserve isn't worrying about a rainy day, they are planning for Armageddon. Tell me the again the pretty story about how this builds investor confidence. I like fairytales.

Your pushback is fair, and Iike I said earlier, I am not specifically an advocate or a believer one way or another; save for I don't subscribe to binary axioms about what public companies should do, save for make great products, delight their customers, convert that delight to loyalty and repeated buying patterns, grow and diversify their revenue sources, and do so profitably and with high margins.

On those fronts, I am a very satisfied Apple investor, but to your point, love the products, love the company, but don't forget that it's an investment. To the extent that I perceive better places to put dollars, I assuredly would.

My Comcast example (cited earlier) is a case where big and recurring dollars would be involved for the buy, the integration and the going forward investment in evolving the infrastructure around same.

To be clear, I think that there is a <5% probability that Apple would ever pursue such a path, given all of the things that could go wrong, but I sleep just as well at night knowing that if they thought it was prudent to pull the trigger on something in that league of BHAG (big, hairy, audacious goals) that they could, as I'd sleep at night if they did a buyback or instituted a dividend.

Then again, my experience on buybacks is that, save for cases of extreme undervaluing of a stock, the primary driver is window dressing. With dividends, it's usually (but not always) a case of being out of ideas.

In the case of Apple, the ever-growing hoard, and lack of clear (relative) use of same is yet another valid reason for it to be a highly volatile stock. Side note: neither of my other two tech bellwethers - Google or Amazon are issuing dividends.
post #37 of 44
Quote:
Originally Posted by aaarrrgggh View Post

The conventional wisdom is that companies in rapid growth mode should horde cash to fund their expansion, while companies in stable markets have no effective need for the cash and should return it to shareholders....

I know you were commenting with a slightly different focus, but I think Apple is still in "rapid growth mode", and therefore I think they should horde cash.

I could probably write a giant series of blog posts on the topic to back up my views, but since we're in a little discussion, I'll be brief: Apple's moves lead me to believe that they are planning to set the rules for the future of content distribution (and when I say "content", I mean everything).

This is a Big Deal, and it'll require money. Apple is traditionally a company that makes small, very strategic acquisitions...personally I see them putting all the cogs into place, and when they're really ready to fire up the machine, they're going to make a very audacious play, and that's what the cash horde will be for.

I'm not quite sure what it could be yet...when the bandwidth technology increases enough buy a wireless carrier and then provide the whole solution? Anyway...maybe not that, but something.
post #38 of 44
Who is the one fascinated with the flat red in the bold font?
post #39 of 44
Quote:
Originally Posted by AppleInsider View Post

Mac sales in Italy, France, Switzerland and Spain all grew more than 40 percent. Australia up over 70 percent, China up almost 100 percent.

Swiss people has a strong affection for high quality gadgets. About 7% of population uses an iPhone! I am sure that a lot of iPhone users bought their first Mac recently (like I did) because the great experience with the iPhone. I'm positive that a tablet computer from apple would be a great success in Switzerland.
post #40 of 44
Quote:
Originally Posted by hypermark View Post

Your pushback is fair, and Iike I said earlier, I am not specifically an advocate or a believer one way or another; save for I don't subscribe to binary axioms about what public companies should do, save for make great products, delight their customers, convert that delight to loyalty and repeated buying patterns, grow and diversify their revenue sources, and do so profitably and with high margins.

On those fronts, I am a very satisfied Apple investor, but to your point, love the products, love the company, but don't forget that it's an investment. To the extent that I perceive better places to put dollars, I assuredly would.

My Comcast example (cited earlier) is a case where big and recurring dollars would be involved for the buy, the integration and the going forward investment in evolving the infrastructure around same.

To be clear, I think that there is a <5% probability that Apple would ever pursue such a path, given all of the things that could go wrong, but I sleep just as well at night knowing that if they thought it was prudent to pull the trigger on something in that league of BHAG (big, hairy, audacious goals) that they could, as I'd sleep at night if they did a buyback or instituted a dividend.

Then again, my experience on buybacks is that, save for cases of extreme undervaluing of a stock, the primary driver is window dressing. With dividends, it's usually (but not always) a case of being out of ideas.

In the case of Apple, the ever-growing hoard, and lack of clear (relative) use of same is yet another valid reason for it to be a highly volatile stock. Side note: neither of my other two tech bellwethers - Google or Amazon are issuing dividends.

I would not look to what other companies are doing or not doing, in terms of how any given company should treat their investors. Every case is an individual case.

Capital is for expansion, not hoarding. In Apple's case, I don't believe that they could responsibly use anywhere close to as much cash as they have accumulated for any imaginable amount of R&D, or for responsible acquisition that would expand their business. I probably should not have to point out that most large corporate acquisitions or mergers do not come out well, and for Apple to be able to spend any substantial fraction of even their current cash hoard, it would have to be mega-merger, which history suggests, has even a smaller chance of having a happy ending. I would hate to see Apple risk their carefully constructed approach to the consumer electronics market in the vain hope of achieving "synergy" through major acquisitions. The most likely result would be Agincourt.

Quote:
Originally Posted by suzerain View Post

I know you were commenting with a slightly different focus, but I think Apple is still in "rapid growth mode", and therefore I think they should horde cash.

I could probably write a giant series of blog posts on the topic to back up my views, but since we're in a little discussion, I'll be brief: Apple's moves lead me to believe that they are planning to set the rules for the future of content distribution (and when I say "content", I mean everything).

This is a Big Deal, and it'll require money. Apple is traditionally a company that makes small, very strategic acquisitions...personally I see them putting all the cogs into place, and when they're really ready to fire up the machine, they're going to make a very audacious play, and that's what the cash horde will be for.

I'm not quite sure what it could be yet...when the bandwidth technology increases enough buy a wireless carrier and then provide the whole solution? Anyway...maybe not that, but something.

These suggestions come up every quarter, like clockwork. Last time we were debating how Apple could spend $35 billion, the quarter before that, $30 billion. Next quarter no doubt, we'll be debating how they should spend $45 billion, and next year, we will be debating how they could spend $60 billion. At some point it becomes incumbent on those who suggest that this sort of money could be spent responsibly on growth opportunities to show how it could be done. Show us a merger that is likely to produce better than one plus one (which it must, in order to be worthwhile). Show how Apple giving back no more than two weeks of free cash flow to patient investors somehow puts this perfect opportunity in peril.

BTW, it's worth reminding people who aren't AAPL investors that those of us who are AAPL investors have seen zero return in two years. The grim reality is that while Apple has grown profits substantially and fattened its wallet immeasurably over that period, that long-term investors have seen exactly squat as a result.
Please don't be insane.
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Please don't be insane.
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