Morgan Stanley recommends Apple use cash for share buybacks, dividends - Page 2

Is that the best you have? Cmon MBA finance guy, explain where you got this expertise.

Aside from litle evidence dividend or share buy back improves stock price in general and the very real tax liabilities this is not self evident in stockholdeers interest. In fact, if stock value is important, best way to improve stock value is not sales or growth, but accumulating cash, ironic!

Particularly a company whose future plans they are not privy to so how the hell do the know how much cash is needed

Why do these people get paid? Zero imagination. Zero understanding.

Other than my bank tellers, I don't want to hear analytic crap from bankers.

I got my MBA from Stanford and I say you're a frickin idiot.

If they ever build a manufacturing plant in the US it will be a fully automated one that would use hardly any employees.

Dont put your hopes on Apple to make a dent in the high unemployment figures. It is just not Apples way, having been burned in the past with just such a plant.

+100! Great post nvidea!

I don't think (IMHO) that there is a more reviled profession on Earth, that has been more wrong than right consistently, and should no longer receive ANY news coverage regarding finance... than ANAL-Cysts!

Is there even 1... just one... that has even come close predicting anything relating to Apple over the last 10 years? They can't even point to, or even fathom, how Apple has out-managed every single other business on the planet with it's products, and it's financial foresight and acumen.

And they have the chutzpah to offer "advice"? Wow. Just WOW!

Wait til the end of 2012 when Apple has $138 billion then drop $90 billion on 51% of Google and kill Android. They would still have ~$50 billion in playing around money.

But that isn't going to happen.

There are several companies they should be looking into.

TiVo
Netflix
Hulu
Nvidia
AMD/Ati
Sprint

Apple's putting a dent into the high unemployment by growing from 5,000 in 1998 to nearly 47,000 in 2011.

Because then iPads would start at $1,399 and no one would buy them?

I guess Morgan Stanley needs money, again. Why don't they purchase a few patents and sue Apple?

If you don't like it, them sell your Apple shares and reinvest your money in a company that's more to your liking. Perhaps Dell or Microsoft...

so basically they have said that Apple should

1.buy another company
2.pay dividend
3.buyback shares!
4.use the money to prepurchase components

Which is all you can do with it (apart from increasing wages or building a new headquarters or more R&D which are partly mentioned in the report!!!!!)

Am I missing something here or MS just stated the obvious?



On a more serious note, I just bought an iPad and very happy about it!

I presume it looks like a big X

Apple is already the most valuable technology company on earth. That proves that Steve Jobs was right in saying that by making and selling great products, the stock takes care of itself. Why do they have to do more? I really hope Tim Cook never changes that.

Dividends and buybacks are gimmicks, needed when a company isn't growing. Why do they need gimmicks?

Why do people keep insisting that a company's cash belongs to the shareholders? That is incorrect legally, technically and really. Not a single penny belongs to the shareholders unless the SHA says otherwise. And I assure you the SHA does not say so.

Such experts eh?

I'd settle for a new MBP every three years, top of the line of course

I hate to say it but....
America is not a manufacturing country anymore and I don't think it is coming back.
We are the innovators and engineers of products now. Not the builders.
The sooner people realize this the sooner this country can move on to a new path for prosperity. Instead of wishing and waiting for manufacturing jobs to come back, we need to retrain ourselves to compete where we can compete with the world. I see and deal with overseas manufacturing on a daily basis. If it's not going to China, it's going to Vietnam. If not there, Indonesia, India, Philippines, Mexico, Columbia, etc, etc, etc. But the jobs that remain here are the innovative ones.

Just my two cents from what I'm seeing in the field.

No, that was Merrill Lynch... MS is still a pretty important player on the street

Maybe you should keep your mouth shut when it comes to understanding the financial industry and what might be in the best interest of shareholders... their points are quite valid

Yea... This news is kinda silly. Investors have said that Apple should do lots of things with it's stock. This isn't the first time some financial analysts have said that Apple should do this. Apple regularly ignores such advice.

"Sitting on cash" has done about as well as - or even beat, depending on your horizon - beat the market. Short of investing in an asset that has performed well, such as Apple (i.e., a repurchase), sitting on it is fine for now.

Stop being such an angry young man, and move along....

Bingo!

Nonsense. This is some third rate Wall Street 'research.'

To the extent that it's correlated, it's only because cash is cumulative earnings.

Who/what is 'SHA'?

This sounds like more grand internet finance wisdom being touted by anonymous geniuses....

You're exactly right. In 2011, manufacturing will constitute only about 12% of US GDP.

Ouch!

Question. Where does Apple actually have all this cash, and I assume there also paying for it to be insured by someone? Would be one hell of a news story if they lost a significant part of it from the bank holding it going bankrupt.


Why are they gimmicks? You invest in a company to make money. If your investing for the long term then you need dividends. That way you can keep re-investing and getting bigger rewards. Right now Apple is an awkward investment, if you invested 10 years ago then awesome you've made a killing on the share price going up. Until you sell though you've got nothing. You have owned part of what is either the highest or second highest valued company in the world and in the last 10 years you earned 0 from it. Apple looks set to continue to be great but you can never increase your shares in it unless you make the money elsewhere.

Buybacks are also exactly what they say. The actual value of the company will stay the same but everyones share price goes up as the number of shares go down. Profit is released to those choosing the leave.


Your right it doesn't. But if you own part of the company, something you invested money into then you expect to get a share of the profits. Is it right that the very lowest paid worker in the company earns more from Apple than a shareholder?



Best option I can see is Apple uses all the money to invest in a company that buys Apple shares. That way increasing the demand and value of Apple shares. That way Apple still has the value on their balance sheet and the share price increases.

No it isn't. They didn't go bankrupt and were not sold to BoA. BoA purchased Merrill Lynch, an investment back that was in trouble. I get it that you don't like banks, but perhaps you should check your facts before sounding off.

There is more than one fractional purchase program avail to people, so I don't agree with the 'barrier to entry' position.

Obviously MS does not fully understand the value of the component pre-buy's that Apple does.

They also seem to not understand the large IP wars that are underway. They will require a war chest.

I am a also a stock holder, and I invested in Apple to be Apple and to let them do what they think is right. So far I am very happy, if at any time I am not, I have the option to sell my shares.

If you want a dividend stock there are many others to choose from, but at this point one should understand Apple is not one of them, and a person should act accordingly. (Stay or Sell)

Wait, what??? You're not seriously suggesting that Apple should be paying their shareholders more than any of their employees?

Please buy back shares instead. I do not want to pay taxes on the dividends! Just give me capital appreciation!

That is nonsense. We still manufacture a very large percentage of what we consume. Not as high a percentage as in the past, but well over half. There's lot of manufacturing in the U.S. - and some signs that some companies are bringing some back.


If you have to ask where Apple has the cash, you need to go back to school. It's not sitting in a safe deposit box. The 'cash' is in 1s and 0s all over the world banking system. I'm sure that a great deal is in various banks (well insured, undoubtedly), but even more is probably in cash instruments (equivalent to money market accounts).


Yep. You need to go back to school - or stop commenting on financial matters which you don't understand. Long term investors need dividends? That's one of the most ludicrous things I've ever seen. A long term investor only cares about one thing - whether they have more money at some date in the future than present. It doesn't matter one whit whether that is in stock appreciation or dividends - except for the fact that they'll pay more taxes if it's in dividends than in stock appreciation.

Issuing dividends to allow people to buy more shares is a zero-sum game.


So you don't understand the difference between wages and investment? Wow.

In reality, Apple shareholders have done extremely well over the past decade. They have (collectively) made billions of dollars. The fact that the money is in share value rather than cash is irrelevant (other than, again, the fact that they're not taxed as heavily this way).


I take it back - I thought you made the most foolish financial statement in the world above - but you've topped it.

Maybe Apple should just invest in Merril Lynch or Morgan Stanley. Those have been really great investments over the past decade.


Better yet - get yourself a financial education. Corporate debt is often an incredible leverage tool to maximize profits and corporate value.

And Apple isn't getting 5% on their cash. The actual figure is somewhere around 1%, IIRC. Undoubtedly, their money is in very conservative investments and there is an additional cost for insurance which reduces the return.


No way Apple could borrow money for 2%.


Exactly. The most tax-effective way for Apple to return money to shareholders is in share price appreciation.

This is idiotic. AAPL already embeds the cash value. Paying a dividend results in huge tax liabilities to shareholders including institutions. Up to half the money is instantly vaporized.. this idiotic move could cost investors tens of billions.

The only reason AAPL should buy back shares at $375 is if we all believe AAPL is a guaranteed great investment at $375. I would have serious reservations about that. It's certainly no slam dunk. What is a slam dunk is liquid cash in today's environment. In retrospect, Apple could not have been more prudent or more optimal in its cash management. Apple very likely could lecture others on financial mgmt. They need no lecture.

Edit: Actually, AAPL should have brought more AAPL in the past. We all should have. Care to do it now?

I dont agree, most growth stocks dont pay dividends because they also dont make a lot of profit. People need to go back to fundamentals... ultimately, why do we own a stock that doesnt returns anything? Apple stock price sits on the future possibility of it returning some dividends or else its not worth anything at all.

At some point, Apple needs to start paying shareholders. It doesnt have to be when the company stops growing.

Not at all; plenty of assets are worth money even if they do not spit out cash. It has a value because it's money (literally, with regard to this cash). Even if Apple never pays a dividend, it can be a good investment.. it has value, as cash does (or perhaps better than that). It is an asset that can be converted to money. It need not liquidate just to prove that. Value is enough.

Actually, if Apple spits out money and the money goes to tax, the net change in shareholder welfare would be negative. They get $35 dividend afte taxes, but they lost $70 in share value, which they could have recouped by selling stock. It's like you prefer money in fifties instead of twenties, so you're willing to pay a 35% tax just to change bills. Not good.

There are many very healthy companies that engage in long-term share buyback programs as a way of returning value to shareholders. Its not always a parlor trick.

Absolutely.

If you do your research correctly, you will know what you are getting into when you invest in AAPL, Berkshire-Hathaway (BRK.A and BRK.B) or any other investment vehicle. AAPL has never paid a dividend and there has never been widespread belief that they would change that policy. AAPL shareholders should know that. If you were looking for a dividend payment, go buy some Windstream or AT&T. Or even junk bonds, those are yielding 8 percent right now.

When you buy shares of a company's stock, you are basically putting your approval stamp on the company's senior management team in running the business. If you have disagreement with the way Apple is using its cash hoard, you really shouldn't be an investor. Or more accurately, if you're not a fund manager or the top guy at Legg Mason, no one is going to listen to you. But keep filling in those proxy ballots.

Morgan Stanley should first learn how to run their own business -- their customer service is terrible!