Dividend seen creating 'scarcity issue' for under-owned Apple stock - Page 4

They may enter the TV business, but Apple is too smart to enter such a money losing enterprise as you're suggesting. The TV business doesn't mean the cable or content business. Not a lot of money to be made there, and LOTS of costs. Completely opposite Apple's current (and you would probably agree, successful) business model. Not going to happen bro.

As a consumer great.

But more importantly as an AAPL INVESTOR I'd hate it. Apple would loose money by offering all that content for $30/month.

Apple really doesn't go after business by being cheaper then the next guy. They offer Premium products and services at a fair/premium price.

You guys are all missing the point. Cable costs so high because you are forced to pay for a bouquet of channels, most of which you never watch. Even on channels you watch, you hardly ever watch more than a couple of shows. Most sports content is sold as premium addons that you pay extra for - a season pass.

You pay for the amortized cost of a set top box that actually is quite expensive to make (every box having its own hard disk, and multiple tuners). You pay extra just for the privilege of being able to record.

There are lots of inefficiencies in cable. At $30 a month for specific content that you want to consume, subsidized by targeted iAds that offer more value to the advertiser and the viewer, it is not as outrageous as you think. The real cost of the content you watch would not be much more
than $30 a month.

And Apple running a giant DVR in the cloud on behalf of everyone is a lot cheaper and effective than you running your own DVR. Because everything is recorded. Not just what you decided to record in advance.

The only issue with this model is that existing operators would not play nice and allow Apple to offer such a subscription model. That is the reason why Apple will have to prise open this market as a power play, and lose money for some time. Not because they will always bleed money on this.

Once this model is established, Apple will actually be running this similar to the way it runs iTunes and iCloud. Breakeven, and possibly make a small profit, but this makes the Apple ecosystem so much more attractive.

I see some severe technical hurdles as well as some logistical ones.

For starters, putting content in the cloud will be slow. Even Siri takes too long to send and receive and that's simple data, imagine if you had to queue millions of 720p videos at once. Even the home LAN DVR system from DirectTV is apparently slow.

Then there is the way content is sent. If you are using the cable co's pipes to get internet and TV but then a huge portion of their customer base decides to opt out of cable TV and start using the internet data more heavily their costs go up while their revenue goes down. They pay huge fees to get access to those stations. They will have no choice but to rise their internet charges.

Of course there are hurdles - not just technical and logistical - but a whole lot more. That is the reason why this has not been done yet, and that is the reason it will be difficult even for Apple to do this. However, if anyone can pull it off, it will be Apple.

Talking of bandwidth - if Netflix can stream DVDs to you, by charging just $8 per month, then why can't Apple do this charging $30? If Amazon can do it, why can't Apple? Of course there is a function of scale - but Apple also has more resources that it can throw at the problem. Like Google, Apple can easily buy up unlit fibre across the country and use it for streaming media. At the end of the day, bandwidth is a function of price - whether the price is paid by Apple by buying unlit fibre - or by the customers with a higher monthly bill.

Secondly, I expect that the bandwidth issue will also be addressed by technology. If Apple can come out with an A5X based Apple TV, that has serious horse power for decoding media, they might be able to use very high compression to send media, without impacting the picture quality. Apple's biggest advantage is that they don't have to target lowest common denominator hardware. They can easily release such a service that will work only with the latest Apple TV and reasonably expect people to upgrade to the latest one (at $100, it is a no-brainer).

Thirdly, even if there is an increase in the monthly internet bill, I think customers would happily pay that extra, if it means that their TV watching experience is significantly improved. No one can deny that the Cable TV business is ripe for Apple's magic touch.

While there are several hurdles - there are also immense positives with this approach. Just imagine, there are over a 100 TV channels in the US that sell advertising and charge top dollar for prime time advertising. Quite obviously, a person can at best watch one or two of these channels at prime time. So the money spent across these varied channels is for the most part wasted. Instead if you display targeted ads, whenever a person is seeing the video, you can charge significantly more than prime time charges on a per user basis - irrespective of whether the content is watched in the morning, afternoon or even past midnight. I would expect that Apple might be in a position to offer such a service at rates lower than $30 per month, if they took full advantage of targeted advertising.

Don't get me wrong - this is not an easy nut to crack. But I have confidence in Apple's ability to crack this nut.

Sounds like you have given this a lot of thought, so I won't argue. If its a good idea I'm sure Apple is all over it.

I just got involved on this board since Apple's cash balance has hit $100bn and believe a stock buyback/annual dividend would increase the stock price further.

Unfortunately this discussion is way off topic for this thread - and maybe that is the reason why there are just a couple of people interested in discussing this topic. But seriously, I think this is the sort of thing Steve Jobs had in mind when he said he figured out TV. A lot of people think that the reference was to a Siri based remote control for the TV! But I think that is laughable, to say the least. Apple just will not be satisfied with changing things at the level of the remote control only - when there is so much to be fixed. And most definitely, Steve would not have referred to a better remote control as "having cracked TV"! His standards are way too high for that!

I wonder if the moderators can cut out this discussion and create a separate thread - so that more people can discuss this! I don't know if it is just me, but I genuinely believe this is something Apple wants to do, and can do! This is the reason why Apple TV is still a hobby - for a company that believes in focus.

I don't think it's off topic, Apple in the TV space is relevant to almost all of Apple's endeavours, and definitely with regards to future growth.

You're pretty much correct. Like with most other things (my pet area is console gaming), it's not hard to imagine Apple coming in and decimating everyone.

The fact that I have to watch ads on cable TV makes it a waste of my time and money. If I want ads, if I just want to "surf [the TV channels]", that's what digital free-to-air is for.

If I want anything else, then there's on-demand ad-free streaming, and iTunes Store.

So I think many people agree with you on the track you're taking. But as always, it's the traditional, incumbent players that are sitting on their butts as consumers storm their gates.

The only reason Apple TV is still a hobby is because of one of Steve's mantras. "Focus is about saying No."

I don't think it's an issue of core competency, it's an issue of whether they can just smoke everyone in one product launch.


Thank you. I've been saying this for almost a year now [as nvidia2008].


Again, it's about focus. Apple can now do anything they want. It's just whether they want to do it. Not doing everything themselves keeps them focused. They would only start a concrete company if they could make the best, most delightful concrete in the world that everyone would want to buy. Focus is about saying "No".


Thank you. At least someone agrees to what I've been saying for quite a while now.


OK, fair enough on the raising cash issue.

But, there's several things wrong with the analysts' comments (or, just right, if you're trying to push the stock price higher).

Clearly Wall Street wants stocks to go up, they want AAPL to go up ever more, and they want Apple to issue dividends so AAPL goes up. For Apple, why would they care about the stock price at the moment? If the company doesn't have any legal or ethical obligation to issue dividends, for where Apple is at, why would it need to? To me, it doesn't make any sense. They might do it, but they would have to have a good(almost charitable) reason.


Now this is a compelling argument, rather than dividends, since it offers real bang for the buck. Unless someone can quantify how giving dividends financially benefits Apple, it's money down the drain. I know if you own AAPL stock you'd want dividends, but hey, you're enjoying a good ride on the stock price already. I'd rather Apple use that cash to continue making superb products and services at affordable prices for everyone.

The only thing is I know Apple would be somewhat uncomfortable investing too much in its own stock, since that's not "real equity". As we know, if Apple stock plummeted tomorrow, and much of that $100b is in AAPL stock, that won't be good for Apple.

Obviously Wall Street just wants more of the Apple pie, and they will stop at virtually nothing to get it.

As for yields, even a regular Joe investing in AUD cash savings can get amost 6%. So given the global diversification of Apple's investments, 5% yield is a minimum amount. And like they say, it's mostly short-term securities, which runs at very much reduced risk... Compared to Apple investing in AAPL and other stocks which would significantly increase their risk.

Isn't it amazing that (A) analysts are trying to tell what the most successful company in the world should do, and (B) that analysts are saying Apple has too much money, and it's not investing it properly. To paraphrase Steve, "I know these analysts, and some of these guys haven't done anything in 7 years...!" I empathise with their work and their efforts, but I question whether the financial industry actually creates any ~real~ value in our lives.

I think Apple knows what it is doing.

In general yes, but that's not how Apple is structured. There is no legal and ethical obligation to reward shareholders. There's things they have to do in light of the shareholders, but the Apple Board and executive management call most of the shots.

People invest in businesses to get a return and have a say in how the business is run ~ but mostly in the context of private investors. A publicly-listed company, AFAIK, is quite different.

Yes, people own stocks to get a share of the profits. If they company issues dividends, then they get it as an income stream. If the company does not, then their best hope is for the stock price to go up. But most publicly-listed companies, from my layman's understanding, does not have to issue dividends, and does not need to make the stock price go up. In general, of course they need to run the company well, but usually that side of governance is more the responsibility of the Board and executive management. Yes, shareholder activism is good, but in AAPL's case where most of it is instutional investors, I question their motives.

Edit: Additionally, I've just read that in the US, shareholders cannot move for dividends to be issued. It's solely at the discretion of the Board.

I'd like to think that companies exist to reward a much greater ecosystem, which they may or may not, depending on one's views eg. "trickle down". Perhaps down the line, it could be made that all companies ~must~ return a certain level of profits to the public shareholders. This could make the stock market less volatile, though some would say this is communism.

I don't like ads myself - but that is partly because of the poor quality of ads, and the fact that they are not well targeted. Considering how much money it costs to run some these ads, I am surprised companies don't spend a bit more time and money to make the ad enjoyable.

My feeling is that once you have targeted ads, a lot of these problems will go away - because at least theoretically, there will be some benefit in seeing these ads (if they are properly targeted).

IMHO, Apple could become the ideal advertising company - because they care a lot about creativity, innovation,delighting the customer and other such things. Customers would be more comfortable with Apple targeting ads relevant to them, than someone like Google. Thirdly, Apple is in the ads game to create a media ecosystem and sell more devices. They make their money on devices. So chances are that Apple would not be too aggressive in pushing ads, and would just make enough money on the ads to subsidize content. Whereas, someone like Google makes money only on ads - so they have to keep pushing ads aggressively, to keep their quarterly earnings numbers healthy.

Although I suspect Apple will happily sell ads for zero money just to push a knife into Google!

I don't know the legal obligations but I would argue that there is definitely an ethical obligation to reward shareholders. If not, why would any rational person invest in stocks? I like Apple computers but I'm invested in the stock because I think it can make me money. Because its a profitable company.

Apple knew well the implications of becoming a publicly listed company when it did so. You invite the public to be owners of the business. To pretend otherwise would be dishonest. And at the time it did go public I'm sure the money it raised was vital to its growth and development. Oh, and the founders made out pretty well too.

I think some people fail to recognize how powerful even a relatively small dividend from Apple would impact their ROI. If Apple issued a very modest $1/ per quater dividend per share at todays closing price that would be less than a 1% dividend yield. But if you bought shares at $200 then it is about 2%, which isn't too bad. If you're a long term Apple investor and bought at say $80 a share now you've got a 5% dividend yield. In which case you've got a great growth and income stock all in one. And if you still believe Apple is a great growth story then you can re-invest the dividends.

And as I've tried to point out, Apple could easily issue a $2/share quarterly dividend(so double those figures above)...without touching the large war chest. In fact in would likely continue to grow, albeit a little slower.

And the part YOU keep missing is that there are several ways to reward shareholders. Are you going to argue that Apple has not rewarded shareholders for the past decade because it doesn't give out dividends?

No. And I'm not opposed to a buy back which you have said that you prefer to dividends.

But this is why you invest in a growth stock like Apple. It has reached the pinnacle. It is fast growing company that can easily afford to pay dividends. Its reached a point where it can be a growth and income stock. If it doesn't pay dividends (or buy back shares) now when should it? They have 100 billion in cash and no debt. How much 'better' does Apple's balance sheet have to get before they can 'afford' to pay a dividend or buy back shares?

Generally, companies become 'growth and income' stocks after they are no longer able to grow fast enough to be called a 'growth' stock. That is, it's NOT good news.

Here's a more detailed analysis of share buybacks:
http://seekingalpha.com/article/3944...g?source=yahoo

Apple aren't being valued as a growth stock now anyway. Current PE is 15 while earnings growth is 50%.

There's no need to fear a dividend dropping Apple's share price. It looks like its already priced in.

This is a superb idea.


I'm curious, is there any documentation, legal claims or concepts of corporate social responsibility of ethical obligations to reward shareholders in dividends, stocks or otherwise?

A person invests in stocks for a variety of reasons, rational and non-rational. Of course everybody wants the price to go up, but I'm not sure about the expectations of dividends, because that is never guaranteed and in the US is solely at the discretion of the Board for publicly-listed companies.

If people have been going into stocks with a large expectation of dividends, particularly tech/growth stocks (in essence, not necessary in technicals) ... I'm afraid they may have made a mistake.

I always thought "blue-chip" companies are the ones you own stocks in for dividends, not for big increases in price, but even this idea is outdated and incorrect, as I have been informed.

Personally, I think it would be great if public companies had a legal obligation to issue dividends, but I am really not quite sure if they are ethically obliged to do so. Simply because growing up I have always known my Dad to be happy about dividends when he got the cheques in the mail (even to today), but those were always stocks which he knew were giving dividends, either by nature that they were giving dividends for some while, or by rumour (in which case he knew the risks and the dodgy nature of said rumours) that a company would begin to give good dividends. There were definitely stocks which he got into which he looked at for profit purely from a stock price perspective, in which case he didn't expect much dividends.

So perhaps my childhood experience was different from what's ethically expected of companies, or that now corporate behaviour needs to be adjusted accordingly.

A dividend would likely only raise the stock price, since more people would want to buy it, as it has not only potential for a lot of growth ($600, $700) but also is giving dividends as well.

My question is unless there is a ethical and legal obligation (which would be nice), from Apple's perspective I don't see a reason for dividends. Even a buyback is not a compelling argument in light of Apple's own interests (which can be said to include legal and ethical obligations to shareholders).

Again, perhaps it's a layperson's view, but a company is most succesful in its history and the history if its industries, is making tons of money, has tons of money that in itself is easily guaranteed to make tons of money back, and is one of the most sought after and largest stocks in the world. Why would this company now want to give away its money in a way that is not normally deemed as charity?