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Dividend seen creating 'scarcity issue' for under-owned Apple stock - Page 3

post #81 of 138
Quote:
Originally Posted by Dr Millmoss View Post

This is just plain bizarre reasoning. Please think about what you are saying. If Apple ever had to fund operations out cash reserves, then this would mean the company is losing money. Would you seriously want to be an AAPL investor if they went from being one of the most profitable companies on the planet to losing money?

Yeah I love that argument. Could you imagine a scenario where Apple needs $50 billion more than it can get by selling products and services? Running $50 billion in the red? How many people here would still be investing in it at that point? And who is dumb enough to think that that market would be cool with that expenditure just because they have the cash to not go bankrupt? I love it, so stupid!
post #82 of 138
Quote:
Originally Posted by jragosta View Post

t as good as mine, but if you want to have it that way, look at Microsoft's growth rates before they started giving a dividend and after. They grew a rapid rates until they started the dividend and they've been flat (or down) since then.

So you're saying that the dividend caused the slow growth? Sure sounds like it!
post #83 of 138
Quote:
Originally Posted by mstone View Post

Apple doesn't seem well suited to the banking business. At least philosophically. Sure they have enough money to enter any business they choose, however, keep in mind that they have suggested one of the secrets to their current success can be attributed to keeping their product line lean. I don't remember how many products they said but it is astoundingly low for a fortune 100 company.

I think Apple entering the banking industry would flop just like Apple entering the social network industry did. They should concentrate on insanely great tech and leave banking to the bean counters.

Not to mention that getting into the banking business doesn't require $100B - the beauty of a bank is that customers GIVE you money to HOLD for them, you don't have to earn it by selling hardware first, and then loan it out. Some people just don't understand!
post #84 of 138
Quote:
Originally Posted by jragosta View Post

They've confused cause and effect. Companies that are doing well pay more in dividends. And companies that are doing well tend to do well the next year, as well. Essentially, all their 'evidence' shows is that companies give more dividends during good economic times and tend not to give dividends when there are clouds on the horizon. There's nothing there that indicates that the dividends cause (or even contribute to) growth.

Funny, confusing cause and effect is the same thing you did WRT MSFT in the post I just replied to.

Quote:
HOWEVER, my argument is (and has always been) that it's up to the Board and Management to decide when that time is right. No one on this forum or any of the idiot analysts who keep chiming in on the subject is in a position to dictate when Apple should do so. You buy AAPL if you're confident in the management's ability to make decisions like that. If you're not confident in their ability to make that decision, don't buy the stock.

No, that's not what your argument is or was. You have been saying they SHOULDN'T, not that they HAVEN'T. We all know that the board has not yet delivered a dividend. If you don't wish to participate in a discussion of whether they SHOULD or not, you should not be posting so much on this thread.
post #85 of 138
Quote:
Originally Posted by syracuse View Post

Their is a large investor base of Mutual Funds that would LOVE to own AAPL but CAN'T. If AAPL pays a dividend those Mutual Funds will buy AAPL.

Its so basic and straight forward, its almost laughable.

There were approximately 7,600 mutual funds in the US as of 2010, of which a little over 5,000 were equity funds (including hybrid funds that invest in stocks and bonds). The data are from the Investment Company Institute.

The ones that cannot, by their charter, invest in non-dividend-paying companies such as AAPL (e.g., 'income' funds or balanced funds) constitute perhaps no more than 1,500 or so. In other words, there are PLENTY that can still invest in the company despite its not paying dividends.

Second, just an starting to pay dividends will make AAPL attractive to such funds, it will make AAPL less attractive to others, such as pure 'growth' funds. Thus, the net effect predicted on AAPL from such portfolio rebalancing is totally speculative, at best.

Third, and perhaps most important, the stock has been doing superbly even without this group of MFs investing in Apple. Apple need not bother with actions that can only be viewed as responding to a tail's attempt to wag the dog.
post #86 of 138
Quote:
Originally Posted by Realistic View Post

The article indirectly mentions that with; ""In other words, Apple is substantially under-owned by major investment funds, particularly those focused on income, i.e., dividend," and I own shares in two such mutual funds.

Of course this is true.

But there thousands of others that hold it. Moreover, the analyst does not allow for the fact that starting to pay a dividend might make Apple less attractive to the ones that already hold the company because it does not pay dividends (i.e., growth funds).
post #87 of 138
Quote:
Originally Posted by anantksundaram View Post

There were approximately 7,600 mutual funds in the US as of 2010, of which a little over 5,000 were equity funds (including hybrid funds that invest in stocks and bonds). The data are from the Investment Company Institute.

The ones that cannot, by their charter, invest in non-dividend-paying companies such as AAPL (e.g., 'income' funds or balanced funds) constitute perhaps no more than 1,500 or so. In other words, there are PLENTY that can still invest in the company despite its not paying dividends.

Second, just an starting to pay dividends will make AAPL attractive to such funds, it will make AAPL less attractive to others, such as pure 'growth' funds. Thus, the net effect predicted on AAPL from such portfolio rebalancing is totally speculative, at best.

Third, and perhaps most important, the stock has been doing superbly even without this group of MFs investing in Apple. Apple need not bother with actions that can only be viewed as responding to a tail's attempt to wag the dog.

Sounds like you just took your opinion, slapped some made up numbers (unless you can tell me where that 1500 came from) and went from there as if you had proved something.

Secondly, the raw number is not important. What is important is the amount of money that is invested elsewhere as a result of the stupid policy of holding onto this much cash and doing zippy with it.
post #88 of 138
Quote:
Originally Posted by jragosta View Post

Stock buybacks are easy. Let's say that the market values the entire company at $500 B and there are 1 B shares. That means that each share is valued at $500.

Now, if Apple buys back 10% of its shares, there are only 900 M shares in circulation, but the market valuation doesn't change (the cash is replaced with something of equal value - the shares). So the share price would be about $555.

Your arithmetic does not seem to be correct.

Note that $50B in cash left the company, so the firm's market cap (assuming nothing else changes, there are no signaling effects, etc) is $500B $50B = $450B.

With the now 900M shares outstanding, wouldn't the new share price -- $450B/900M -- be the same as before, i.e., $500 (again, assuming nothing else changes)?
post #89 of 138
Quote:
Originally Posted by cameronj View Post

Sounds like you just took your opinion, slapped some made up numbers (unless you can tell me where that 1500 came from) and went from there as if you had proved something.

Perhaps you have some kind of comprehension deficiency: did you note that I gave you my source?

Quote:
Originally Posted by cameronj View Post

Secondly, the raw number is not important. What is important is the amount of money that is invested elsewhere as a result of the stupid policy of holding onto this much cash and doing zippy with it.

Talk about throwing in something that is totally speculative to justify an 'opinion.'
post #90 of 138
Quote:
Originally Posted by anantksundaram View Post

Perhaps you have some kind of comprehension deficiency: did you note that I gave you my source?

Actually you didn't. Your posted the source for the total number of funds, and then you said "perhaps 1500 require dividends"

What am I missing?

Usually when someone provides a source, there is a link involved.
post #91 of 138
Quote:
Originally Posted by backtomac View Post

I remember Steve talking about focus and how that meant saying NO to ideas. Some that are even good ideas but that by saying NO to some ideas that allowed their focus to be sharpest on the best ideas.

This is a ridiculous idea for a tech company like Apple. Its beyond their core competency and I would sell Apple stock immediately if they announced such a stupid plan. I think others would as well.

Kind of like how cell phones were beyond their core competency as of 2006?
post #92 of 138
Quote:
Originally Posted by SolipsismX View Post

I'm not suggesting that Apple follow in the footsteps of Bank of America, I'm suggesting they just continue doing what they've been doing for a decade with iTunes Store and now with their ability to pay for items with your iPhone at an Apple Store.. just with all other stores.

If they would no longer have to pay a percentage fee to MC and Visa per transaction they could pass some of that savings back to you in terms of free iTS merchandise which is just another win for them.

The only change they have to make is to add NFC (which is surely coming anyway) and have a way for direct deposit added to your account. No need to do home loans and other banking solutions.

I certainly agree.

And as you stated elsewhere, Apple is very close to being a bank already -- people just don't realize it, because (1) they don't understand what a modern bank really consists of and (2) they don't understand there's more to Apple than the devices they see in front of them.
post #93 of 138
Quote:
Originally Posted by cameronj View Post

Not to mention that getting into the banking business doesn't require $100B - the beauty of a bank is that customers GIVE you money to HOLD for them, you don't have to earn it by selling hardware first, and then loan it out. Some people just don't understand!

There's more to it than putting up a shingle that says "bank" and then having people deposit their savings. People don't just hand over their money to Fred's Bank.

True, $100B is not a necessary condition to start a bank. But, if you happen to have $100B that you'd like to do something with, loaning money to your customers (so they can buy your products) and loaning money to your suppliers (so they can make your products), isn't such a bad thing to do. And if you can cut out the middle man in making those loans (i.e. the banks), so much the better. And, if in creating this bank, you can increase the value of your entire ecosystem of products, even better still.
post #94 of 138
Quote:
Originally Posted by Blastdoor View Post

There's more to it than putting up a shingle that says "bank" and then having people deposit their savings. People don't just hand over their money to Fred's Bank.

True, $100B is not a necessary condition to start a bank. But, if you happen to have $100B that you'd like to do something with, loaning money to your customers (so they can buy your products) and loaning money to your suppliers (so they can make your products), isn't such a bad thing to do. And if you can cut out the middle man in making those loans (i.e. the banks), so much the better. And, if in creating this bank, you can increase the value of your entire ecosystem of products, even better still.

I think Apple should start a concrete company so they can stop paying these outside companies for the concrete for their stores. And a glass company. And why isn't Apple in the aluminum refining industry anyway? Why do they let these aluminum companies make all that cash?

Speaking of which why do they let Foxconn take the high margin manufacturing business out from under their noses?

People, listen: Apple is a high margin high tech consumer product designer. Doing that, and JUST that, has made them the most valuable public company in the world. They do NOT need to jump into a business (ISP, mobile operator, bank (gasp)) where margins are tiny, regulation is high, and profits are low.
post #95 of 138
Quote:
Originally Posted by cameronj View Post

Actually you didn't. Your posted the source for the total number of funds, and then you said "perhaps 1500 require dividends"

What am I missing?

Usually when someone provides a source, there is a link involved.

Ugh. Add laziness to your arrogance.

See: http://www.icifactbook.org/fb_data.html

Look at Table 5 for total number of equity funds in 2010 (4,585) and hybrid funds (478; these are firms that own a mix of stocks and bonds).

Of those 2,750 are 'capital appreciation funds' -- i.e., they invest in non-dividend-paying ('growth') stocks such as AAPL for their capital appreciation potential. (Table 6). There are 692 'total return' funds (total return = div yield + capital gains), and they are the ones that are most likely to require dividends. I counted all of them, plus all the hybrid funds as falling into that category, and that is ~1,200. So when I said "1,500" I was being extremely generous about the number of funds that may not buy AAPL because of their investing style limitations.
post #96 of 138
Quote:
Originally Posted by Blastdoor View Post

Kind of like how cell phones were beyond their core competency as of 2006?

Are you really going to argue that banking is their core competency?

If so please put forth some reasoning. I'd like to hear it.
post #97 of 138
Quote:
Originally Posted by anantksundaram View Post

Ugh. Add laziness to your arrogance.

See: http://www.icifactbook.org/fb_data.html

Look at Table 5 for total number of equity funds in 2010 (4,585) and hybrid funds (478; these are firms that own a mix of stocks and bonds).

Of those 2,750 are 'capital appreciation funds' -- i.e., they invest in non-dividend-paying ('growth') stocks such as AAPL for their capital appreciation potential. (Table 6). There are 692 'total return' funds (total return = div yield + capital gains), and they are the ones that are most likely to require dividends. I counted all of them, plus all the hybrid funds as falling into that category, and that is ~1,200. So when I said "1,500" I was being extremely generous about the number of funds that may not buy AAPL because of their investing style limitations.

Would Apple cease to be growth stock simply by paying out a dividend? Would growth funds be required to sell their stake in Apple in that case? Can a stock not have significant growth and pay a dividend? Maybe it hasn't happened much before, but Apple is all about going where no one has gone before.
post #98 of 138
Quote:
Originally Posted by CGJ View Post

Don't you mean 'back to the customers'? You know, the ones that actually pay THE company, not pay FOR the company.

And then there's the employees. They give their hearts and souls to bring us Apple products.
post #99 of 138
Quote:
Originally Posted by cameronj View Post

It's been a decade since Apple needed cash in the bank to finance operations. Money coming in is sufficient.

What Apple should do is a one-time special dividend using 50 billion. That will amount to about $5 per share, and if they do it soon, the tax hit on shareholders will be small. That will leave them 50B in the bank which grows by around 10 per quarter, and in another year they can do it again if the tax environment remains reasonable.

I'm not trying to argue with you but can you, or anyone, show me a clear, real life example of a dividend being paid that brought extra value to the company. I just don't see it. I think that the 100 billion is burning a hole in everyone's pocket .... except Apple. Nothing wrong with " keeping your powder dry" for future use, imho. Just sayin'
Apple, bigger than Google, ..... bigger than Microsoft,   The universe is unfolding as it should. Thanks, Apple.
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Apple, bigger than Google, ..... bigger than Microsoft,   The universe is unfolding as it should. Thanks, Apple.
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post #100 of 138
Quote:
Originally Posted by cameronj View Post

Not to mention that getting into the banking business doesn't require $100B - the beauty of a bank is that customers GIVE you money to HOLD for them, you don't have to earn it by selling hardware first, and then loan it out. Some people just don't understand!


There is ample enough evidence to suggest that Apple makes all of it's money by focussing on what it does best ... and not by trying to be everything to everybody ... so to suggest that they "branch out" into the financial sector ... where they have little or no expertise, goes against the very same kind of thinking that rescued Apple from the brink of bankruptcy. Forget the bank balance ... focus on what they do best. Follow Apple's lead, for cryin' out loud. This is not rocket science. \
Apple, bigger than Google, ..... bigger than Microsoft,   The universe is unfolding as it should. Thanks, Apple.
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Apple, bigger than Google, ..... bigger than Microsoft,   The universe is unfolding as it should. Thanks, Apple.
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post #101 of 138
These Wall Street bloodsuckers and their Dividend BS. They just want Apple to become "Another Company", riddled in debt, at the mercy of Wall Street and Banks.

I think the cash is a HUGE reason to pay up for the Stock. Yes, I said that right. If you believe in the Management, then you believe that whether it's 100 Billion, or 1 Trillion, they have money there to use if and/or when they ever need it, ensuring that your Company that you're Invested in, will ALWAYS be able to stay on top, or if they ever sneeze, climb quickly back to the top

If I'm going long on AAPL, then I'd rather know that they're secure, and have a "Floor", rather than paying out a ludicrous $50B a year or whatever, in Dividends. Remain a growth story!

Plus, again, AAPL have tons of "weapons" they can use to boost the Stock price, if ever they mature to a level where growth is slowing, and they need to prop, or boost the Stock up. A Dividend is one of them. Right now, Apple is flying, and agile, and rich, yet with its mind on future growth, not letting itself get spoiled by its riches.... let's keep it that way for awhile. No need for a Dividend, at least not yet.
post #102 of 138
Something you learn in behavioral economics is that when prices go up to an expensive level, people are slow to sell, and eager to buy. They believe that prices tend to increase, so why wouldn't you buy a lot? After all, the most expensive asset in the world has a quantifiable record of making people extremely rich.

When prices crash to a low level, people are terrified of buying, and wish to sell. After all, when prices decline, it is evident that people who own that thing tended to lose money.

So, for the average person, they lust after expensive assets and spurn cheap assets. This is like being wrong 100% of the time.

Buying AAPL today is a worse idea than it has ever been in history. That's simply a fact. I am not saying it will go down. I am not trying to tell people don't buy it. Just saying now is not a "good" time... it is a "bad" time... just offering that.

In 2009, it was a great time to buy stocks. Epically great. But did people emotionally want to do that? Worth thinking about.
post #103 of 138
Please Dont give back dividends. They should just continue to invest.

Most of the so called "CASH" aren't even inside US. And those inside US are continued to be used as operational cost and expenses. R&D, and buying up other IPs or companies like Chomp.

There are only two kind of people in this world.

Those who dont understand Apple and those who misunderstood Apple.

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There are only two kind of people in this world.

Those who dont understand Apple and those who misunderstood Apple.

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post #104 of 138
Quote:
Originally Posted by ksec View Post

Please Dont give back dividends. They should just continue to invest.

Most of the so called "CASH" aren't even inside US. And those inside US are continued to be used as operational cost and expenses. R&D, and buying up other IPs or companies like Chomp.

Apple can pay a dividend and not touch their enormous cash horde.

Apple is easily throwing off 2-4 billion of profits per quarter. That could pay a $2 per share quarterly dividend and still add 1-2 billion of profits to their coffers.

And with 100 billion of cash they have more than enough to fund any purchases they might want to make.
post #105 of 138
My tirades against the financial industry aside, what's wrong with this picture? The most sought-after, desirable and highest-market-cap stock is "under-owned"? Am I missing something?
post #106 of 138
Quote:
Originally Posted by backtomac View Post

Apple can pay a dividend and not touch their enormous cash horde.

Apple is easily throwing off 2-4 billion of profits per quarter. That could pay a $2 per share quarterly dividend and still add 1-2 billion of profits to their coffers.

And with 100 billion of cash they have more than enough to fund any purchases they might want to make.

This is what I don't understand. Why would a company with all that money need to issue dividends? There is no logical reason, in my mind. It doesn't need to raise more cash, and it doesn't need to push up the stock price or grow market or mindshare through the stock market.
post #107 of 138
10 years ago I learnt about the "food pyramid" of investing. At the bottom is savings accounts, term deposits, in the middle stocks and at the top high-risk stuff.

I think it still applies. As much as I want to go out and put tons of money in Apple stock, that upsets the investing food pyramid, and this would be one heck of an indigestion.

Still, for some people, getting in at $522 is not too shabby, Apple should be on track for $600 ~ though I would classify getting in now as mid-to-high risk, IMHO.

Quote:
Originally Posted by bwik View Post

Something you learn in behavioral economics is that when prices go up to an expensive level, people are slow to sell, and eager to buy. They believe that prices tend to increase, so why wouldn't you buy a lot? After all, the most expensive asset in the world has a quantifiable record of making people extremely rich.

When prices crash to a low level, people are terrified of buying, and wish to sell. After all, when prices decline, it is evident that people who own that thing tended to lose money.

So, for the average person, they lust after expensive assets and spurn cheap assets. This is like being wrong 100% of the time.

Buying AAPL today is a worse idea than it has ever been in history. That's simply a fact. I am not saying it will go down. I am not trying to tell people don't buy it. Just saying now is not a "good" time... it is a "bad" time... just offering that.

In 2009, it was a great time to buy stocks. Epically great. But did people emotionally want to do that? Worth thinking about.
post #108 of 138
Quote:
Originally Posted by herbapou View Post

I dont think there are preferred shares available yet. They will need to set them up if they go that way. I am not sure how income funds buying preferred shares will impact the common shares. Preferred shares prices dont move a lot, which is good for the yield since its stays the same, but I dont see how this could help rise the price of common shares.

The last entity to own Apple's preferred stock was Microsoft:
http://www.wikinvest.com/stock/Apple...referred_Stock
Scroll down to Dec 19, 2003.

Quote:
Preferred Stock

In August 1997, the Company and Microsoft Corporation (Microsoft) entered into patent cross license and technology agreements. In addition, Microsoft purchased 150,000 shares of Apple Series A nonvoting convertible preferred stock ("preferred stock") for $150 million. These shares were convertible by Microsoft after August 5, 2000, into shares of the Company's common stock at a conversion price of $8.25 per share. During 2000, 74,250 shares of preferred stock were converted to 9 million shares of the Company's common stock. During 2001, the remaining 75,750 preferred shares were converted into 9.2 million shares of the Company's common stock.
post #109 of 138
Quote:
Originally Posted by sunilraman View Post

This is what I don't understand. Why would a company with all that money need to issue dividends? .

To reward shareholders. They are owners of the business and should get a share of the profits. That's why people invest in businesses and own stocks.

I think that the reason that Apple is 'under owned' and undervalued by some metrics is two fold. One, some institutional investors can only hold dividend paying stocks. I don't think this is a large number but some certainly are. Secondly, I think some may be avoiding Apple because they have not shown that they shareholder friendly. Issuing a dividend or buying back stock, another reasonable use of their cash, would show a commitment by Apple to enhance shareholder value.
post #110 of 138
The mobile landscape is growing and becoming more competitive.

Apple should save the cash for R&D and innovation.
post #111 of 138
Quote:
Originally Posted by Technarchy View Post

The mobile landscape is growing and becoming more competitive.

Apple should save the cash for R&D and innovation.

If apple spends even 10% of that cash on an expense that flows to the income statement the stock will tank so hard you'll beg them to do a dividend instead. Hell, you'll beg them to burn the cash instead.
post #112 of 138
Quote:
Originally Posted by sunilraman View Post

This is what I don't understand. Why would a company with all that money need to issue dividends? There is no logical reason, in my mind. It doesn't need to raise more cash, and it doesn't need to push up the stock price or grow market or mindshare through the stock market.


When/If Apple issues a dividend, that DOES NOT raise cash for Apple.

The analyst makes the point and shows the statistics that Apple is under owned by the Fund industry and in particular Funds that invest in dividend paying stocks.

Do people even read the articles that they comment on? Or do they just make comments to be disagreeable?
post #113 of 138
Quote:
Originally Posted by Technarchy View Post

The mobile landscape is growing and becoming more competitive.

Apple should save the cash for R&D and innovation.

They have MORE than enough for this.

Apples server farm in North Carolina cost 1-2 billion IIRC.

The new 22 nm chip fab facility Intel is built to make Ivy Bridge chips cost 5 billion.

Apple bought Chomp for 50 million (already paid for in the time you took to read this)

Anobit reportedly cost 500 million.

Apple have 100 billion in cash and raised 13 billion in profits in the last quarter.
post #114 of 138
Quote:
Originally Posted by backtomac View Post

They have MORE than enough for this.

Apples server farm in North Carolina cost 1-2 billion IIRC.

The new 22 nm chip fab facility Intel is built to make Ivy Bridge chips cost 5 billion.

Apple bought Chomp for 50 million (already paid for in the time you took to read this)

Anobit reportedly cost 500 million.

Apple have 100 billion in cash and raised 13 billion in profits in the last quarter.

Yeah you never know when hard times might hit. Duhhhhh Think of it as a rainy day...er, week... er, year... er, decade... er century fund.
post #115 of 138
At the end of the day, one has to evaluate what one can earn on the money, and what one can buy with the money. If you can buy something that earns you more than what the money itself earns you, then you are better off buying that with your money.

In Apple's case, the stock trades at a Forward P/E of about 11. If you invert that, then E/P is 1/11. That means, Apple shares earn about $1 for every $11 of Price - so that works out to a yield of just over 9%.

The cash on the other hand has two types of earnings - one is the yield on the cash when it is invested into Long Term and Short Term securities. In current market conditions, this would be anywhere from 1-4%, so lets assume that Apple earns about 2.5% on their securities investments. The other type is invested in prepaying for components, or for investing in plants on behalf of partners, to lower their component costs. It is difficult to calculate a yield for this investment.

However, the beauty is that Apple is obviously not going to use its entire cash hoard to buy back its stock. So we can ignore the second type (component investment). If you just consider the first type, it is very obvious that it is much better for Apple to invest in its own shares than in Securities.

There is yet another advantage to buying back shares. It is perfectly legal for Apple entities overseas to buy Apple shares with the cash they own. And they don't have to pay tax on the cash - if it is used to buy back shares. The entire transaction can be conducted overseas - where some overseas investment bank buys Apple shares on behalf of the overseas entity, and the overseas entity buys these shares from the investment bank. This sort of transaction is the simplest way for Apple to avoid the proposed Obama tax on foreign earnings.
post #116 of 138
Outside of a share buy back, the next best option for Apple is to use some of this cash to prise open a market that otherwise would be impossible to play in.

For instance, take the US Cable business. Entrenched players like Comcast and content owners are unlikely to allow Apple to offer a subscription model or competitive ala carte pricing of channels.

While they will be forced to play with Apple for antitrust reasons, they are not obliged to offer Apple the terms it needs. In such a scenario, Apple could probably attempt a power play - pay the content owners what they want, while offering customers what it wants to offer.

Maybe they will lose about $20-$30 per month per subscriber doing this. Say $300 a year. If they can sign up 10 million US households into this model, that would be $3 billion a year.

Now would you rather Apple paid out 3 Billion in an inefficient dividend, or spent that $3 billion to prise open cable TV market? Apple is probably the ONLY company that can pull this off. Even if it costs $10B a year, Apple can sustain this for 2-3 years easily and prise open this market.

Over those 3 years, Apple can invest in original content creation, etc to fully crack open the market. And to ensure that this becomes profitable. Or without losing money - similar to everything else on iTunes.

Would it be wise to do this? Wresting control of the TV market could really be a huge thing if successful. But to be successful in this, Apple needs to perfect a few things. Create the best possible interface for the end user, invest in massive data centers to support all this media streaming, sort out all the issues with iAd so that they can monetize this offering with ads of their own to offset some of the losses (or offer even cheaper plans to the subscriber). And most importantly, have enough money in the bank so no one thinks Apple is pulling a bluff on them!

In some ways, Amazon is playing what should be Apple's script. Willing to lose money on devices, willing to offer all you can watch content deals at ridiculously low price per year, and investing in creating original content. What Amazon is doing with Kindle fire, Apple can do with the Apple TV - without losing money on the device, with a much higher monthly subscription price than Amazon is asking for, better content coverage, etc.
post #117 of 138
Quote:
Originally Posted by macarena View Post

Outside of a share buy back, the next best option for Apple is to use some of this cash to prise open a market that otherwise would be impossible to play in.

For instance, take the US Cable business. Entrenched players like Comcast and content owners are unlikely to allow Apple to offer a subscription model or competitive ala carte pricing of channels.

While they will be forced to play with Apple for antitrust reasons, they are not obliged to offer Apple the terms it needs. In such a scenario, Apple could probably attempt a power play - pay the content owners what they want, while offering customers what it wants to offer.

Maybe they will lose about $20-$30 per month per subscriber doing this. Say $300 a year. If they can sign up 10 million US households into this model, that would be $3 billion a year.

Now would you rather Apple paid out 3 Billion in an inefficient dividend, or spent that $3 billion to prise open cable TV market? Apple is probably the ONLY company that can pull this off. Even if it costs $10B a year, Apple can sustain this for 2-3 years easily and prise open this market.

Over those 3 years, Apple can invest in original content creation, etc to fully crack open the market. And to ensure that this becomes profitable. Or without losing money - similar to everything else on iTunes.

Would it be wise to do this? Wresting control of the TV market could really be a huge thing if successful. But to be successful in this, Apple needs to perfect a few things. Create the best possible interface for the end user, invest in massive data centers to support all this media streaming, sort out all the issues with iAd so that they can monetize this offering with ads of their own to offset some of the losses (or offer even cheaper plans to the subscriber). And most importantly, have enough money in the bank so no one thinks Apple is pulling a bluff on them!

In some ways, Amazon is playing what should be Apple's script. Willing to lose money on devices, willing to offer all you can watch content deals at ridiculously low price per year, and investing in creating original content. What Amazon is doing with Kindle fire, Apple can do with the Apple TV - without losing money on the device, with a much higher monthly subscription price than Amazon is asking for, better content coverage, etc.

Your share buyback idea is fine, but I'd pass on Apple getting involved in the cable business.

If Apple can combine the TV + stereo + WIFI, thus creating a killer home entertainment center with wireless speakers throughout the home, sign me up.

I hope Apple stays focused and doesn't take their cash hoard and go into money losing businesses. I'm just not a fan of Amazon's business model.
post #118 of 138
Quote:
Originally Posted by syracuse View Post

Your share buyback idea is fine, but I'd pass on Apple getting involved in the cable business.

If Apple can combine the TV + stereo + WIFI, thus creating a killer home entertainment center with wireless speakers throughout the home, sign me up.

I hope Apple stays focused and doesn't take their cash hoard and go into money losing businesses. I'm just not a fan of Amazon's business model.

Exactly - at $79.99 for Amazon Prime it is obviously a lousy business model. Even cheaper than NetFlix. But at $29.99 per month? If Apple offered all you can consume TV, including live news and sport, integrated with a Giant cloud DVR that records everything for you, so you don't have to. What about such a model?

Better get used to the idea bro - Apple is going to enter the TV business someday!
post #119 of 138
Quote:
Originally Posted by macarena View Post

Outside of a share buy back, the next best option for Apple is to use some of this cash to prise open a market that otherwise would be impossible to play in.

For instance, take the US Cable business. Entrenched players like Comcast and content owners are unlikely to allow Apple to offer a subscription model or competitive ala carte pricing of channels.

While they will be forced to play with Apple for antitrust reasons, they are not obliged to offer Apple the terms it needs. In such a scenario, Apple could probably attempt a power play - pay the content owners what they want, while offering customers what it wants to offer.

Maybe they will lose about $20-$30 per month per subscriber doing this. Say $300 a year. If they can sign up 10 million US households into this model, that would be $3 billion a year.

Now would you rather Apple paid out 3 Billion in an inefficient dividend, or spent that $3 billion to prise open cable TV market? Apple is probably the ONLY company that can pull this off. Even if it costs $10B a year, Apple can sustain this for 2-3 years easily and prise open this market.

Over those 3 years, Apple can invest in original content creation, etc to fully crack open the market. And to ensure that this becomes profitable. Or without losing money - similar to everything else on iTunes.

Would it be wise to do this? Wresting control of the TV market could really be a huge thing if successful. But to be successful in this, Apple needs to perfect a few things. Create the best possible interface for the end user, invest in massive data centers to support all this media streaming, sort out all the issues with iAd so that they can monetize this offering with ads of their own to offset some of the losses (or offer even cheaper plans to the subscriber). And most importantly, have enough money in the bank so no one thinks Apple is pulling a bluff on them!

In some ways, Amazon is playing what should be Apple's script. Willing to lose money on devices, willing to offer all you can watch content deals at ridiculously low price per year, and investing in creating original content. What Amazon is doing with Kindle fire, Apple can do with the Apple TV - without losing money on the device, with a much higher monthly subscription price than Amazon is asking for, better content coverage, etc.

This is why investors want a dividend. So Apple doesn't pull a Microft and invest billions of dollars in businesses that loose money for years. Does x-box and bing ring a bell?
post #120 of 138
Quote:
Originally Posted by backtomac View Post

This is why investors want a dividend. So Apple doesn't pull a Microft and invest billions of dollars in businesses that loose money for years. Does x-box and bing ring a bell?

Ding ding ding.

No wait, Apple should become a bank! Or a mobile network operator! Why make $2 revenue on a dollar input when you can make $1.03 on a dollar input?
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