Apple drops Earnings Per Share guidance because outstanding shares are in flux - Page 2

 

I heard Tim Cook wears a hair piece. He purchased his from the same place Donald Trump did.

 

Call me crazy, but I wish that Tim Cook was more like Donald Trump sometimes.

 

I want to see a CEO who has a big mouth and doesn't really care about what other people think. It's not like Wall Street treats Apple fairly anyway, IMO. I'd like to see a CEO of Apple be more forceful and not be worried about insulting those who deserve to be insulted. Steve Jobs wasn't worried about insulting anybody. Tim Cook seems like a nice guy, but maybe he's too nice. I'm just speculating here, I don't know the guy and I've never met him.

I believe interest rates and inflation have bottomed and are heading up, so borrowing long term has some appeal (you know, pay it back with less valuable dollars). Keeping the cash, rather than using it for share
repurchase, communicates that they might have a plan to do something constructive with it. I feel that using
cash on hand for share repurchases is the action that indicates Apple's growth is over.

I have always appreciated Apple's debt free status, but my dislike for the short-side manipulators makes me want Apple to take extreme measures.

Call me crazy, but very time I hear Donald Trump, I cringe. It screams "loudmouthed fool" in my head.

I think you may be -- as others have pointed out -- ignoring the fact that, short of stupid, wasteful acquisitions (which, thank God, Apple has never done) there's nothing remotely that anyone expects Apple to be spending $137B on. Not even counting the rate at which cash continues to pile in every quarter.

 

What makes you feel that it would signal "Apple's growth is over"? If anything, giving a chunk of it back to the shareholders is probably the best thing Apple could do. It tells the market -- as others have pointed out -- that Apple thinks its shares are significantly undervalued and hence a good investment, and is willing to put its money where its 'think' is.

 

When he was having that feud with Rosie O'Donnell, I was definitely rooting for Trump, because even though I am not a huge fan of his, I really can't stand Rosie O'Donnell. And also, I'm from New York, so I tend to like people with big mouths, plus I have a big mouth too, and I'm not afraid to admit it.

I agree. Just the threat of Apple buying billions of dollars of their own stock would be enough to make gaming AAPL much more risky, even if they never did it. The traders would probably move on to work their magic on other companies, and AAPL's volatility would return to something more reasonable.

I wonder if borrowing offshore to repurchase shares at home, and then repaying the loans with offshore cash, would be considered money laundering.

Well, you and I can agree on Rosie O'Donnell, for sure.

I agree that nobody expects Apple to spend that $137B, but they certainly have been holding on to it very tightly and, every time the cash pile comes up in the earnings calls, they give reasons for wanting to hang on to it. Just because I or others cannot conceive of what they are planning, doesn't mean they aren't planning something. They have surprised the world on several occasions. The money coming in every quarter could be used to repay debt, while keeping the cash pile at a steady level, rather than increasing to ludicrous levels.

WIth regard to returning cash to shareholders, I expect that the dividend will gradually be increased (maybe annually). Companies routinely manage dividends, share repurchases, debt service, and capital spending, while keeping cash reserves in equilibrium. Thats what the financial officers get paid for.

If Apple thinks its shares are a good investment, that would be true whether they invested cash on hand or borrowed cash. Of the two options, spending cash on hand seems to me the greater admission of lack of expectation of growth.

 

Let's try that again. Quote is a nice feature. ;-)

 

Amen - hit it on the nose.

Maybe it was a different stelligent who said:
Just how the heck else could that be interpreted?

http://wiki.fool.com/Does_a_Stock_Buyback_Affect_the_Price%3F
"A stock buyback usually pushes up the price,"

http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/stock-dividends-repurchases.asp
"A stock repurchase typically has the effect of increasing the price of a stock."

http://www.theoptionsguide.com/stock-repurchase.aspx
"the act of reducing the number of available shares in the market should cause the stock price to rise as basic law of supply and demand would suggest."

And, for academic research:
http://www.nasdaqomx.com/digitalAssets/76/76006_thepriceimpactofopenmarketsharerepurchases.pdf
Not to mention, of course, simple supply and demand. For any given level of demand, when the supply is lower, the price goes up.

Now, there are exceptions, but most of the exceptions are companies that are failing. Dell, for example, did not increase in share price when they repurchased shares (although there is some evidence that the rate of decline did slow). But for a healthy company, buybacks will almost always increase share price.

They would have to borrow money or pay huge taxes first. Only the US cash can be used towards buyback/ dividends.

It did.

Why would the share price increase due to the buyback? The company is using is money to invest in itself. The fact that the money was there with the company is already factored in the pre-buyback price. View it like when you own a share you own a % of the company + % of cash. After the buyback you own greater % of the company but the cash is gone/reduced (Net gain/loss = 0). The sentiment of the market however may change due to the announcement. 

 

So why the buyback? Because if apple believes that it is undervalued, it is a good opportunity to invest just like we invest in a company if we feel a company is undervalued.

Maybe, but when Jobs was still at Apple and before the IPhone, Jobs initiated an Apple stock buy back. He said he thought the stock was a good investment.

The difference between Jobs and Trump is Jobs actually had a brain. Further, Jobs was never spouting stuff just to spout stuff.

No, they won't. Take a moment to read the thread before jumping to post.

That's vastly oversimplified - particularly when considering a company which is growing and whose cash reserves are growing.

History shows that stock repurchases generally increase the share price (see my post earlier for links).

Hmm, Apple has the best quarter in its history yet Wall Street has tanked its stock. The SEC needs to get on this ASAP. It makes no effing conceptual sense to me.
I see fraud. I see millions lost by investors who bought at the top stock price then pulled out the shot gun in the shed along with a hand written note saying to the family "I'M SORRY".

 

I should think anyone buying Apple would be intelligent enough not to commit the ultimate in human stupidity.

 

I suppose that statement is more Apple-drum-beating than reflective of my true point for it, but…

There is no such thing as an efficient market, and the current stock price does not take any of that money into account.  In fact, at $450/share, it does not even take all the company earnings into account - the current stock price is discounting a huge drop in margins.

The share price would increase since:

1. Fewer shares => greater EPS
2. The pool of shares owned by long term holders would be a bigger percentage of the total,
since buying on the open market would mostly come from short term traders.
3. The added buying pressure would move the stock upwards, since very few of the total shares
are bought and sold each day.

If I was Tim, I would bring back the $94 billion from overseas, borrow $100 billion, and buy back 40% of the shares on the fly, if I could do it quietly without making the price jump.

Wall Street made a lot of investors look like suckers.
They jacked up Apple's stock price to lead the suckers to the water and they drunk it. Next,after getting all that money, they tanked the stock to reap millions. They say it's because Apple didn't meet "their numbers" so the investors loose their money . Wall Street pimps make millions and Apple reports the best quarter in their history. It was a set up.
And all this talk about Apple's inability to grow was a false flag.
Think about it. This was the BEST QUARTER in Apple's history. I'm writing to the SEC about this sh**!

 

It's not a secret how much cash Apple has in the US. $94 billion is held overseas (as noted the conf call), leaving Apple around $40 billion here in the US. So there's not really a big push for Apple to repatriate its cash because it doesn't even have plans to spend the $40 billion here yet. 

 

It announced plans to spend $10 billion on buybacks over the next three years, and will spend $1 billion on retail this year (much of which will be outside the US) and another $9 billion in CapEx on equipment etc (again, much of which will be outside the US). It will also spend $10 billion in quarterly dividend payments this year. But despite all that spending, Apple is bringing in new cash much faster than it is spending. 

 

$23.4 billion flowed in, $16 billion of which was thrown on TOP of the existing $121 billion cash pile. 

 

This makes the talk of Apple being out of options and falling behind the piddling Google and failing PC makers and the collapsing Microsoft and Nokia and RIM absolutely, mind-blowingly absurd. 

Sorry to say it, but this is an extremely lame article. Implying that they are going to buy enough shares to materially impact the EPS is misleading. I mean it would take 9.4 million shares to change the share count, and by extension EPS, by even 1%. Of course that assumes 0 dilution which we know will not be the case. Plus, knowing revenue and margin projections it is easy to come up with projected EPS so why not provide a number? Then again, given this will be the first quarter where EPS declines YoY maybe, and this is concerning, Apple didnt want to come out and say it.

I'm not a big fan of buybacks, I would much prefer a larger dividend increase, but it would be nice if the buybacks at least reduced the amount of the shares outstanding. Since buybacks favor sellers and not investors as opposed to dividends I would much rather see a 25% increase to the current dividend to get it into the 3% range

Buybacks and dividends are only associated with value companies because historically that has been the case, it certainly isnt an absolute and Apple is fairly unique in terms of the combination of size, profitability and future prospects. I mean they don't need the money, and as long as the ratio they are paying out stays reasonable it shouldnt interfere with being a growth company. Of course the 7% revenue growth next quarter is going to interfere with being known as a growth company.

I just want to say that I think Tim Cook is doing a great job. He has been doing a great job for a heckuva long time, all the while never asking for nor receiving any recognition under the long shadow of Jobs. Yes, Steve was great at shoving a recalcitrant partner into line, or anyone really, but it takes more than being loud and pushy to make a success the size that is Apple's.

Tim has been doing the heavy lifting FOR YEARS now. Apple reached this level of success because of his management! All during the time Jobs was sick, although he did show up as much as possible until the last possible moment, there were lots of times where he wasn't really running the company, Tim was.

I hope he can maintain his cool during this vicious assault by Wall Street. I know he can, he's pretty unflappable, that's why SJ hired him. Tim's supply chain management expertise is the real reason Apple is so profitable. I also agree, who knows what they might be planning to do with their cash? Wall Street just wants them to spend right now, like Amazon or Google does, do something anything. I am betting on Apple, and I don't think it will be too much longer.

So the analysts want Apple to throw them a bone eh? They better watch out what they wish for.

I see that the entire product line has been refreshed, leaving the entire rest of the year open for something new. I think Wall Street senses this and is going for the smack down now while they still can.

As for options? Well, there's always the cautionary tale of Dell's Ups and Downs With Options

[URL]http://www.nytimes.com/2013/01/18/business/how-dell-became-entangled-in-options.html?pagewanted=all&_r=2&&[/]

As for the SEC, they are revolving door robots who won't do anything.

Anybody read this article?

http://macdailynews.com/2013/01/26/so-who-dumped-800000-shares-of-aapl-in-the-last-second-of-trading-on-friday/

Apple just doesn't fit the street's 'rules'. Would ANYTHING they did change what these traders are up to? I doubt it. Unless these hedge traders want to kill the golden goose entirely, they will find a season when they will allow a golden egg or two.

Whose debt do you propose they repay? Apple has none, and as a shareholder I don't want them paying off anyone else's debt.

 

Thats odd.  I could swear Cook makes hundreds of million a year in stock options, but I guess he needs more recognition than that?

I agree with this. Perhaps invests to make SIRI and iCloud much much much better?, Oh, and 20 GB. per account wouldn't hurt either.

source?

When Jobs was at Apple before the success of the IPhone, but after the IPod, he announced an Apple share buy back calling Apple a Good investment.

Don't swear. Especially when you're wrong.


Two problems with your logic:

1. Apple could easily afford to buy many times the 9 M shares you are suggesting. If they were to buy 5% of outstanding stock, that would only cost them $23 B - which would be less than 1/5 of their available cash.

2. I would rather see a stock buyback than a dividend increase. Dividends are taxed as normal income (at least I assume that's what will happen with the expiration of the Bush tax cuts) while capital gains have almost always been taxed at a lower rate.

 

They can do it Warren Buffet style: commit a substantial amount, say $50B, over the next 2 - 3 years and they will only buy back if the share falls below its intrinsic value. Of course, Apple can come up with a much better Discounted Cash Flow model on its earnings than any analyst on the street. That will be enough to stop all such non-sense. If they don't have enough cash on shore, issue bonds. With the current interest rate and their rock-solid balance sheet, they can sell bonds at Treasury + 25bps, which is about 2.25%. 

 

It's time for management to care about shareholders. I have not seen a company so dedicated to its customers (making the best products even if yield is low) yet completely ignore its shareholders.

Sorry if this has been already stated:

 

Ah, the power of Dollar Cost Averaging... :)
 

 

Uh, he made 116 million dollars last year selling stock.  I guess that isnt enough recognition according to you?  How about they build him a statute, hold an awards ceremony and vote on a special compensation package to make up for his lack of recognition?  How can he soldier on with his lack of recognition?  Tell you what, start up the recognize Tim Cook fund and lets right this wrong.

 

1.   You might want to focus on reality instead of fantasy.  My logic is fine for the real world.  Yes, Apple could buy back more shares than that, but the reality is they were reluctant to start a buyback plan in the first place do you really think they are going to increase the plan by multiple factors just because investors are crying about it?  Lol, well keep dreaming. 

 

2.  Buybacks help once and only once, when you sell the stock.  Dividends provide a constant stream of revenue to investors and much of that gets reinvested back into the company.  Dividends getting taxed at 15% for people making under 250K as of now, and normal income once you are over that  Not only do higher dividends make the stock more appealing to a wider range of investors, but they actually reward people holding the stock instead of selling it.  Capital Gains are now taxed at 20% if you hold the investment over 1 year, so for a large class of investors the dividend is still taxed less than the capital gains.

 

Maybe you will be right.  After all Cook sells all his share as soon as they vest so it would be in his best interest to do a buyback and try to get a spike in share price.

What utter nonsense.

 

True, it's shaky.  It's the SEC.  Check the filings from 1/12 (sorry dont recall the exact date) and 3/28/12.

 

2011 was a banner year for Mr. Cook.  He was "unrecognized" to the tune of $378 million dollars.

 

He slummed it in 2012 only $112 Million.  Hope his family can eat on that.

AAPL was under $100 in January, 2009. They're now well over $400 - even with the recent collapse. Plus, they've paid out $8 per share in dividends in that time.

It's a shame that they completely ignore shareholders --- other than quadrupling their money over 4 years. /s
Edited by jragosta - 1/27/13 at 8:31am

 

I'm sorry, who are you to say what he deserves to earn?

You're wrong. The $378 M is a payout to be earned over the next decade. It's certainly not hundreds of millions of dollars per year as you claimed.