Not sure I can agree with much of his reasoning (not that anyone is expecting a huge dividend). He appears to be making an assumption that Apple's cash is being invested at a high rate of return. Heavens why?
I think he's also short of Apple's cash. I'm pretty sure it's well over $50b with securities.
You guys are looking at the consolidated balance sheet, yes?
Your last statement is wrong. MSFT began to stagnate years before they declared the one-time dividend.
With $50 billion (and counting) Apple can do a hell of a lot more than weather a storm, they could withstand the End of Time.
How much is enough?
$23 or $50B may seem like a lot but we need to consider how much money these companies can spend in a year. That amount isn't even close to excessive for a tech company selling to consumers.
The primary possible internal uses of cash to drive growth are R&D, capex, or acquisitions. None of them really rise to the challenge in Apple's case.
Apple's R&D does not cost that much, since they seem to be quite adept at "A&D" (ref. Soundjam, Quattro, PA Semi, etc. acquisitions). Their capex needs are quite low, since one of their biggest likely capex items - retail space - is probably leased to a large extent. As to a large acquisition, three strikes against it: one, they are often a waste of time, attention, and money; two, I can't think of a fairly priced synergy-creating large acquisition for Apple that will truly bring value to the existing product portfolio; three, Apple is not constrained (as most large companies are not) by having to use cash as the medium of exchange.
So, bottom line, what else could they possibly do with the cash, if they do not want to leave it lying around on the balance sheet? Give it back to the shareholders. There are only two choices there: dividends or share repurchases. Dividends would be a disaster, in my opinion: It would signal that Apple had become a staid, steady cash flow, 'income' business with no good ideas and not a 'growth' business. Moreover, once dividends are initiated, there is no turning back.
Which, logically, leaves Apple with share repurchases as the only option.
Horse crap.
Apple is on the verge of dumping several billion in building investment alone with the new Campus and if you think the North Carolina build-out is the only one you're nuts.
$23 or $50B may seem like a lot but we need to consider how much money these companies can spend in a year. That amount isn't even close to excessive for a tech company selling to consumers.
It's a huge amount, one of the largest cash reserves in the history of business. Apple could not possibly spend any significant part of it responsibly on growth, and they are so far from taking on debt it's ridiculous to even mention it. They haven't had a penny of longterm debt on their books in years. The reason the dollars keep building up (the rate was about $1.25b a week, as of the last quarterly report, certainly more now) is not because of how much they spend but because of how little they spend, relative to cash flow.
Your last statement is wrong. MSFT began to stagnate years before they declared the one-time dividend.
Share price stagnated, true. But that was why the demand for a dividend arose. It shouldn't arise right away; who knows what will happen in a year or two. But after a few years, the story is different.
The same thing was true for the cash hoard. The demand exploded after some years. But they had over $63 billion when they dispersed about $33 billion of it. It's also interesting to note that Gates got almost $8 billion of that, and Ballmer got almost $2.5 billion.
The stock has dropped and remained at a low level for years first. At one Time, MS was worth about $600 billion. I doubt if the demand would have arisen if the company value had kept on rising.
Quote:
With $50 billion (and counting) Apple can do a hell of a lot more than weather a storm, they could withstand the End of Time.
How much is enough?
I'd like to see them use some of it. We may see more server centers, if they are moving stuff to the cloud as it seems they may. now, there are rumors that not only may they move some machines to AMD, but that they may buy the company (I hope not!).
I used $50 billion as an arbitrary number, but we'll see.
OK, just wondering. The finance sites don't lump the long-term securities into the cash, so I was curious why you and melgross were.
It's investments and cash. That's how Apple describes it, and so shall I. I don't care how they break it down.
I have investments and cash. When I value my portfolio, I count all of it as one lump, even though it's broken down internally. Apple mostly has short term investments. these can be used almost as cash.
For a company, the difference doesn't really matter that much, though they may have to pay taxes on profits of the sale of same. Its why some companies are now taking on debt to finance purchasing of assets. Money is cheap right now, and for those with not a huge amount of cash, it's cheaper to take debt.
now, there are rumors that not only may they move some machines to AMD, but that they may buy the company (I hope not!).
The AMD speculation was just that as far as I know. I'm opposed to them owning actual fabs, they should just design and contract with manufacturers, IMO.
Share price stagnated, true. But that was why the demand for a dividend arose. It shouldn't arise right away; who knows what will happen in a year or two. But after a few years, the story is different.
The same thing was true for the cash hoard. The demand exploded after some years. But they had over $63 billion when they dispersed about $33 billion of it. It's also interesting to note that Gates got almost $8 billion of that, and Ballmer got almost $2.5 billion.
The stock has dropped and remained at a low level for years first. At one Time, MS was worth about $600 billion. I doubt if the demand would have arisen if the company value had kept on rising.
Beware the cause and effect fallacy. MSFT didn't stagnate because they declared a dividend, but the other way round. It's absolutely not a coincidence that some of the top people at Microsoft were the largest beneficiaries of the one-time dividend. Microsoft had been using grants and options as a recruiting tool for some time, so quite a few other top people had a lot of dead money tied up in stock when MSFT flatlined after 2000.
This is the worst reason to declare a dividend, IMO. I'm not advocating this at all, and I'm not hearing anyone else doing it.
Quote:
I'd like to see them use some of it. We may see more server centers, if they are moving stuff to the cloud as it seems they may. now, there are rumors that not only may they move some machines to AMD, but that they may buy the company (I hope not!).
I used $50 billion as an arbitrary number, but we'll see.
Some of it yes, but it's the vast sums they are accumulating that I find troubling. They could build server centers all day and night and not make a noticeable dent in the cash hoard. In fact they could do it quite easily out of cash flow.
I wouldn't be surprised if Apple decided to postpone an update to the Mac Pro lineup, due to sustained demand through the quarter and low component prices (=>high profit margin) for the aging technology.
It's frustratingly long since the last significant update.
...At one Time, MS was worth about $600 billion...
There were questions around at the time about whether MS might become a $1 trillion enterprise.
In the late 1990's, I was castigated for being (in the end), the sole Mac user within our enterprise, which today still has its major enterprise agreements exclusively with Dell.
Whenever we revisit this discussion, which we seem to do every three months, I am always told by some reflexive anti-dividend person that we can talk again when Apple's cash load reaches $X billions. It's happened at $20, $30, $40 and now $50 billion. How much is enough now? Just curious, since no amount seems to be.
It certainly couldn't be me, since in just a few posts prior, I replied to melgross saying the following: "True. At some point, given the amount to which it is piling up, they will have to do something with it."
Apple is on the verge of dumping several billion in building investment alone with the new Campus and if you think the North Carolina build-out is the only one you're nuts.
That was $2B, as I recall.
Do you have any evidence of anything else that Apple is doing, or are you just speculating? If the latter, you can go wallow in it with your horse friend.
Beware the cause and effect fallacy. MSFT didn't stagnate because they declared a dividend, but the other way round. It's absolutely not a coincidence that some of the top people at Microsoft were the largest beneficiaries of the one-time dividend. Microsoft had been using grants and options as a recruiting tool for some time, so quite a few other top people had a lot of dead money tied up in stock when MSFT flatlined after 2000.
You're getting it backwards. If you read what I wrote, I said that they gave a dividend because the share price had stagnated over several years, not the other way around.
Quote:
This is the worst reason to declare a dividend, IMO.
I'm not advocating this at all, and I'm not hearing anyone else here doing it. It's often why it's done. The concept being that giving a dividend will give more value to the stockholder, make the stock more valuable because of the income derived from it, and hopefully, cause the stock to rise. Companies with slowly rising stocks are more likely to give dividends. Usually these are retail companies and industrial manufacturers.
Quote:
Some of it yes, but it's the vast sums they are accumulating that I find troubling. They could build server centers all day and night and not make a noticeable dent in the cash hoard. In fact they could do it quite easily out of cash flow.
The problem, as I see it, is that Apple likely didn't expect to get this rich. It crept up on them. By the time they realized what happened, it was too difficult to do much.
We have differing views of this, and it shall remain that way. At some point, they will do something with it.
Comments
Not sure I can agree with much of his reasoning (not that anyone is expecting a huge dividend). He appears to be making an assumption that Apple's cash is being invested at a high rate of return. Heavens why?
I think he's also short of Apple's cash. I'm pretty sure it's well over $50b with securities.
You guys are looking at the consolidated balance sheet, yes?
http://www.apple.com/pr/library/2010/04/20results.html
It's about $23B cash and short-term securities, maybe $50B including long-term securities.
Sites like Yahoo! Finance and Google Finance really only look at the short term assets.
Just keep doing what you do.
The bigger the war chest the better.
Your last statement is wrong. MSFT began to stagnate years before they declared the one-time dividend.
With $50 billion (and counting) Apple can do a hell of a lot more than weather a storm, they could withstand the End of Time.
How much is enough?
$23 or $50B may seem like a lot but we need to consider how much money these companies can spend in a year. That amount isn't even close to excessive for a tech company selling to consumers.
Exhibit A: http://www.businessinsider.com/chart...-oracle-2010-4
I agree 100% with your point about dividends.
The primary possible internal uses of cash to drive growth are R&D, capex, or acquisitions. None of them really rise to the challenge in Apple's case.
Apple's R&D does not cost that much, since they seem to be quite adept at "A&D" (ref. Soundjam, Quattro, PA Semi, etc. acquisitions). Their capex needs are quite low, since one of their biggest likely capex items - retail space - is probably leased to a large extent. As to a large acquisition, three strikes against it: one, they are often a waste of time, attention, and money; two, I can't think of a fairly priced synergy-creating large acquisition for Apple that will truly bring value to the existing product portfolio; three, Apple is not constrained (as most large companies are not) by having to use cash as the medium of exchange.
So, bottom line, what else could they possibly do with the cash, if they do not want to leave it lying around on the balance sheet? Give it back to the shareholders. There are only two choices there: dividends or share repurchases. Dividends would be a disaster, in my opinion: It would signal that Apple had become a staid, steady cash flow, 'income' business with no good ideas and not a 'growth' business. Moreover, once dividends are initiated, there is no turning back.
Which, logically, leaves Apple with share repurchases as the only option.
Horse crap.
Apple is on the verge of dumping several billion in building investment alone with the new Campus and if you think the North Carolina build-out is the only one you're nuts.
You guys are looking at the consolidated balance sheet, yes?
http://www.apple.com/pr/library/2010/04/20results.html
It's about $23B cash and short-term securities, maybe $50B including long-term securities.
Sites like Yahoo! Finance and Google Finance really only look at the short term assets.
Yes, I know. The current 8-K shows $18.5b more in marketable securities.
$23 or $50B may seem like a lot but we need to consider how much money these companies can spend in a year. That amount isn't even close to excessive for a tech company selling to consumers.
Exhibit A: http://www.businessinsider.com/chart...-oracle-2010-4
It's a huge amount, one of the largest cash reserves in the history of business. Apple could not possibly spend any significant part of it responsibly on growth, and they are so far from taking on debt it's ridiculous to even mention it. They haven't had a penny of longterm debt on their books in years. The reason the dollars keep building up (the rate was about $1.25b a week, as of the last quarterly report, certainly more now) is not because of how much they spend but because of how little they spend, relative to cash flow.
Yes, I know. The current 8-K shows $18.5b more in marketable securities.
OK, just wondering. The finance sites don't lump the long-term securities into the cash, so I was curious why you and melgross were.
Your last statement is wrong. MSFT began to stagnate years before they declared the one-time dividend.
Share price stagnated, true. But that was why the demand for a dividend arose. It shouldn't arise right away; who knows what will happen in a year or two. But after a few years, the story is different.
The same thing was true for the cash hoard. The demand exploded after some years. But they had over $63 billion when they dispersed about $33 billion of it. It's also interesting to note that Gates got almost $8 billion of that, and Ballmer got almost $2.5 billion.
The stock has dropped and remained at a low level for years first. At one Time, MS was worth about $600 billion. I doubt if the demand would have arisen if the company value had kept on rising.
With $50 billion (and counting) Apple can do a hell of a lot more than weather a storm, they could withstand the End of Time.
How much is enough?
I'd like to see them use some of it. We may see more server centers, if they are moving stuff to the cloud as it seems they may. now, there are rumors that not only may they move some machines to AMD, but that they may buy the company (I hope not!).
I used $50 billion as an arbitrary number, but we'll see.
OK, just wondering. The finance sites don't lump the long-term securities into the cash, so I was curious why you and melgross were.
It's investments and cash. That's how Apple describes it, and so shall I. I don't care how they break it down.
I have investments and cash. When I value my portfolio, I count all of it as one lump, even though it's broken down internally. Apple mostly has short term investments. these can be used almost as cash.
For a company, the difference doesn't really matter that much, though they may have to pay taxes on profits of the sale of same. Its why some companies are now taking on debt to finance purchasing of assets. Money is cheap right now, and for those with not a huge amount of cash, it's cheaper to take debt.
now, there are rumors that not only may they move some machines to AMD, but that they may buy the company (I hope not!).
The AMD speculation was just that as far as I know. I'm opposed to them owning actual fabs, they should just design and contract with manufacturers, IMO.
Assuming they really don't have a better plan for the excess cash:
What might work would be some kind of multiplier of my stock, either in increased worth of a share or in increased numbers of shares at a given price.
That way I can "let it ride", not pay capital gains right now, and place my dividend as a bet on Apple's future.
Oh, I forgot.....
Apple is doomed!?
Finally, someone with sense!
THEY'RE GOING BANKRUPTS!!!1!!!!1111!!!!
MICROSOFT RULEZ!!!1!!!!
Share price stagnated, true. But that was why the demand for a dividend arose. It shouldn't arise right away; who knows what will happen in a year or two. But after a few years, the story is different.
The same thing was true for the cash hoard. The demand exploded after some years. But they had over $63 billion when they dispersed about $33 billion of it. It's also interesting to note that Gates got almost $8 billion of that, and Ballmer got almost $2.5 billion.
The stock has dropped and remained at a low level for years first. At one Time, MS was worth about $600 billion. I doubt if the demand would have arisen if the company value had kept on rising.
Beware the cause and effect fallacy. MSFT didn't stagnate because they declared a dividend, but the other way round. It's absolutely not a coincidence that some of the top people at Microsoft were the largest beneficiaries of the one-time dividend. Microsoft had been using grants and options as a recruiting tool for some time, so quite a few other top people had a lot of dead money tied up in stock when MSFT flatlined after 2000.
This is the worst reason to declare a dividend, IMO. I'm not advocating this at all, and I'm not hearing anyone else doing it.
I'd like to see them use some of it. We may see more server centers, if they are moving stuff to the cloud as it seems they may. now, there are rumors that not only may they move some machines to AMD, but that they may buy the company (I hope not!).
I used $50 billion as an arbitrary number, but we'll see.
Some of it yes, but it's the vast sums they are accumulating that I find troubling. They could build server centers all day and night and not make a noticeable dent in the cash hoard. In fact they could do it quite easily out of cash flow.
Re: discussion on Apple cash hoard: If they gave me the money I'd have to pay taxes on it. Not what I want to do right now.
Assuming they really don't have a better plan for the excess cash:
What might work would be some kind of multiplier of my stock, either in increased worth of a share or in increased numbers of shares at a given price.
That way I can "let it ride", not pay capital gains right now, and place my dividend as a bet on Apple's future.
Somebody stuffs money in your pocket and you find a reason to complain?
That's great logic.
It's frustratingly long since the last significant update.
...At one Time, MS was worth about $600 billion...
There were questions around at the time about whether MS might become a $1 trillion enterprise.
In the late 1990's, I was castigated for being (in the end), the sole Mac user within our enterprise, which today still has its major enterprise agreements exclusively with Dell.
Congratulations to all at Apple.
Whenever we revisit this discussion, which we seem to do every three months, I am always told by some reflexive anti-dividend person that we can talk again when Apple's cash load reaches $X billions. It's happened at $20, $30, $40 and now $50 billion. How much is enough now? Just curious, since no amount seems to be.
It certainly couldn't be me, since in just a few posts prior, I replied to melgross saying the following: "True. At some point, given the amount to which it is piling up, they will have to do something with it."
Horse crap.
Apple is on the verge of dumping several billion in building investment alone with the new Campus and if you think the North Carolina build-out is the only one you're nuts.
That was $2B, as I recall.
Do you have any evidence of anything else that Apple is doing, or are you just speculating? If the latter, you can go wallow in it with your horse friend.
Beware the cause and effect fallacy. MSFT didn't stagnate because they declared a dividend, but the other way round....
You should take a look at the announcement effect of MSFT's dividend.
You'd be surprised about the perceived cause and effect.
Beware the cause and effect fallacy. MSFT didn't stagnate because they declared a dividend, but the other way round. It's absolutely not a coincidence that some of the top people at Microsoft were the largest beneficiaries of the one-time dividend. Microsoft had been using grants and options as a recruiting tool for some time, so quite a few other top people had a lot of dead money tied up in stock when MSFT flatlined after 2000.
You're getting it backwards. If you read what I wrote, I said that they gave a dividend because the share price had stagnated over several years, not the other way around.
This is the worst reason to declare a dividend, IMO.
I'm not advocating this at all, and I'm not hearing anyone else here doing it. It's often why it's done. The concept being that giving a dividend will give more value to the stockholder, make the stock more valuable because of the income derived from it, and hopefully, cause the stock to rise. Companies with slowly rising stocks are more likely to give dividends. Usually these are retail companies and industrial manufacturers.
Some of it yes, but it's the vast sums they are accumulating that I find troubling. They could build server centers all day and night and not make a noticeable dent in the cash hoard. In fact they could do it quite easily out of cash flow.
The problem, as I see it, is that Apple likely didn't expect to get this rich. It crept up on them. By the time they realized what happened, it was too difficult to do much.
We have differing views of this, and it shall remain that way. At some point, they will do something with it.