Morgan Stanley recommends Apple use cash for share buybacks, dividends

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  • Reply 101 of 126
    Quote:
    Originally Posted by JONOROM View Post


    I guess the field is not the place to look. The good ol' USA has the second largest manufacturing economy on the PLANET. And if China weren't manipulating their currency we would be #1.



    Why is that, you ask? Because we are the best, sucker!



    Have some pride and seek the truth, OK? Don't talk down our nation and our people.



    I wonder if people like you are actually posting from somewhere in China, trying to discourage the American people. Are you an employee of Red China, perchance?



    USA, USA, USA!!!!!



    I would love for the US to be #1 again at manufacturing. I would love to see the US prosper. I would love to see all of my friends and family, who lost their manufacturing jobs and are now unemployed, find jobs. But I am also a realist and am not blind to what is going on in this world. You can't blame China for our government trade policies. You can't blame other countries for our big business' sending work their way. I'm not saying that it is right or that I like it. It's just the way it is right now.
  • Reply 102 of 126
    Quote:
    Originally Posted by JONOROM View Post


    I guess the field is not the place to look. The good ol' USA has the second largest manufacturing economy on the PLANET. And if China weren't manipulating their currency we would be #1.




    You seem to be trying to counter perceptions with mere reality. That never works.



    What works is the loudest, biggest guy in the group saying "we don't make nothing here no more!".



    Trust me, that is much more effective than statistics.
  • Reply 103 of 126
    Quote:
    Originally Posted by tenzo View Post


    I would love for the US to be #1 again at manufacturing. I would love to see the US prosper. I would love to see all of my friends and family, who lost their manufacturing jobs and are now unemployed, find jobs.



    The same thing has happened many times over the course of history. There were huge dislocations at the time of the agrarian revolution, when people settled down into villages with a division of labor, rather than being nomadic hunter/gatherers. Suddenly, with enough to eat, people needed to learn how to do more than be a spear-chucker.



    More recently, we saw an industrial revolution. It used to be that pretty much everybody was living on as farm and growing food. The tractor kind of changed that. Huge dislocations occurred as people couldn't get work manning a hoe anymore.



    Even in the non-agricultural sector, artisans were replaced with machines. Pre-made standard parts allowed semi-skilled labor to replace guilds. Hand-carved furniture was replaced with machine-made.



    The changes were wrenching. Mike Mulligan and his steam shovel could replace 100 men with 100 picks and shovels.



    Now we are seeing similar changes. Robotics are revolutionizing manufacturing.



    People in post-industrial economies need new skills. Many will fall through the cracks. Twas ever thus.
  • Reply 104 of 126
    Quote:
    Originally Posted by ConradJoe View Post


    The same thing has happened many times over the course of history. There were huge dislocations at the time of the agrarian revolution, when people settled down into villages with a division of labor, rather than being nomadic hunter/gatherers. Suddenly, with enough to eat, people needed to learn how to do more than be a spear-chucker.



    More recently, we saw an industrial revolution. It used to be that pretty much everybody was living on as farm and growing food. The tractor kind of changed that. Huge dislocations occurred as people couldn't get work manning a hoe anymore.



    Even in the non-agricultural sector, artisans were replaced with machines. Pre-made standard parts allowed semi-skilled labor to replace guilds. Hand-carved furniture was replaced with machine-made.



    The changes were wrenching. Mike Mulligan and his steam shovel could replace 100 men with 100 picks and shovels.



    Now we are seeing similar changes. Robotics are revolutionizing manufacturing.



    People in post-industrial economies need new skills. Many will fall through the cracks. Twas ever thus.



    Well said
  • Reply 105 of 126
    john.bjohn.b Posts: 2,742member
    Quote:
    Originally Posted by Dr Millmoss View Post


    As per usual, a lot of people don't seem to get the basics of capitalism. The purpose of capital is to invest it in growing the company's business. The basic assumption is that profits are most efficiently used this way, if you can also assume that the company is good at what it does. If the amount of accumulated capital exceeds the ability of the company to reinvest it in growth, then some other purpose for it should be found by a responsible board of directors. The usual method is via a dividend to the stockholders. While this often occurs when companies have hit a growth wall, in Apple's case it's happening because they are growing too rapidly to spend all the money they make. The bottom line is, Apple is not doing the stockholders any favors by sequestering so much cash. It is no crime for stockholders to want their value maximized. Cash contributes nothing to shareholder value unless it can be responsibly invested in future earnings growth or it is paid out to the shareholders. Apple has shown no signs of doing the former, so they should instead do the latter.



    And you think that following standard Wall Street paradigms aren't responsible for the stagnation of, for example, Microsoft's share price? Yes, there are defined business models that are used over and over by companies with average to below-average market performance numbers. That said, what about Apple since the iPod was introduced seems to be "usual" to you, that the "usual methods" would apply? Instead, they are managing their short-term assets as a strategic asset (N.B. it's not all cash) that gives them leverage and flexibility to use it where they see fit. Again, as one small example, Apple can prepay a contract for future delivery of specific types of memory or displays with a vendor to ensure supply and establish a known cost of goods, a billion dollars or more at a time, all without breaking a sweat.



    Also worth pointing out, a shareholder has the right to vote for BoD elections and special shareholder proposals, or sell the stock. They don't, however, have the right to dictate how a company's day-to-day strategic operations are run.
  • Reply 106 of 126
    Quote:
    Originally Posted by tenzo View Post


    I hate to say it but....

    America is not a manufacturing country anymore and I don't think it is coming back.

    We are the innovators and engineers of products now. Not the builders.

    The sooner people realize this the sooner this country can move on to a new path for prosperity. Instead of wishing and waiting for manufacturing jobs to come back, we need to retrain ourselves to compete where we can compete with the world. I see and deal with overseas manufacturing on a daily basis. If it's not going to China, it's going to Vietnam. If not there, Indonesia, India, Philippines, Mexico, Columbia, etc, etc, etc. But the jobs that remain here are the innovative ones.



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



    There's a slight problem with the America as Service Economy thesis. Not everyone is an entrepreneur! People do need sustainable work, that does not require them to be multitalented geniuses. Also, a country is more secure strategically when there is some manufacturing base that is local.



    Do we really expect that Joe Average is going to wake up one day and dream up a product and have it assembled in India/Brazil and marketed worldwide? True, a lot of that will and must happen, but I think we had better improve available schools before we even dream about having that kind of society.



    This is very different a problem than the workforce faced when computers first came out , everyone thought they'd lose their jobs to machines-- but many learned to adapt and productivity increased. To expect people to change their innate temperaments seems like waayy too much though.



    I think it's still a slavery issue in some ways. I think the Europeans have got us beat in resolving the 'greed' mentality. They set up industry expecting to pay a fair wage and taxes for the overall good of society, rather than depend on spotty charity and privatization.



    Why must we have 'slaves' to make our products 'affordable' ? I don't begin to pretend to have the answer, but it is an interesting question.



    Oh, I'm gonna get flamed for this post. It was intended to be philosophical.
  • Reply 107 of 126
    Quote:
    Originally Posted by John.B View Post


    And you think that following standard Wall Street paradigms aren't responsible for the stagnation of, for example, Microsoft's share price? Yes, there are defined business models that are used over and over by companies with average to below-average market performance numbers. That said, what about Apple since the iPod was introduced seems to be "usual" to you, that the "usual methods" would apply? Instead, they are managing their short-term assets as a strategic asset (N.B. it's not all cash) that gives them leverage and flexibility to use it where they see fit. Again, as one small example, Apple can prepay a contract for future delivery of specific types of memory or displays with a vendor to ensure supply and establish a known cost of goods, a billion dollars or more at a time, all without breaking a sweat.



    Also worth pointing out, a shareholder has the right to vote for BoD elections and special shareholder proposals, or sell the stock. They don't, however, have the right to dictate how a company's day-to-day strategic operations are run.



    Pardon? I don't recall making a Microsoft comparison. I'm not sure where this fits in. The point is, Apple cannot spend even a tiny fraction of their cash (liquid assets if you prefer) on growth. They couldn't do it years ago when the hoard was a quarter the size it is today so there's no reason to expect them to do so as the hoard approaches $100 billion.
  • Reply 108 of 126
    Quote:
    Originally Posted by FriedLobster View Post


    Apple's cash hoard would be better spent on major acquisitions or major product development.



    If investors are not satisfied with AAPL despite explosive growth in stock price over the years, then they can perhaps buy GOOG (LOW ROIC) or MSFT (stagnant share price, pays dividend).



    GO AHEAD I DARE YOU SELL AAPL!



    Point missed, I guess since your response didn't have anything to do with what I said.
  • Reply 109 of 126
    Quote:
    Originally Posted by Dr Millmoss View Post


    As per usual, a lot of people don't seem to get the basics of capitalism. The purpose of capital is to invest it in growing the company's business. The basic assumption is that profits are most efficiently used this way, if you can also assume that the company is good at what it does. If the amount of accumulated capital exceeds the ability of the company to reinvest it in growth, then some other purpose for it should be found by a responsible board of directors. The usual method is via a dividend to the stockholders. While this often occurs when companies have hit a growth wall, in Apple's case it's happening because they are growing too rapidly to spend all the money they make. The bottom line is, Apple is not doing the stockholders any favors by sequestering so much cash. It is no crime for stockholders to want their value maximized. Cash contributes nothing to shareholder value unless it can be responsibly invested in future earnings growth or it is paid out to the shareholders. Apple has shown no signs of doing the former, so they should instead do the latter.



    You're confusing capitalism with capital. Capitalism is a macroeconomic concept. How to run a company, including how to use its profits, is microeconomics. Nothing in the definition or study of capitalism says that "The basic assumption is that profits are most efficiently used this way" or any particular way. Capitalism is more about an economic system, and less about how an individual company operates. Sure, in a capitalist system, many companies use profits in the way you described (actually, you didn't describe it first but I'm too lazy to quote others). But that is historical practice and not a requirement or standard of capitalism. Not investing profits that way does not contradict any tenets or assumptions of capitalism. After all, if not spending cash this way goes against capitalism, are you insinuating Apple is practicing socialism or communism?
  • Reply 110 of 126
    Quote:
    Originally Posted by stelligent View Post


    You're confusing capitalism with capital. Capitalism is a macroeconomic concept. How to run a company, including how to use its profits, is microeconomics. Nothing in the definition or study of capitalism says that "The basic assumption is that profits are most efficiently used this way" or any particular way. Capitalism is more about an economic system, and less about how an individual company operates. Sure, in a capitalist system, many companies use profits in the way you described (actually, you didn't describe it first but I'm too lazy to quote others). But that is historical practice and not a requirement or standard of capitalism. Not investing profits that way does not contradict any tenets or assumptions of capitalism. After all, if not spending cash this way goes against capitalism, are you insinuating Apple is practicing socialism or communism?



    Capitalism is both the economic system and the means by which it creates wealth. Call it what you will, it hardly matters. The basic point I am making here is that a company grows its earnings by expanding the business it knows best. They way they do this is by reinvesting current profits into future growth. The fallacy often perpetuated in these discussions is that the goal of a company might be, instead, to accumulate cash, as if it was more like an individual planning for retirement. Companies don't retire unless they fail. They are more analgous to sharks. They have to constantly move forward to survive and grow. Reinvesting capital is how that is accomplished.



    I won't go into the dangers of Apple's seemingly relentless cash accumulation (the lead article does a good job at that), but I would add that Apple is not an investment bank, and I don't know anyone who thinks that any substantial portion of their profits should come from investing liquid assets in securities. At the risk of belaboring the obvious, Apple is a great technology company, and their free cash is far better used advancing that business. It just so happens that Apple is so good at what they do, and the demands for capital reinvestment to keep it very well oiled are so relatively small, that they've created an immense cash machine, with no limits in sight. What they should do with the excess is an entirely reasonable question. It's going to get asked more and more as the size of the cash mountain grows.
  • Reply 111 of 126
    Quote:
    Originally Posted by Dr Millmoss View Post


    The basic point I am making here is that a company grows its earnings by expanding the business it knows best. They way they do this is by reinvesting current profits into future growth.



    The first sentence is spot on. But the second sentence is sadly mistaken. This is not *THE* way of expanding the business. This is ONE way. What way does Apple know best to expand its business? They are doing it and doing it rather well.



    Quote:
    Originally Posted by Dr Millmoss View Post


    The fallacy often perpetuated in these discussions is that the goal of a company might be, instead, to accumulate cash, as if it was more like an individual planning for retirement.



    I don't see this fallacy perpetuated here. A few comments to that effect do not make for *perpetuation*.



    Quote:
    Originally Posted by Dr Millmoss View Post


    Companies don't retire unless they fail. They are more analgous to sharks. They have to constantly move forward to survive and grow. Reinvesting capital is how that is accomplished.



    That's misfired analogy. Again, reinvesting capital is ONE way, not *THE* way. Again, Apple is doing it a different way, which seems rather successful so far.



    Quote:
    Originally Posted by Dr Millmoss View Post


    It's going to get asked more and more as the size of the cash mountain grows.



    Ask all you want. There is no law in the US, no requirement in capitalist tenets, to use the cash to pay dividends or to repurchase stock. Furthermore, Apple does not have a history of going *with the flow*.



    The fact is that 2/3 of Apple's cash is stashed outside the US. To use it in ways that some people want, they will have to bring the cash back to the US and pay taxes on it. I am sure there are ways to circumvent this, but financial gimmickry rarely has long term benefits, IMO. Now, will Apple change its stance if a tax holiday was granted? That would be interesting. Personally, I hope this does not happen.



    This whole thing smells like inventing a crisis where there is none. The amazing thing about Apple right now is that it can burn the cash hoard on hand, and it won't change the enviable position that the position is in.
  • Reply 112 of 126
    Who knows what Apple might do with it's cash. I can sure daydream. Maybe they will do something huge, like buy a car manufacturer and redesign bunch of carbon fiber interchangeable bodies to go on top of an all electric drive train. Buy one drive chain and pop on this years new carbon fiber sportscar body. Or mini truck. Collect them all and hang em on your garage wall The hardest part of this possibility would be the drive chain. There are others all ready with the battery-swap station infrastructure. Its not really so far out of their core competencies....



    Maybe they will build their own semiconductor plant. They are probably the only company that I wouldn't be asking for a rebate from their cash hoard. Whatever they do it will be exciting to watch.
  • Reply 113 of 126
    Quote:
    Originally Posted by scotty321 View Post


    This is the Morgan Stanley that went bankrupt and was sold to Bank of America to remain solvent?



    Yeah, maybe they should keep their mouths shut when it comes to what companies need to do with their profitable cash stockpiles.



    This never happened. Morgan Stanley and Bank of America are two major competitors of one another. You may be thinking of Merrill Lynch, which is still a subsidiary of Bank of America. Maybe you should keep your mouth shut, period. Before you bash on a company (for a ridiculous reason too), maybe you should just do a simple Google search to make sure what you're saying is accurate...
  • Reply 114 of 126
    Quote:
    Originally Posted by palomine View Post


    Who knows what Apple might do with it's cash. I can sure daydream. Maybe they will do something huge, like buy a car manufacturer and redesign bunch of carbon fiber interchangeable bodies to go on top of an all electric drive train. Buy one drive chain and pop on this years new carbon fiber sportscar body. Or mini truck. Collect them all and hang em on your garage wall The hardest part of this possibility would be the drive chain. There are others all ready with the battery-swap station infrastructure. Its not really so far out of their core competencies....



    Maybe they will build their own semiconductor plant. They are probably the only company that I wouldn't be asking for a rebate from their cash hoard. Whatever they do it will be exciting to watch.



    Couple of points. First, we'd better hope (assuming I'm talking to actual stockholders here) that Apple doesn't decided to invest hugely in industries they essentially know nothing about. That is unless you want to see your investment slaughtered. Second, Apple could easily declare a very generous dividend and still sock away ten of billions a year of additional cash. Their free cash flow is immense. The argument against a dividend is extremely vague and mainly nonsensical.
  • Reply 115 of 126
    Quote:
    Originally Posted by Dr Millmoss View Post


    Couple of points. First, we'd better hope (assuming I'm talking to actual stockholders here) that Apple doesn't decided to invest hugely in industries they essentially know nothing about. That is unless you want to see your investment slaughtered. Second, Apple could easily declare a very generous dividend and still sock away ten of billions a year of additional cash. Their free cash flow is immense. The argument against a dividend is extremely vague and mainly nonsensical.



    What made you respond? Do you think that crazy ideas should be stopped in here? Why do you think I'm not a shareholder?



    Of course the stock will be slaughtered as soon as they dare do anything that you can't forsee a use for. Sigh. It's sad really.



    It is more likely that the cash hoard is a deterrent to the telcos, at least until broadband is rolled out. Then, who knows? Somebody needs to make an efficient car, I really don't think it's too far from their core competencies, provided it's electric. Didn't Ives say he wanted to design a car next? Didn't apple talk to VW ? and, to paraphrase Tom Friedman, 'just as sure as I'm sittin here darlin, it ain't gonna be made by Exxon'



    Ah, more likely they'd build a chip fab, nope, a nano chip fab, I agree with the other poster's list.



    I got what I got cause I could SEE this scenario 11 years ago
  • Reply 116 of 126
    e1618978e1618978 Posts: 6,075member
    Katy Huberty is the worst analyst on the planet - go look up her record on Apple calls if you don't believe me. It is absolutely amazing that she is still employed.



    Analysts told Ford to turn their cash horde into dividends, and Ford later regretted not having the money laying around - luckily they sold and leased back their buildings before things went south so they did OK anyway. Apple is still sore about nearly going bankrupt, and they going through the dot com bust - the dot com bust is why most tech companies have no debt and a lot of cash, they learned their lesson.



    Apple wasn't able to sue palm for infringing on the newton because they were too broke, and they had to beg Bill Gates for money. As an Apple customer, I absolutely want them to have a ton of money stashed away for safety, so they don't get into that situation again.



    However a small dividend would be a good idea probably, since some pension funds are not allowed to invest in companies that don't issued dividends.
  • Reply 117 of 126
    Quote:
    Originally Posted by e1618978 View Post


    Katy Huberty is the worst analyst on the planet - go look up her record on Apple calls if you don't believe me. It is absolutely amazing that she is still employed.



    Analysts told Ford to turn their cash horde into dividends, and Ford later regretted not having the money laying around - luckily they sold and leased back their buildings before things went south so they did OK anyway. Apple is still sore about nearly going bankrupt, and they going through the dot com bust - the dot com bust is why most tech companies have no debt and a lot of cash, they learned their lesson.



    Apple wasn't able to sue palm for infringing on the newton because they were too broke, and they had to beg Bill Gates for money. As an Apple customer, I absolutely want them to have a ton of money stashed away for safety, so they don't get into that situation again.



    However a small dividend would be a good idea probably, since some pension funds are not allowed to invest in companies that don't issued dividends.



    Agree, likely scenario. They will always keep a bundle stored away. You are right on that.



    I almost don't care what pension funds can do. I can see they can scarcely make %10 in a good year.



    I don't understand the dividend situation enough to respond intelligently.



    But, I do wonder about the stock share price compression talked about here.

    How come Microsoft split and split, a single share from the 80's would be worth a million. How come not Apple? They've made enough money, right?



    I do think it's half hedge fund manipulation and half culture clash, at least in the sense that Apple does things without consulting the customer, is heavily artistic, etc. Quite unlike the Microsoft example. I sure wish there were a way to get the stock to split so more people would be enticed to buy a few shares, and fund managers...anything to get the stock out of the maw of the hedge monster.
  • Reply 118 of 126
    e1618978e1618978 Posts: 6,075member
    Quote:
    Originally Posted by palomine View Post


    But, I do wonder about the stock share price compression talked about here.

    How come Microsoft split and split, a single share from the 80's would be worth a million. How come not Apple? They've made enough money, right?



    http://finance.yahoo.com/echarts?s=A...urce=undefined



    Apple and Microsoft are not that different over the really long term.
  • Reply 119 of 126
    Quote:
    Originally Posted by palomine View Post


    What made you respond? Do you think that crazy ideas should be stopped in here? Why do you think I'm not a shareholder?



    Of course the stock will be slaughtered as soon as they dare do anything that you can't forsee a use for. Sigh. It's sad really.



    It is more likely that the cash hoard is a deterrent to the telcos, at least until broadband is rolled out. Then, who knows? Somebody needs to make an efficient car, I really don't think it's too far from their core competencies, provided it's electric. Didn't Ives say he wanted to design a car next? Didn't apple talk to VW ? and, to paraphrase Tom Friedman, 'just as sure as I'm sittin here darlin, it ain't gonna be made by Exxon'



    Ah, more likely they'd build a chip fab, nope, a nano chip fab, I agree with the other poster's list.



    I got what I got cause I could SEE this scenario 11 years ago



    Not sure I followed much of that, but if you think companies jumping into unrelated industries are such great drivers of growth, you might want to check out the history of same. And if you don't know what real investor panic looks like, watch what happens if/when Apple announces a massive investment in some sort of wild scheme like the one you evidently favor.



    I got what I got by investing in a consumer electonics company 13 years ago when hardly anyone believed they could even survive. Fortunately they spent the intervening years perfecting their approach to the business they were in, instead of chasing some wild hare.
  • Reply 120 of 126
    No I don't think Apple should rush headlong into something 'else'. Just a wild daydream based on something Ives said and other factoids. A dream really, a wish that somebody who knows what the hell they are doing would tackle the automobile or energy. Look at the mess Google made with their solar investments, ugh.



    I sure do know what investor panic looks like. I've seen that movie many times while holding and selling AAPL. I'm just so tired of the panics really. They are continual false rumors and ginned up phony stories and even fat finger Fridays....I think only people who bought in early, the wealthy, and hedge fund monsters own the stock in any quantity.



    Truly, I know the company is a responsible one in the main, but they put out such cool things it is sometimes shocking to people. I hope they can keep up the excitement, though it most assuredly won't be by making an electric car.



    So, did you have a broker tell you that you were crazy to buy the stock back then? I did. Luckily I bought back in, in a moment of clarity. If I hadn't sold some then, I'd have our retirement x4 instead of x 2 but I'm not complaining.



    Heh. I'd like it if they split 4 for one and gave a small dividend too, but not if it's strategically the wrong thing. All of us would like to know what that pipeline is. I remember the first time I saw the patents for the iPad, long before the phone came out. They have this patent on the gesture dictionary...many surprises ahead just on that alone.
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