Battle of the billion dollar buybacks: Apple, Inc. vs Microsoft Corporation

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  • Reply 21 of 28

    Quote:

    Originally Posted by mhikl View Post



    So, since Apple buys on the open market, it seems to pay more than the stock market price at the time. Why is this?


    Actually, they buy in various volumes over a period of time, say weeks or months.


     


    When they do buy, it is at the market price that prevails then (recognizing that is endogenous to some extent, given a sudden market demand from a buyer!). If they did a targeted repurchase, it would be a negotiated price with the seller which could be different from the market price.


     


    The only thing we might get to know is the 'average' price Apple paid for it, and that could be different (e.g., higher; but could also be lower) from where the price is currently.

  • Reply 22 of 28
    Dan_DilgerDan_Dilger Posts: 1,583member
    What's the number of Microsoft's stock With all those stocks bought back?

    You can find the outstanding shares in a company at a site like Google Finance.

    Apple has had nearly a billion shares outstanding (908M), while Microsoft currently has 8.3 Billion. Apple just passed Microsoft in market cap a couple years ago, but the 10x difference in shares explains why Microsoft's share price is 1/10 the price. If Apple did a 1-10 split, its share count and stock price would look like Microsoft's, but it wouldn't mean anything.

    Basically, shares are fractional ownership of a company. When a company IPOs, it sells shares for some set amount to investors, and then those shares appreciate as the company grows. How much they are worth is based on what new investors are willing to pay and what existing investors are willing to sell for.

    Multiplying the going rate by the number of shares is the "market capitalization" or what the market currently thinks the whole company is worth. This is often misguided and doesn't represent what actual investors are willing to sell for.

    So when AAPL stock dropped from $700 to <$400, its market cap dropped by 3/7ths. But most investors weren't willing to sell their shares for $400 to buyers, whether AAPL or Icahn or whomever.

    Some gullible dummies were, and some unlucky smart people who invested through debt overextended themselves too much and were forced to sell.

    There were lots of people who were destroyed by the wild manipulation of Apple stock.

    There was no rational basis for Apple shares to be pushed from a "less than other tech companies that are performing worse" valuation of $700 to the absolutely absurd, bullshit price of ~$390. It was pushed down by a combination of fraud and ignornantly complicit "journalists" uncritically repeating every scrap of bullshit they were fed.

    Surprise! The winners on that include billionaire investors who write bullshit rather than reading it. Apple realized absorbing those underpriced shares at sub $500 prices was a good use of its extra billions of dollars.

    The shares Apple bought were destroyed, meaning all existing shareholders who had x/940millionths of Apple ownership now have the same x number of 908millionths, so they should be worth more.

    But that isn't stopping AAPL shares from being pushed down to irrational levels, so it's not a good strategy in itself for "raising the share price."

    And as soon as Apple is out of cash, it won't be able to buy back shares at all. However, Apple can keep buying back $ billions of shares using its free cash flow, so it will likely continue. And if shares stay stupidly low, this continues to be a great way for Apple to use its cash (better than letting manipulators buy it up at stupid prices).

    Icahn wants Apple to go into ~$100b of debt to "raise" the price to $600. Which appears to be a pretty transparent act of corporate raiding. Take the cash, leave, stop worrying about AAPL until it generates more cash, if it can after being stripped of capital.

    As long as Icahn, Einhorn, etc can convince the media that reality is upside down and that Apple must distribute all of its cash immediately or its stock will just dry up and blow away (ignoring the fact that holding $140billion is a core component of Apple's value!), we will continue to get reports saying that "Apple must distribute all of its cash immediately or its stock will just dry up and blow away."

    Do what the billionaires say and nobody gets hurt! Also: nobody gets rich listening to people whose job it is to take other people's money.
  • Reply 23 of 28

    Quote:


    You can find the outstanding shares in a company at a site like Google Finance.



    Apple has had nearly a billion shares outstanding (908M), while Microsoft currently has 8.3 Billion. Apple just passed Microsoft in market cap a couple years ago, but the 10x difference in shares explains why Microsoft's share price is 1/10 the price. If Apple did a 1-10 split, its share count and stock price would look like Microsoft's, but it wouldn't mean anything.



    Basically, shares are fractional ownership of a company. When a company IPOs, it sells shares for some set amount to investors, and then those shares appreciate as the company grows. How much they are worth is based on what new investors are willing to pay and what existing investors are willing to sell for.



    Multiplying the going rate by the number of shares is the "market capitalization" or what the market currently thinks the whole company is worth. This is often misguided and doesn't represent what actual investors are willing to sell for.



    So when AAPL stock dropped from $700 to <$400, its market cap dropped by 3/7ths. But most investors weren't willing to sell their shares for $400 to buyers, whether AAPL or Icahn or whomever.



    Some gullible dummies were, and some unlucky smart people who invested through debt overextended themselves too much and were forced to sell.



    There were lots of people who were destroyed by the wild manipulation of Apple stock.



    There was no rational basis for Apple shares to be pushed from a "less than other tech companies that are performing worse" valuation of $700 to the absolutely absurd, bullshit price of ~$390. It was pushed down by a combination of fraud and ignornantly complicit "journalists" uncritically repeating every scrap of bullshit they were fed.



    Surprise! The winners on that include billionaire investors who write bullshit rather than reading it. Apple realized absorbing those underpriced shares at sub $500 prices was a good use of its extra billions of dollars.



    The shares Apple bought were destroyed, meaning all existing shareholders who had x/940millionths of Apple ownership now have the same x number of 908millionths, so they should be worth more.



    But that isn't stopping AAPL shares from being pushed down to irrational levels, so it's not a good strategy in itself for "raising the share price."



    And as soon as Apple is out of cash, it won't be able to buy back shares at all. However, Apple can keep buying back $ billions of shares using its free cash flow, so it will likely continue. And if shares stay stupidly low, this continues to be a great way for Apple to use its cash (better than letting manipulators buy it up at stupid prices).



    Icahn wants Apple to go into ~$100b of debt to "raise" the price to $600. Which appears to be a pretty transparent act of corporate raiding. Take the cash, leave, stop worrying about AAPL until it generates more cash, if it can after being stripped of capital.



    As long as Icahn, Einhorn, etc can convince the media that reality is upside down and that Apple must distribute all of its cash immediately or its stock will just dry up and blow away (ignoring the fact that holding $140billion is a core component of Apple's value!), we will continue to get reports saying that "Apple must distribute all of its cash immediately or its stock will just dry up and blow away."



    Do what the billionaires say and nobody gets hurt! Also: nobody gets rich listening to people whose job it is to take other people's money.



     


    Great post. It sums up most of what i've been saying for months. I wanted to buy a few shares @430$ but i didn't have the cash. They go from one BS rumor to the next and they bring the price down by a few dollars every time. I never understood how people could think a company with no dept and double digit growth quarter after quarter could be worth  a P/E less than 10 (look at amazon, netflix,etc).  According a to an older firend of mine, they were doing the same crap (and a lot worse) 30 years ago.

  • Reply 24 of 28
    The author of this article could use a course in corporate finance.

    I do not understand how one can conclude that buy backs are ineffective because Microsoft was doing buy backs for a decade and hasn't seen a stock price appreciation in that time. How do we know that the stock wouldn't be in the tank right now if it didn't do the buy backs? It just isn't logical.

    Buy backs make sense. The cash sits their and earns 1% interest. Use it to buy back shares so investors can reinvest the money to make 8%. In the end the equity decreases, EPS increases and hence P/E would decrease or presumably the price increases to maintain a similar P/E.

    That's fine but the conversation today revolves way too much around these buy backs. Apple should definitely be doing it but what will move the needle much more on stock price is innovation and growth. Apple should be at a P/E of closer to 20. The market seems to think that Apple has peaked and will slightly decline in the future. They need to focus on introducing innovative products to prove those neigh sayers wrong. That'll impact the price much more than any buy back.
  • Reply 25 of 28
    jragostajragosta Posts: 10,473member
    You can find the outstanding shares in a company at a site like Google Finance.

    Apple has had nearly a billion shares outstanding (908M), while Microsoft currently has 8.3 Billion. Apple just passed Microsoft in market cap a couple years ago, but the 10x difference in shares explains why Microsoft's share price is 1/10 the price. If Apple did a 1-10 split, its share count and stock price would look like Microsoft's, but it wouldn't mean anything.

    Not quite. Apple's market cap is $456 B. Microsoft's is $264 B. So if Apple split by about 9:1 (to get the same number of shares), AAPL would still be almost twice MSFT's share price.
  • Reply 26 of 28
    I'm not a stock broker or anything but would assume that tactics such as stock buy back and dividend payments generally serve as a way to bolster confidence with existing shareholders. The fact that AAPL has had a dividend is notable is because typically tech companies aren't known for sharing surplus cash with shareholders, but reinvesting in new technology. My own opinion about why the stock price has dropped though is market fear about the number of products that AAPL sells: iPhone, iPod, iPad, MacBook, Mac, iTunes, iBooks and Apps... the software bound to hardware of course. So if any one hardware line has significant drops in unit sales to end users it will significantly impact revenues unless a new successful category can take its place. For example iPod sales have been steadily declining while iPhone sales steadily increasing. However, competition from outside companies is fierce with Android now outselling iPhone, and half a dozen companies attempting to fight for distant 3rd, 4th, 5th positions, etc. Why a company like Amazon does so well on Wall Street is interesting too, despite razor thin margins and a much higher price to earnings ratio than AAPL. Investors seem to value the widely diverse line of products Amazon sells and theapparent lack of competition as well. In my opinion these are quite valid points that should be taken into account before buying or selling shares in these companies. However, AAPL has had the advantage of historically negative press from quite a wide range of news sources which cannot be discounted as effecting share price, despite continued increases in sales volume and near record profits. This allows for easy pickings by its executives for making additional profits on stock buy backs. Times can change though and it's possible that in 10 more years Amazon will face its own fierce competition and AAPL will have increased its market share of PC/Post PC devices to have taken Microsofts perch at the top of the mountain.
  • Reply 27 of 28
    mayormayor Posts: 1member

    Quote:

    Originally Posted by CustomTB View Post



    I'll say it.... What is APPL? Did you leave of the E or were you referring to the stock symbol AAPL?


    Not only that, but they left a whole bunch of letters out of microsoft- they spelled it MSFT ! Can't they spel ?

  • Reply 28 of 28
    tallest skiltallest skil Posts: 43,388member

    Originally Posted by mayor View Post


    Not only that, but they left a whole bunch of letters out of microsoft- they spelled it MSFT ! Can't they spel ?




    His comment was on the fact that APPL isn't Apple's stock symbol, not that he didn't understand what a stock symbol was.

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