Apple went from $0 debt to $16B and no one in Wall Street blinked an eye. An additional $16B debt won't matter because they will have over $200B in cash by the end of the year. The key is the debt is extremely cheap and it doesn't take a genius to see that Apple could pay off all the debt even if their free cash flows is CUT IN HALF.
Once a Republican president gets into the White House we will probably see a tax holiday. Then Apple can bring back all their cash and pay off all their debt.
You'll be long dead before a Republican takes the White House, ever again.
-Anything else in the entire world that 1/3 of their savings could afford
One burrito for lunch is not dumb, but buying 1000 burritos you don't really need is completely stupid.
Also remember, it's exponentially easier to spend money than to save it.
Cash earns nothing? Since it's used in this context as a short hand term for savings, I'm pretty sure Apple's got it all in various accounts (which can earn interest), rather than in stacks of $20's tucked under Tim Cook's mattress.
Look, you obviously have no clue, nor any hope for getting one, but let's try this again just for closure: If I have $3000, and I use $1000 to buy Swiss Francs. Did I just waste my money? As for how much interest Apple earns, it is a matter of public record, and it is WAY under 1%. So, buying back stock actually SAVES them money, since they don't have to pay out those dividends. AND the stock appreciates while in the treasury, so next time they give stock grants, it is cheaper.
It is not always imprudent to take on additional debt. It depends on the level.
To answer your question, it can be quite bad to take on debt beyond a certain level because:
It increases the risk of financial distress;
It increases financial risk to shareholders because they're pushed down in priority in terms of claims to the firm's cash flows (ore precisely, their expected returns go up because – sorry to get technical – their ‘equity ß' (but not the asset ß) goes up);
The more debt you take on, the lower your credit rating, thereby raising the marginal cost of additional debt;
Senior debt – the kind that Apple would issue – comes with indentures, which place all sorts of restrictions on management behavior on things from working capital, to share repurchases, to dividend payments, to capex….. the list goes on
It could eliminate your financial slack, i.e., you may not have as much access to external capital as you like (and at a cost you want) when you actually need it, when, for example, major new investment opportunities present themselves;
External financing is always more expensive than internal financing because of transaction costs, filing/registration requirements, signaling costs, agency costs;
In general, there is no need to take on debt unless you want to take on debt (or unless you think you could become a takeover target, and want to preemptively recapitalize).
Ultimately, my point of view is that nobody knows Apple's business as well as Apple does. I can also see that Apple is extremely conscious of their growing cash holdings. They have constantly said that they are working on returning money to shareholders. I don't think that Apple is just sitting on the cash out of spite or out of fear. Sure, they are more conservative than most of their competitors but I just don't think that Apple's long term vision and Icahn's long term vision is the same. Apple is thinking about all their investors as a whole while Icahn is thinking more about Icahn. That is his precedent.
That’s the simple bottom line, if you trust Apple management.
I do. (Although I believe that they really need to do a much better job of managing Wall Street expectations – they’re doing a p!$$-poor job on that front, IMHO).
A guy like Icahn has no business giving advice to Apple. In fact, given his company’s pathetic stock performance (relative to Apple’s), it is laughable and arrogant for him to presume to do that.
See my reply to sog35 here, for more on Icahn's stock v. AAPL: http://bit.ly/1ejzEML
That’s the simple bottom line, if you trust Apple management.
I do. (Although I believe that they really need to do a much better job of managing Wall Street expectations – they’re doing a p!$$-poor job on that front, IMHO).
A guy like Icahn has no business giving advice to Apple. In fact, given his company’s pathetic stock performance (relative to Apple’s), it is laughable and arrogant for him to presume to do that.
See my reply to sog35 here, for more on Icahn's stock v. AAPL: http://bit.ly/1ejzEML
I completely agree with trusting Apple management. They don't always do or say what folks would like to see or hear but they have a strong understanding of their business and their customers. Carl Icahn is solely interested in making money. Sure he's an investor and that what an investor needs to do, but I don't think he is providing Apple any insight that they don't have on their own. His long term might be a year or two, if that, but Apple's long term is infinitely longer than that.
I also think there are outside factors influencing the stock other than how Apple is managing Wall Street's expectations. Apple took the initiative awhile back to give more accurate guidance to try and taper expectations. They also provide more insight into their business than pretty much all their competitors. Apple, especially Tim Cook, has been stepping out of its shadows more lately with things like announcing the Mac Pro so far in advance, Tim Cook doing more interviews and even talking about entering new product categories. I think those are all steps in the right direction but I also think there are institutions and other large investors, including people like Icahn, that are influencing the stock beyond what folks see in public.
Maybe Icahn should turn his attention to Fox, a nice even split between media and newspapers leaving plenty of assets to sell off, Rupert's getting on in years and there are plenty of opportunities for an activist shareholder to restructure with some juicy profits, once Rupert is out of the way.
Can you elaborate on that? In my lifetime this has mostly swapped between a Republican and Democratic president every 2 terms.
What he meant to have said (no, not a joke): "I wish I die before a Republican is elected president". But since it is hard to talk of one's own demise, he decided to insult everyone else.
What he meant to have said (no, not a joke): "I wish I die before a Republican is elected president". But since it is hard to talk of one's own demise, he decided to insult everyone else.
Look, you obviously have no clue, nor any hope for getting one, but let's try this again just for closure: If I have $3000, and I use $1000 to buy Swiss Francs. Did I just waste my money? As for how much interest Apple earns, it is a matter of public record, and it is WAY under 1%. So, buying back stock actually SAVES them money, since they don't have to pay out those dividends. AND the stock appreciates while in the treasury, so next time they give stock grants, it is cheaper.
What a maroon...
Seems like I was correct in that 1% is more than nothing? Get over it.
You know... if buying back Icahn's amounts of stock is such a absolute sure and totally perfect way to make money, I'm sure Apple would love to do that... oh wait... they aren't. So maybe it's time to get off this hobby horse and leave Carl's o-ring unsuctioned.
Seems like I was correct in that 1% is more than nothing? Get over it.
You know... if buying back Icahn's amounts of stock is such a absolute sure and totally perfect way to make money, I'm sure Apple would love to do that... oh wait... they aren't. So maybe it's time to get off this hobby horse and leave Carl's o-ring unsuctioned.
No, 1% is LESS than nothing, since Apple pays more than that in dividends.
Comments
Apple went from $0 debt to $16B and no one in Wall Street blinked an eye. An additional $16B debt won't matter because they will have over $200B in cash by the end of the year. The key is the debt is extremely cheap and it doesn't take a genius to see that Apple could pay off all the debt even if their free cash flows is CUT IN HALF.
Once a Republican president gets into the White House we will probably see a tax holiday. Then Apple can bring back all their cash and pay off all their debt.
You'll be long dead before a Republican takes the White House, ever again.
"Keep buying Tim!"
What he said: "Keep buying Tim!"
What he meant: "Make me even more obscenely wealthy Tim!"
You'll be long dead before a Republican takes the White House, ever again.
I must be in the wrong place: is this the "Red Army Faction Insider"?
What does Apple need more?
-More AAPL stock
-Anything else in the entire world that 1/3 of their savings could afford
One burrito for lunch is not dumb, but buying 1000 burritos you don't really need is completely stupid.
Also remember, it's exponentially easier to spend money than to save it.
Cash earns nothing? Since it's used in this context as a short hand term for savings, I'm pretty sure Apple's got it all in various accounts (which can earn interest), rather than in stacks of $20's tucked under Tim Cook's mattress.
Look, you obviously have no clue, nor any hope for getting one, but let's try this again just for closure: If I have $3000, and I use $1000 to buy Swiss Francs. Did I just waste my money? As for how much interest Apple earns, it is a matter of public record, and it is WAY under 1%. So, buying back stock actually SAVES them money, since they don't have to pay out those dividends. AND the stock appreciates while in the treasury, so next time they give stock grants, it is cheaper.
What a maroon...
Why is it bad to take additional debt?
It is not always imprudent to take on additional debt. It depends on the level.
To answer your question, it can be quite bad to take on debt beyond a certain level because:
In general, there is no need to take on debt unless you want to take on debt (or unless you think you could become a takeover target, and want to preemptively recapitalize).
Ultimately, my point of view is that nobody knows Apple's business as well as Apple does. I can also see that Apple is extremely conscious of their growing cash holdings. They have constantly said that they are working on returning money to shareholders. I don't think that Apple is just sitting on the cash out of spite or out of fear. Sure, they are more conservative than most of their competitors but I just don't think that Apple's long term vision and Icahn's long term vision is the same. Apple is thinking about all their investors as a whole while Icahn is thinking more about Icahn. That is his precedent.
That’s the simple bottom line, if you trust Apple management.
I do. (Although I believe that they really need to do a much better job of managing Wall Street expectations – they’re doing a p!$$-poor job on that front, IMHO).
A guy like Icahn has no business giving advice to Apple. In fact, given his company’s pathetic stock performance (relative to Apple’s), it is laughable and arrogant for him to presume to do that.
See my reply to sog35 here, for more on Icahn's stock v. AAPL: http://bit.ly/1ejzEML
That’s the simple bottom line, if you trust Apple management.
I do. (Although I believe that they really need to do a much better job of managing Wall Street expectations – they’re doing a p!$$-poor job on that front, IMHO).
A guy like Icahn has no business giving advice to Apple. In fact, given his company’s pathetic stock performance (relative to Apple’s), it is laughable and arrogant for him to presume to do that.
See my reply to sog35 here, for more on Icahn's stock v. AAPL: http://bit.ly/1ejzEML
I completely agree with trusting Apple management. They don't always do or say what folks would like to see or hear but they have a strong understanding of their business and their customers. Carl Icahn is solely interested in making money. Sure he's an investor and that what an investor needs to do, but I don't think he is providing Apple any insight that they don't have on their own. His long term might be a year or two, if that, but Apple's long term is infinitely longer than that.
I also think there are outside factors influencing the stock other than how Apple is managing Wall Street's expectations. Apple took the initiative awhile back to give more accurate guidance to try and taper expectations. They also provide more insight into their business than pretty much all their competitors. Apple, especially Tim Cook, has been stepping out of its shadows more lately with things like announcing the Mac Pro so far in advance, Tim Cook doing more interviews and even talking about entering new product categories. I think those are all steps in the right direction but I also think there are institutions and other large investors, including people like Icahn, that are influencing the stock beyond what folks see in public.
edited for typos.
Some thought the White House would never turn Black.
Can you elaborate on that? In my lifetime this has mostly swapped between a Republican and Democratic president every 2 terms.
Can you elaborate on that? In my lifetime this has mostly swapped between a Republican and Democratic president every 2 terms.
What he meant to have said (no, not a joke): "I wish I die before a Republican is elected president". But since it is hard to talk of one's own demise, he decided to insult everyone else.
Some thought the White House would never turn Black.
And once you go Black...
Nothing about his comment was insulting to me.
Nothing about his comment was insulting to me.
I am happy for you.
Please...take a humour pill and lighten up. :no:
Look, you obviously have no clue, nor any hope for getting one, but let's try this again just for closure: If I have $3000, and I use $1000 to buy Swiss Francs. Did I just waste my money? As for how much interest Apple earns, it is a matter of public record, and it is WAY under 1%. So, buying back stock actually SAVES them money, since they don't have to pay out those dividends. AND the stock appreciates while in the treasury, so next time they give stock grants, it is cheaper.
What a maroon...
Seems like I was correct in that 1% is more than nothing? Get over it.
You know... if buying back Icahn's amounts of stock is such a absolute sure and totally perfect way to make money, I'm sure Apple would love to do that... oh wait... they aren't. So maybe it's time to get off this hobby horse and leave Carl's o-ring unsuctioned.
Seems like I was correct in that 1% is more than nothing? Get over it.
You know... if buying back Icahn's amounts of stock is such a absolute sure and totally perfect way to make money, I'm sure Apple would love to do that... oh wait... they aren't. So maybe it's time to get off this hobby horse and leave Carl's o-ring unsuctioned.
No, 1% is LESS than nothing, since Apple pays more than that in dividends.
No, 1% is LESS than nothing, since Apple pays more than that in dividends.
You said Apple makes zero from 'cash'.
You then cited Apple makes '1% from cash' as evidence that Apple makes 'zero'.
Now by creative accounting, you've said that Apple makes 'less than zero' on 'cash' because of a different expense in a different area.