I'm actually long msft myself and this hardly has me shaking! The Zune brand may be dying, but some of the things they actually make money on are looking up. It isn't a zero-sum game.
As has been reported numerous times, the profit margins on the device have greatly increased the handset-maker's revenue, even allowing it to lower its prices on MacBook Pros without affecting the company's bottom line.
Suggestion - don't report on financial affairs when nobody at AI knows anything about finance. "Profit margins' do not increase revenues. The "margins" commonly referenced by legitimate financial news sources and analysts is "gross margin" (aka gross profit) which is the difference between sales price and the actual costs of manufacturing (see ifixit"s breakdown of manufacturing costs, which are commonly posted on this site). That's your gross margin / gross profit. Revenues come first, it is not a product of anything else on the income statement.
What is true, however, is that the high Gross Margins / Gross Profits seen from the iPhone are able to compensate for lower margins on other products. All of this contributes to increases in cash.
So not only are apple shafting buyers with massive profit margins, but they are also holding out on us shareholders.
Let's celebrate on being shanked two ways!
All companies seek profit margins, but a company really has to create and deliver a differentiated product to command "massive profit margins". Apple's profit margins are a testament to the hard work they put into each device and highlights an expertise that other companies consistently fail to mimic.
In regards to your "holding out on us shareholders" comment, you must not understand that any money you receive in the form of a dividend will matched with a direct reduction in the value of your shares. So, if you get a $5 dividend for each share, then each share will see a reduction in value by $5. People and institutions that trade shares (and therefore creating the market price) are aware of any loss of asset and will price the share accordingly.
Feel free to spend money on other companies products and invest in other companies that meet you criteria; criteria which apparently excludes quality products and profitable companies.
In regards to your "holding out on us shareholders" comment, you must not understand that any money you receive in the form of a dividend will matched with a direct reduction in the value of your shares. So, if you get a $5 dividend for each share, then each share will see a reduction in value by $5. People and institutions that trade shares (and therefore creating the market price) are aware of any loss of asset and will price the share accordingly.
And your proof for this is...? And before you say that it "must" be true, consider that most companies carry debt on their balance sheets, and the only time it becomes an issue for investors is when it looks like the company might have trouble servicing that debt, and the extent to which it becomes a cost of doing business. Also keep in mind that none of the standard measures of corporate performance include debt or cash on hand. Not gross earnings, not EPS, not P/E. A dollar returned to investors does not equal a dollar reduction in in stock value.
Old habits die hard... MS has a choice - do the hard work to create an environment which is irresistible to consumers and developers OR take the quick and lazy way, try to buy their way in and spread FUD, even though it doesn't work any more.
No wonder their market cap and share price has been static for a decade, while GOOG and AAPL have been posting multiples. MS needs a new business model, one with growth potential, and they have nothing but yesterday's technology, yesterday's software.
And your proof for this is...? And before you say that it "must" be true, consider that most companies carry debt on their balance sheets, and the only time it becomes an issue for investors is when it looks like the company might have trouble servicing that debt, and the extent to which it becomes a cost of doing business. Also keep in mind that none of the standard measures of corporate performance include debt or cash on hand. Not gross earnings, not EPS, not P/E. A dollar returned to investors does not equal a dollar reduction in in stock value.
The drop in share value has nothing to do with the business metrics that managers and analysts use to gauge a companies operating efficiencies, rather it has to do with arbitrage.
The first five results from a google search for "ex dividend date"
"Usually the stock's price will drop by the amount of the dividend on the ex-dividend day (ceteris paribus) since that much wealth has already been transferred by the company to its owners."
"With a significant dividend, the price of a stock may move up by the dollar amount of the dividend as the ex-dividend date approaches and then fall by that amount after the ex-dividend date."
"if you buy a dividend stock before the ex-dividend date, then you will receive the next upcoming dividend payment. If you purchase the stock on or after the ex-dividend date, you will not receive the dividend."
"Further, for all pending transactions that have not been completed by the ex-dividend date, the exchanges automatically reduce the price of the stock by the amount of the dividend. This is done because a dividend payout automatically reduces the value of the company (it comes from the company's cash reserves), and the investor would have to absorb that reduction in value (because neither the buyer nor the seller are eligible for the dividend)."
To determine a market's PE ratio for a given stock that has large sums of cash on hand, simply subtract take out the amount of cash per share. Divide this "net" figure by earnings (ttm or expected is up to you) and you have a modified multiplier. Finally, at the end of the day, while everyone values stocks with different methods, a dollar in the hand is still a dollar in the hand.
Why not just link to the WSJ article and be done with it?
You're basically taking their article, and changing some words, and publishing it as your own. Of course you've linked, and cited the Journal, but c'mon, this is mostly a fresh bowl of copypasta.
Also, the copy(pasta)-editor for AppleInsider completely misunderstood a portion of the article, and has also misinformed readers:
From WSJ:
Microsoft was in just such a growth slowdown in 2004, when it held nearly $60 billion in cash and investments. It opted to make a $32 billion one-time payment to shareholders, and doubled the payout of its annual dividends (which Microsoft began issuing the prior year).
From AI:
While Apple would rather invest in its cash as the company continues to grow, Microsoft, experiencing a growth slowdown since 2004, has taken a different approach to attract investors. Last year, Microsoft made a one-time $32 billion payment to its shareholders and doubled the payout of its annual dividends.
---
AppleInsider seems to think that MSFT's slowdown began after 2004 and backs that up by stating that the 32bn payment happened 'last year'.
Well, no.
The payment happened in 2004, and the dividend in the prior year (2003) was basically an admission by MSFT that the growth was over.
That's the Microsoft way. No innovation, just copy what others invented. No research, just buy others out. No culture, just drive them out of business.
Just a few among many business practices of Microsoft. What a shame!
Exactly.
Microsoft doesn't know how to lead, just to copy and follow.
Apple knows how to innovate and create markets. Because in business, the first ones in a new market are the ones going to profit the most. The johnny come later's don't make nearly anything.
Developers know this and they know Microsoft, so they resist M$ and M$ has to resort to bribing them.
There is no love working for Microsoft and Apple has to bribe no one.
All companies seek profit margins, but a company really has to create and deliver a differentiated product to command "massive profit margins". Apple's profit margins are a testament to the hard work they put into each device and highlights an expertise that other companies consistently fail to mimic.
In regards to your "holding out on us shareholders" comment, you must not understand that any money you receive in the form of a dividend will matched with a direct reduction in the value of your shares. So, if you get a $5 dividend for each share, then each share will see a reduction in value by $5. People and institutions that trade shares (and therefore creating the market price) are aware of any loss of asset and will price the share accordingly.
Feel free to spend money on other companies products and invest in other companies that meet you criteria; criteria which apparently excludes quality products and profitable companies.
whatever gets you to sleep at night, but apologists love you for it
The drop in share value has nothing to do with the business metrics that managers and analysts use to gauge a companies operating efficiencies, rather it has to do with arbitrage.
In terms of buzzword content, I give this sentence a 9 out of 10.
Quote:
To determine a market's PE ratio for a given stock that has large sums of cash on hand, simply subtract take out the amount of cash per share. Divide this "net" figure by earnings (ttm or expected is up to you) and you have a modified multiplier. Finally, at the end of the day, while everyone values stocks with different methods, a dollar in the hand is still a dollar in the hand.
Ah, the wisdom of Google, combined with Wikipedia. Now all is known.
Only in theory, and then only for stocks with large dividends, and not even then. In reality, investors and traders pay little to no attention to cash or hand or debt. It wasn't so long ago that AAPL was trading for close to its cash value. If you discounted the stock price for cash, as you suggest is the correct method, then the value of AAPL at that point was close to zero, or even minus, if you considered their other less liquid assets. And forget about the value of the business itself. At that point, the market was saying that wasn't worth anything.
I wish P/E was computed net cash or debt, but I have never seen such a number published.
In fact, dividends create value for investors. They make a stock more attractive.
Such a grab-bag article. What does Microsoft bribing developers have to do with Apple's cash position?
Because AI knows any article mentioning Microsoft will drive up page hits which is good for advertising revenue. They know the same group of MS haters will have to chime in with the same tired, witless MS bashing comments like they always do.
none of you understand the real problem with dividends. In high-growth fields like technology, when a firm decides to pay dividends, it sends a signal that share price growth alone is not sufficient to satisfy investors. That means the company is no longer innovating and growing like it did in the past. They are no longer re-investing profits within the company, rather they are paying out income to shareholders. Microsoft made that giant dividend payment a few years ago, and their share price has be completely stagnant, if not actually lower than before. They're done growing. Apple is not. Dividends do indeed create shareholder value, however, Apple feels they can create more value by holding onto their cash. This allows them to continue to make investments during economic downturns (which they are doing), as well as gives them the ability to make acquisitions at the drop of a hat (see the $300 million all-cash PA Semi deal).
As an investor, I'd rather see the stock price double (like Apple's has) than get a buck or two a year in dividends.
PS - the person who asked for proof that dividends have an immediate effect on share price got totally owned by the guy with all the quotes and links. HA.
They are no longer re-investing profits within the company, rather they are paying out income to shareholders. Microsoft made that giant dividend payment a few years ago, and their share price has be completely stagnant, if not actually lower than before. They're done growing. Apple is not. Dividends do indeed create shareholder value, however, Apple feels they can create more value by holding onto their cash. This allows them to continue to make investments during economic downturns (which they are doing), as well as gives them the ability to make acquisitions at the drop of a hat (see the $300 million all-cash PA Semi deal).
That's all well and good, but exactly what is Apple reinvesting the money into? I think it should be obvious that Apple didn't need $31 Billion in cash to buy PA Semi. It would seem that Apple might have to be another special case in another category unless they have something in mind, but all their investments relevant to their needs so far were pretty small relatively speaking, they pre-buy panels and chips, buy small companies, all with money that could be easily covered in one quarter's earnings.
Weren't there rumblings that Microsoft was going to be classified as a mutual find if they didn't start paying dividends? It wasn't as if they were going to use their $60B to buy useful things, especially given that they were eventually thinking of buying Yahoo.
Comments
Got MS long? Poor dear.
I'm actually long msft myself and this hardly has me shaking! The Zune brand may be dying, but some of the things they actually make money on are looking up. It isn't a zero-sum game.
Can't say I have. I have heard of regular proof reading though.
As long as it's > 102 Proof Bourbon, all is kosher.
As has been reported numerous times, the profit margins on the device have greatly increased the handset-maker's revenue, even allowing it to lower its prices on MacBook Pros without affecting the company's bottom line.
Suggestion - don't report on financial affairs when nobody at AI knows anything about finance. "Profit margins' do not increase revenues. The "margins" commonly referenced by legitimate financial news sources and analysts is "gross margin" (aka gross profit) which is the difference between sales price and the actual costs of manufacturing (see ifixit"s breakdown of manufacturing costs, which are commonly posted on this site). That's your gross margin / gross profit. Revenues come first, it is not a product of anything else on the income statement.
What is true, however, is that the high Gross Margins / Gross Profits seen from the iPhone are able to compensate for lower margins on other products. All of this contributes to increases in cash.
So not only are apple shafting buyers with massive profit margins, but they are also holding out on us shareholders.
Let's celebrate on being shanked two ways!
All companies seek profit margins, but a company really has to create and deliver a differentiated product to command "massive profit margins". Apple's profit margins are a testament to the hard work they put into each device and highlights an expertise that other companies consistently fail to mimic.
In regards to your "holding out on us shareholders" comment, you must not understand that any money you receive in the form of a dividend will matched with a direct reduction in the value of your shares. So, if you get a $5 dividend for each share, then each share will see a reduction in value by $5. People and institutions that trade shares (and therefore creating the market price) are aware of any loss of asset and will price the share accordingly.
Feel free to spend money on other companies products and invest in other companies that meet you criteria; criteria which apparently excludes quality products and profitable companies.
In regards to your "holding out on us shareholders" comment, you must not understand that any money you receive in the form of a dividend will matched with a direct reduction in the value of your shares. So, if you get a $5 dividend for each share, then each share will see a reduction in value by $5. People and institutions that trade shares (and therefore creating the market price) are aware of any loss of asset and will price the share accordingly.
And your proof for this is...? And before you say that it "must" be true, consider that most companies carry debt on their balance sheets, and the only time it becomes an issue for investors is when it looks like the company might have trouble servicing that debt, and the extent to which it becomes a cost of doing business. Also keep in mind that none of the standard measures of corporate performance include debt or cash on hand. Not gross earnings, not EPS, not P/E. A dollar returned to investors does not equal a dollar reduction in in stock value.
Can't say I have. I have heard of regular proof reading though.
Martha! Quick! Hide the kids!
They're doing that nasty kinda proof reading again!
No wonder their market cap and share price has been static for a decade, while GOOG and AAPL have been posting multiples. MS needs a new business model, one with growth potential, and they have nothing but yesterday's technology, yesterday's software.
Let's see.
1. $10K USD per app.
2. So, $1G/$10K = 10 000 apps !
3. OK. $1G/$100K = 1 000 apps.
4. $1G/$25G Cash (and equivalents) = 4% of cash. OMG, they will go broke soon!
I think that Microsoft can afford to fund some app development.
And your proof for this is...? And before you say that it "must" be true, consider that most companies carry debt on their balance sheets, and the only time it becomes an issue for investors is when it looks like the company might have trouble servicing that debt, and the extent to which it becomes a cost of doing business. Also keep in mind that none of the standard measures of corporate performance include debt or cash on hand. Not gross earnings, not EPS, not P/E. A dollar returned to investors does not equal a dollar reduction in in stock value.
The drop in share value has nothing to do with the business metrics that managers and analysts use to gauge a companies operating efficiencies, rather it has to do with arbitrage.
The first five results from a google search for "ex dividend date"
"Usually the stock's price will drop by the amount of the dividend on the ex-dividend day (ceteris paribus) since that much wealth has already been transferred by the company to its owners."
http://en.wikipedia.org/wiki/Ex-dividend_date
"With a significant dividend, the price of a stock may move up by the dollar amount of the dividend as the ex-dividend date approaches and then fall by that amount after the ex-dividend date."
http://www.sec.gov/answers/dividen.htm
"if you buy a dividend stock before the ex-dividend date, then you will receive the next upcoming dividend payment. If you purchase the stock on or after the ex-dividend date, you will not receive the dividend."
http://www.dividend.com/ex-dividend-dates.php
"After the ex-date has been declared, the stock will usually drop in price by the amount of the expected dividend."
http://www.investopedia.com/terms/e/ex-dividend.asp
"Further, for all pending transactions that have not been completed by the ex-dividend date, the exchanges automatically reduce the price of the stock by the amount of the dividend. This is done because a dividend payout automatically reduces the value of the company (it comes from the company's cash reserves), and the investor would have to absorb that reduction in value (because neither the buyer nor the seller are eligible for the dividend)."
http://www.investorwords.com/1819/ex_dividend_date.html
To determine a market's PE ratio for a given stock that has large sums of cash on hand, simply subtract take out the amount of cash per share. Divide this "net" figure by earnings (ttm or expected is up to you) and you have a modified multiplier. Finally, at the end of the day, while everyone values stocks with different methods, a dollar in the hand is still a dollar in the hand.
You're basically taking their article, and changing some words, and publishing it as your own. Of course you've linked, and cited the Journal, but c'mon, this is mostly a fresh bowl of copypasta.
Also, the copy(pasta)-editor for AppleInsider completely misunderstood a portion of the article, and has also misinformed readers:
From WSJ:
Microsoft was in just such a growth slowdown in 2004, when it held nearly $60 billion in cash and investments. It opted to make a $32 billion one-time payment to shareholders, and doubled the payout of its annual dividends (which Microsoft began issuing the prior year).
From AI:
While Apple would rather invest in its cash as the company continues to grow, Microsoft, experiencing a growth slowdown since 2004, has taken a different approach to attract investors. Last year, Microsoft made a one-time $32 billion payment to its shareholders and doubled the payout of its annual dividends.
---
AppleInsider seems to think that MSFT's slowdown began after 2004 and backs that up by stating that the 32bn payment happened 'last year'.
Well, no.
The payment happened in 2004, and the dividend in the prior year (2003) was basically an admission by MSFT that the growth was over.
NOT!
Let's see.
1. $10K USD per app.
2. So, $1G/$10K = 10 000 apps !
3. OK. $1G/$100K = 1 000 apps.
4. $1G/$25G Cash (and equivalents) = 4% of cash. OMG, they will go broke soon!
I think that Microsoft can afford to fund some app development.
10K per app is just going to fund a bunch of "fart" apps. Good luck with that strategy!
That's the Microsoft way. No innovation, just copy what others invented. No research, just buy others out. No culture, just drive them out of business.
Just a few among many business practices of Microsoft. What a shame!
Exactly.
Microsoft doesn't know how to lead, just to copy and follow.
Apple knows how to innovate and create markets. Because in business, the first ones in a new market are the ones going to profit the most. The johnny come later's don't make nearly anything.
Developers know this and they know Microsoft, so they resist M$ and M$ has to resort to bribing them.
There is no love working for Microsoft and Apple has to bribe no one.
All companies seek profit margins, but a company really has to create and deliver a differentiated product to command "massive profit margins". Apple's profit margins are a testament to the hard work they put into each device and highlights an expertise that other companies consistently fail to mimic.
In regards to your "holding out on us shareholders" comment, you must not understand that any money you receive in the form of a dividend will matched with a direct reduction in the value of your shares. So, if you get a $5 dividend for each share, then each share will see a reduction in value by $5. People and institutions that trade shares (and therefore creating the market price) are aware of any loss of asset and will price the share accordingly.
Feel free to spend money on other companies products and invest in other companies that meet you criteria; criteria which apparently excludes quality products and profitable companies.
whatever gets you to sleep at night, but apologists love you for it
The drop in share value has nothing to do with the business metrics that managers and analysts use to gauge a companies operating efficiencies, rather it has to do with arbitrage.
In terms of buzzword content, I give this sentence a 9 out of 10.
To determine a market's PE ratio for a given stock that has large sums of cash on hand, simply subtract take out the amount of cash per share. Divide this "net" figure by earnings (ttm or expected is up to you) and you have a modified multiplier. Finally, at the end of the day, while everyone values stocks with different methods, a dollar in the hand is still a dollar in the hand.
Ah, the wisdom of Google, combined with Wikipedia. Now all is known.
Only in theory, and then only for stocks with large dividends, and not even then. In reality, investors and traders pay little to no attention to cash or hand or debt. It wasn't so long ago that AAPL was trading for close to its cash value. If you discounted the stock price for cash, as you suggest is the correct method, then the value of AAPL at that point was close to zero, or even minus, if you considered their other less liquid assets. And forget about the value of the business itself. At that point, the market was saying that wasn't worth anything.
I wish P/E was computed net cash or debt, but I have never seen such a number published.
In fact, dividends create value for investors. They make a stock more attractive.
it's a subjective term so who knows what the developer meant by that.
IMO though 10,000 hasn't been anything one could consider "a bucket of money" for a long time.
Indeed, a 'bucket' would need to be way into 6 figures, especially to do something for MS.
Such a grab-bag article. What does Microsoft bribing developers have to do with Apple's cash position?
Because AI knows any article mentioning Microsoft will drive up page hits which is good for advertising revenue. They know the same group of MS haters will have to chime in with the same tired, witless MS bashing comments like they always do.
Great work!
Cut that out. Maybe you would have a point if you weren't so condescending about it.
As an investor, I'd rather see the stock price double (like Apple's has) than get a buck or two a year in dividends.
PS - the person who asked for proof that dividends have an immediate effect on share price got totally owned by the guy with all the quotes and links. HA.
They are no longer re-investing profits within the company, rather they are paying out income to shareholders. Microsoft made that giant dividend payment a few years ago, and their share price has be completely stagnant, if not actually lower than before. They're done growing. Apple is not. Dividends do indeed create shareholder value, however, Apple feels they can create more value by holding onto their cash. This allows them to continue to make investments during economic downturns (which they are doing), as well as gives them the ability to make acquisitions at the drop of a hat (see the $300 million all-cash PA Semi deal).
That's all well and good, but exactly what is Apple reinvesting the money into? I think it should be obvious that Apple didn't need $31 Billion in cash to buy PA Semi. It would seem that Apple might have to be another special case in another category unless they have something in mind, but all their investments relevant to their needs so far were pretty small relatively speaking, they pre-buy panels and chips, buy small companies, all with money that could be easily covered in one quarter's earnings.
Weren't there rumblings that Microsoft was going to be classified as a mutual find if they didn't start paying dividends? It wasn't as if they were going to use their $60B to buy useful things, especially given that they were eventually thinking of buying Yahoo.