I for one, do not think that the announcement of new iPhone/iPad models is the only news here.
Maybe Apple finally got China Telecom and its potential 700 million customers on board. Just think that 5% of 700 M is 35 M.
It makes sense to borrow money at 3% to buy back stock and push the share price up to $600
rough calculation
Buy $100B worth of shares at 3% costs 103B over a certain term
According to my calculation if share price goes to $600 thats a 9% gain based on an average buying price of 550 ie 50/550
thats about 9% "profit" on a total purchase of 100Billion. That is called a no brainer!
what is the money doing offshore? I don't think it is making 9% now is it?
The point is that they can leverage it to make more money by borrowing and using offshore cash as collatoral, 100B at 3% or less - and pay the principle off at 3% over a number of years. i.e use future profits to pay the loan which is also before taxes I believe? Basically the cash hoard can be reduced and the benefit is to stock price is kept really high and it makes the company more attractive to investors
That's not the way such a decision would be considered. There is no 'profit' at all - unless you sell more shares at 600 (in your example) and that's not in the cards.
Rather, the decision is one of "we have $x billion domestically and $y billion overseas. We want to maximize shareholder value. How do we do that?"
It seems that their decision was that they were generating plenty of profit both domestically and overseas to pay off the loan and they didn't have anything better to spend that money on.
That's not the way such a decision would be considered. There is no 'profit' at all - unless you sell more shares at 600 (in your example) and that's not in the cards.
Rather, the decision is one of "we have $x billion domestically and $y billion overseas. We want to maximize shareholder value. How do we do that?"
It seems that their decision was that they were generating plenty of profit both domestically and overseas to pay off the loan and they didn't have anything better to spend that money on.
I respectfully disagree sir, yes I Agree they don't make a classical profit because as you point out you they can't sell them, but for all intents and purposes they are indeed making a "profit" in the sense that each share they own is worth more implicitly because there are less of them available in the float thereby causing the stock to rise. The profit they make in the USA is reduced in future years because they have to service the debt - this reduces taxes they owe in the US without really costing them anything, in fact it saves money. I assume they pay their suppliers mainly from their offshore accounts
This AAPL rally won't last. And AAPL will continue to trade sideways as long as they continue to issue these dividends. The smart money is going in to Amazon.com.
lol.. that is right. Don't invest in ANY company making profit and doing any profit sharing. /s
I believe that 150 Billion is too much, but not 100 B if it is limited by the PE of the stock . There is no reason to buy rapidly above 15 PE . I would use 25 % of cash earnings each Q from over seas to buy back stock between 15 and 20 PE. I would retire debt over 20 PE. I would stop acquiring debt atfter the net of cash minus debt minus the cost of repatriating the debt leaves $50 B in cash reserves. What you are buying is future Apple earnings. Given managements knowledge of the pipeline that should be a very safe bet.
Comments
China Mobile?
That's not the way such a decision would be considered. There is no 'profit' at all - unless you sell more shares at 600 (in your example) and that's not in the cards.
Rather, the decision is one of "we have $x billion domestically and $y billion overseas. We want to maximize shareholder value. How do we do that?"
It seems that their decision was that they were generating plenty of profit both domestically and overseas to pay off the loan and they didn't have anything better to spend that money on.
I am glad I bough in at $400 when almost everyone here said I was crazy.....
That's not the way such a decision would be considered. There is no 'profit' at all - unless you sell more shares at 600 (in your example) and that's not in the cards.
Rather, the decision is one of "we have $x billion domestically and $y billion overseas. We want to maximize shareholder value. How do we do that?"
It seems that their decision was that they were generating plenty of profit both domestically and overseas to pay off the loan and they didn't have anything better to spend that money on.
I respectfully disagree sir, yes I Agree they don't make a classical profit because as you point out you they can't sell them, but for all intents and purposes they are indeed making a "profit" in the sense that each share they own is worth more implicitly because there are less of them available in the float thereby causing the stock to rise. The profit they make in the USA is reduced in future years because they have to service the debt - this reduces taxes they owe in the US without really costing them anything, in fact it saves money. I assume they pay their suppliers mainly from their offshore accountsOriginally Posted by Potsie Webber
The smart money is going in to Amazon.com.
HA HA H AH AH AH A HA HA HA H AH AH!
jragosta, have a look at this one! BA HA HA!
Quote:
Originally Posted by Potsie Webber
This AAPL rally won't last. And AAPL will continue to trade sideways as long as they continue to issue these dividends. The smart money is going in to Amazon.com.
lol.. that is right. Don't invest in ANY company making profit and doing any profit sharing. /s