More money WASTED by Cook - the buybacks have done nothing for shareholders or Apple - use that money to give us far larger dividends - not the pathetic 2% a year as it is now.
To my mind, Cook is trying to correct a serious error in judgement he made several year ago: paying dividends at all. I thought it was a bad idea at the time because it made Apple a target for whiners and institutional raiders.
What he's trying to do now is get rid of the whiners and raiders. Cook will not say anything to boost the stock price and he won't increase the dividend by more than a few paltry percentage points (if at all). What he will do is to continue to 'waste' money buying Apple shares at a knockdown price.
Icahn has dumped his shares. This is Cook's first major success in his strategy. As the share price sinks he'll buy more and more of the whiners and raiders will dump their shares driving the price down further. The shareholders left will be those who see the stock as a long-term growth proposition and not a quick profit day trade.
So to my mind, Cook is not wasting the money – he's getting rid of investors who think like you, which is much better for the company long term.
I know, I want them to go private SO BAD! What a mark of excellence that would prove! I think... A company that started out, went public for 30 or so years, then regained it's utter independence and goes back private! Being the most profitable company in the world! You can sit there and say, so many people use Windows blah blah blah, that means squat! I would easily pay $1,200 for a REAL SECURE LAPTOP, vs a $700 CLICK ANYTHING DIE laptop. That's why when you compare Apple to other computer companies it's seriously a shamble! Apple does the work, to make things SECURE. F! everything else. Do you want to restore from backup every other day? I seriously can't browse the Web like I can on my Mac. If I feel like I want to "Click on something risky" on my Mac, NO PROBLEM, on my Windows machines, not unless I do a full backup, and if I REALLY need to click on it IN WINDOWS, otherwise I just jump over to my Mac and then click it, sheesh then if it's SAFE I go back the Win7 machine. Here's the other point, people used to ask me when I was out at places, they said what do you do on your laptop if there's no internet, and I would say I am programing, they would say oh. But the real deal is most people MUST have internet all the time for their computer, SO HOW are you supposed be able to use Windows and not be able to CLICK on something in a Web PAGE! The answer is you can't! Microsoft will soon be migrating to Linux, trust me. From Windows to Linux just like Apple did from Mac OS 9 to Mac OS X. They must, there are too many HOLES!!! Apple vs Microsoft, please, I hate to bring up the old 2000's argument, but please, GO PRIVATE APPLE!!!
More money WASTED by Cook - the buybacks have done nothing for shareholders or Apple - use that money to give us far larger dividends - not the pathetic 2% a year as it is now.
That's the point: at current stock prices, most of the buybacks last year were made at higher prices. However, Apple expects that to change, based on more information that you have available to yourself. Also, you can't say buybacks haven't helped the stock price because without them it likely would be even lower.
You are really giving Cook and co a lot of credit. How many YEARS did it take before they realized they need to build a phone with a bigger screen? And do you really think they know what the Chinese govt will do? They've propped up the stock price, but falling revenue will offset buybacks. Ac is right. A larger dividend would put in a better floor then buybacks.
Yes, 'the bigger screen' comment comes up a lot from armchair CEOs. The big screen phone didn't just appear overnight; Apple had it designed and ready for years, but didn't release it until sales of the smaller screen phones started to level off. Releasing a larger screen phone when the smaller screen phone was still selling like hot cakes is bad business in Apple's view. But that is just their view. When you run a company that in a really bad quarter still made more money than Google, Facebook and Microsoft combined then Cook will listen to you.
Seems like desperation, but Cook doesnt care he's more focused on LBGT issues, and of course he's sold every share he has ever owned. Or another way to think of it is investors are counting on China and Cook. Right.
That's not true. Cook's shares in Apple are public record. He has tons of shares still to vest, and currently holds many more than you - close to a million last I checked. He has THE vested interest in Apple's stock price going up.
But yes, OBVIOUSLY Apple's second largest market with the most growth potential is important.
How can he sell them before they vest? But trust me, when they vest he will sell just like he's done every other time they have.
Why would you trust in his judgment? It took him YEARS to figure out a bigger screen would be more popular. In 2013 and 14 he promised new product lines over the course of each year and delivered nothing.
Hey, I will buy back when the stock hits $75-80 if it looks like the revenue declines are going to stop.
In short they should save the money for the buybacks until the price is much lower, but they won't because they are desperate and of course Cook has another 500K RSUs vesting in 8/16, and based on his track record he will be selling them all 1 day after they vest.
More money WASTED by Cook - the buybacks have done nothing for shareholders or Apple - use that money to give us far larger dividends - not the pathetic 2% a year as it is now.
That's the point: at current stock prices, most of the buybacks last year were made at higher prices. However, Apple expects that to change, based on more information that you have available to yourself.
Also, you can't say buybacks haven't helped the stock price because without them it likely would be even lower.
And why would it be lower w/o buybacks? And what does that say about Cook's leadership?
sometimes I wonder if people actually realize what buying back shares does for Apple: It retires the dividend payment, now, and as it grows in the future:
If shares are trading around $110, for example, and Apple is paying 1.3% in interest to repurchase those shares, it is effectively paying $1.43 per share to retire those shares. But right now Apple pays a total of $2.08 per share in dividends, so it realizes a net savings of $0.65 per share, in this example. Paying $1.43 to save $2.08 already sounds like a pretty good deal, but it actually gets even better from there. Interest expense is tax deductible, whereas dividend expenses are not, so Apple's after-tax savings are even greater.
Over the past fiscal year alone, Apple has retired 289 million shares outstanding, so you can see how quickly all those dividend savings add up, even if Apple does incur interest expense in order to do so. You can also see these savings manifest in the cash flow statement. Apple boosted its dividend payout by 8% in 2014 and another 11% in 2015 (these increases take effect halfway through the fiscal year), but total dividend expense increased by merely 4% in fiscal 2015 to $11.6 billion.
You need to take a class in investing finance. Go calculate the $$$ shareholders would have in their pockets if the $120,000,000,000 had been given to the shareholders as a dividend. I'd gladly pay the taxes on new money in my pocket as opposed to having a pathetic 2% dividend.
$120,000,000,000 / 5,500,000,000 shares outstanding = $21 / share x your number of shares. compare that to the $2/share/year they have dribbled out under the current scheme.
I know, I want them to go private SO BAD! What a mark of excellence that would prove! I think... A company that started out, went public for 30 or so years, then regained it's utter independence and goes back private! Being the most profitable company in the world! You can sit there and say, so many people use Windows blah blah blah, that means squat! I would easily pay $1,200 for a REAL SECURE LAPTOP, vs a $700 CLICK ANYTHING DIE laptop. That's why when you compare Apple to other computer companies it's seriously a shamble! Apple does the work, to make things SECURE. F! everything else. Do you want to restore from backup every other day? I seriously can't browse the Web like I can on my Mac. If I feel like I want to "Click on something risky" on my Mac, NO PROBLEM, on my Windows machines, not unless I do a full backup, and if I REALLY need to click on it IN WINDOWS, otherwise I just jump over to my Mac and then click it, sheesh then if it's SAFE I go back the Win7 machine. Here's the other point, people used to ask me when I was out at places, they said what do you do on your laptop if there's no internet, and I would say I am programing, they would say oh. But the real deal is most people MUST have internet all the time for their computer, SO HOW are you supposed be able to use Windows and not be able to CLICK on something in a Web PAGE! The answer is you can't! Microsoft will soon be migrating to Linux, trust me. From Windows to Linux just like Apple did from Mac OS 9 to Mac OS X. They must, there are too many HOLES!!! Apple vs Microsoft, please, I hate to bring up the old 2000's argument, but please, GO PRIVATE APPLE!!!
You are really giving Cook and co a lot of credit. How many YEARS did it take before they realized they need to build a phone with a bigger screen? And do you really think they know what the Chinese govt will do? They've propped up the stock price, but falling revenue will offset buybacks. Ac is right. A larger dividend would put in a better floor then buybacks.
Yes, 'the bigger screen' comment comes up a lot from armchair CEOs. The big screen phone didn't just appear overnight; Apple had it designed and ready for years, but didn't release it until sales of the smaller screen phones started to level off. Releasing a larger screen phone when the smaller screen phone was still selling like hot cakes is bad business in Apple's view. But that is just their view. When you run a company that in a really bad quarter still made more money than Google, Facebook and Microsoft combined then Cook will listen to you.
Important to also consider the thickness of the device. Apple was not interested in making a large screen phone the thickness of the iPhone 5 series, which at the time was what the competitor larger screen phones were. Big & heavy. Apple introduced a larger screen phone when technology allowed them to have one thinner and lighter, and thus continue to have a desirable device.
sometimes I wonder if people actually realize what buying back shares does for Apple: It retires the dividend payment, now, and as it grows in the future:
If shares are trading around $110, for example, and Apple is paying 1.3% in interest to repurchase those shares, it is effectively paying $1.43 per share to retire those shares. But right now Apple pays a total of $2.08 per share in dividends, so it realizes a net savings of $0.65 per share, in this example. Paying $1.43 to save $2.08 already sounds like a pretty good deal, but it actually gets even better from there. Interest expense is tax deductible, whereas dividend expenses are not, so Apple's after-tax savings are even greater.
Over the past fiscal year alone, Apple has retired 289 million shares outstanding, so you can see how quickly all those dividend savings add up, even if Apple does incur interest expense in order to do so. You can also see these savings manifest in the cash flow statement. Apple boosted its dividend payout by 8% in 2014 and another 11% in 2015 (these increases take effect halfway through the fiscal year), but total dividend expense increased by merely 4% in fiscal 2015 to $11.6 billion.
Very good points, and one of the few sensible posts on this thread. In addition to your notes on how this saves dividend payout expenses, there is of course the other benefit that future earnings are spread over fewer shares, increasing the earnings/share ratio, a key metric of company profitability. Yes, this hasn't been reflected in the share price (yet), but that is not directly in Apple managements control. Apple forward PE with cash is 10x, but extracting out cash (and debt), the PE is closer to 8x. That is 1/3 of the S&P 500 average right now, and under 1/2 of its long term average.
Apple is simply vastly undervalued by the market - even considering this past down quarter. As more shares are retired, that multiple will increase again. While the market (not necessarily "Wall Street") is valuing shares based on an end-of-the world scenario, as that PE gets even lower with less shares, it will reach a point where momentum shifts.
As noted, if Apple was using sparse cash for this purpose, it would be silly. But they are generating more cash than could otherwise be managed. What most often does fail is large acquisitions.
I know, I want them to go private SO BAD! What a mark of excellence that would prove! I think... A company that started out, went public for 30 or so years, then regained it's utter independence and goes back private! Being the most profitable company in the world! You can sit there and say, so many people use Windows blah blah blah, that means squat! I would easily pay $1,200 for a REAL SECURE LAPTOP, vs a $700 CLICK ANYTHING DIE laptop. That's why when you compare Apple to other computer companies it's seriously a shamble! Apple does the work, to make things SECURE. F! everything else. Do you want to restore from backup every other day? I seriously can't browse the Web like I can on my Mac. If I feel like I want to "Click on something risky" on my Mac, NO PROBLEM, on my Windows machines, not unless I do a full backup, and if I REALLY need to click on it IN WINDOWS, otherwise I just jump over to my Mac and then click it, sheesh then if it's SAFE I go back the Win7 machine. Here's the other point, people used to ask me when I was out at places, they said what do you do on your laptop if there's no internet, and I would say I am programing, they would say oh. But the real deal is most people MUST have internet all the time for their computer, SO HOW are you supposed be able to use Windows and not be able to CLICK on something in a Web PAGE! The answer is you can't! Microsoft will soon be migrating to Linux, trust me. From Windows to Linux just like Apple did from Mac OS 9 to Mac OS X. They must, there are too many HOLES!!! Apple vs Microsoft, please, I hate to bring up the old 2000's argument, but please, GO PRIVATE APPLE!!!
It's not going to happen.. going private that is.
Actually Apple does not need to go private.
They can simply de-list their stock from the public exchanges. And then have their stock sold in a private exchange with unbreakable stipulations. For example they could require any shares purchased needs to be held for 12 months. That would bring an end to options trading, computer trading, and short trading that allows a few Wall Street manipulators to control a $600 billion company.
De-listing the company from public exchanges would stop a ton of manipulation and only long-term investors would be allow to own the stock (minimum 1 year holding period)
Apple would still need to file quarterly with the SEC since it would have far more than 2000 shareholders.
No company has ever gone to such lengths to avoid Wall Street manipulation.
Wouldn't de-listing itself require the consent of the shareholders? Hardly a case of simply de-listing and there's other legal ramifications from doing so. Why would stockholders agree to it, what's in it for them that's better than what they have now? In fact it seems to me that small investors could potentially be negatively impacted the most if it were to happen since their stock is now much less liquid.
BTW, what makes you think no company has "ever gone to such lengths" before? Of course they have. It doesn't happen all that often that a publically traded company voluntarily de-lists but it does happen.
1. So? Artificially restricting the availability of the stock may ensure it remains an undervalued investment, not reaching it's potential. Example? See Publix. 2. See #1 3. Apple isn't required to "waste money on buybacks" now. They can stop if they want. I guess they don't "want". 4. Media coverage has two sides just as most things in life do. I don't recall anyone complaining when Apple got regular incredibly positive press coverage as the "World's most valuable company" or when TV business programs/channels regularly declared Apple to be the "it" stock for the past several years. 5. You seriously think Apple doesn't already have long-term goals, acting like the grasshopper who worries only about today?
By the way for anyone curious, there does not appear to be any requirement for a BOD to get shareholder approval before choosing to de-list from what I've read so far. Yeah, I actually look stuff up. But there are potentially costly and distracting legal ramifications and in the case of Apple I think "potentially" would be an understatement.
Those buybacks are sure having a quick effect, down over 2% to $92.82 already, though I thought the price was supposed to go up. Oh well, many pet economic and financial theories have proven to be unsound lately.
The management team has put 13 years of extraordinary profits on the books and has obliterated almost every metric used to measure a company. If Wall Street can't figure out how to value the stock, that's not the fault of the management team. The $100 billion was not lost by Apple. It was lost by shareholders who invested in a massive company expecting unrealistic sustained growth when they should have been putting the focus on value. The company told everyone 3 months ago almost to the decimal place what yesterday's numbers would be. If you can't accept the company's guidance (which has yet to be adversely wrong) and randomly price the stock based on whatever some guy at BS Fund Company says then you deserve all the losses you suffer.
Apple's PE of 10 is a direct result of the management's inability to tell its story and inspire confidence. It is ridiculous that it has taken a slow down in iPhone units for it to start touting it's Services business. They should have started this three years ago
Awful
It's a direct result of investors ignoring the story and making up whatever BS they wanted to second guess the facts they were presented with. Apple has always promoted their services business, but until recently they didn't have the multifaceted appeal to consumers to generate much revenue. Also Apple Music was only launched last year so it's not like there was a plethora of profitable services to focus on instead of hardware and three years ago iTunes music sales were still doing well. If you had paid attention to the "story" Apple tells over and over, they don't release things before their time. The don't leave money on the table with a service or device that is still making money. You can moan and cry "awful" all you'd like but it has no basis in reality unless you are referring to what the market did to your position in the company.
It's a direct result of investors ignoring the story and making up whatever BS they wanted to second guess the facts they were presented with. Apple has always promoted their services business, but until recently they didn't have the multifaceted appeal to consumers to generate much revenue. Also Apple Music was only launched last year so it's not like there was a plethora of profitable services to focus on instead of hardware and three years ago iTunes music sales were still doing well. If you had paid attention to the "story" Apple tells over and over, they don't release things before their time. The don't leave money on the table with a service or device that is still making money. You can moan and cry "awful" all you'd like but it has no basis in reality unless you are referring to what the market did to your position in the company.
Apple has to do more than just talk. We need to see action.
Apple is worth about $500 billion. Google is almost $500 billion. Facebook is almost $350 billion.
The ad business is close to a ONE TRILLION DOLLAR business. Yet Apple has close to zero revenue from ads. Even though they control the devices of a BILLION USERS.
If Apple is really serious about services they need to build their Adversting/Data Mining empire NOW.
IMO, they need to announce a $200 billion investment in Advertising/Data/Cloud for the next 10 years. I want every cent of money laying around to be invested in that.
Apple talks about Privacy all the time. But guess what? Hardly anyone cares! 90% of iOS users use Google search. 80% of iOS users use Facebook. So obviously most iOS users don't give a crap about Privacy. Neither should Apple. I'd much rather have Apple have my data than Google/Facebook! So go ahead and build your adverstising/data empire!
So get off your high horse Tim Cook and do your job. Stop allowing Facebook/Google extract billions of dollars from iOS users. Build you cloud, search, live video, social networking, ect. Data mine and sell ads. Just do it more responsibily than FB/Google.
The people have choosen. They don't mind some breach in privacy in return for a good service.
I hate to break it to you Sog, but you have no taste.
Grubbing in the gutter for nickels and dimes in ad revenue is not in Apple's DNA.
Apple has to do more than just talk. We need to see action.
Apple is worth about $500 billion. Google is almost $500 billion. Facebook is almost $350 billion.
The ad business is close to a ONE TRILLION DOLLAR business. Yet Apple has close to zero revenue from ads. Even though they control the devices of a BILLION USERS.
If Apple is really serious about services they need to build their Adversting/Data Mining empire NOW.
IMO, they need to announce a $200 billion investment in Advertising/Data/Cloud for the next 10 years. I want every cent of money laying around to be invested in that.
Apple talks about Privacy all the time. But guess what? Hardly anyone cares! 90% of iOS users use Google search. 80% of iOS users use Facebook. So obviously most iOS users don't give a crap about Privacy. Neither should Apple. I'd much rather have Apple have my data than Google/Facebook! So go ahead and build your adverstising/data empire!
So get off your high horse Tim Cook and do your job. Stop allowing Facebook/Google extract billions of dollars from iOS users. Build you cloud, search, live video, social networking, ect. Data mine and sell ads. Just do it more responsibily than FB/Google.
The people have choosen. They don't mind some breach in privacy in return for a good service.
I hate to break it to you Sog, but you have no taste.
Grubbing in the gutter for nickels and dimes in ad revenue is not in Apple's DNA.
If that floats your boat, what don't you invest in Google instead of Apple? Seriously all you have done is claim Apple needs to transform into Google. Why suffer though a transition when you can just invest in the real thing? Then when Google is floundering on services and ads have run their course, you can advise them to step up their hardware business and be like Apple.
Smart money would be to wait until it stops dropping like a rock to buy back shares. Let it find a support level then buy. You can only manipulate the price for so long after that the market always tells the tale.
If that floats your boat, what don't you invest in Google instead of Apple? Seriously all you have done is claim Apple needs to transform into Google. Why suffer though a transition when you can just invest in the real thing? Then when Google is floundering on services and ads have run their course, you can advise them to step up their hardware business and be like Apple.
Google is valued way to high. Even if it executes perfectly for the next 5 years it will barely justify its valuation.
I'm not saying Apple needs to be Google. I'm saying Apple needs to be a platform company. That means controlling the hardware, software, AND SERVICES. That's why they dominated with the iPod/iTunes. But with iPhone they have let other companies take over services. And that is hurting Apple.
IMO, the first company to reach a TRILLION $ valuation needs to control all 3. Hardware, Software, and Services. Apple already owns hardware and software (iOS). They need to catch up on services. Google sucks at hardware and their software(Android) is compromised.
"hurting Apple" relative to what? I agree their services need to improve and become a bigger part of their business. just as they also need to see more hardware that is not phones and tablets, but the entire iPod / iTunes business duopoly from brith to now is a fart in the wind compared to quarterly iPhone sales and part of the attractiveness of the device now is that people are not locked into OEM services bundles. I can buy an iPhone and use Spotify for music or Dropbox for files and google docs/drive or office 365 for work. Apple should compete with services and deliver a superior offering but don't expect the lock in that they had with the iPod. Also don't expect a dedicated ad division or push into true social for Apple either. It's just not what they do and they have pretty much stated it's not their business to collect and sell personal data. Bot managed iAds for apps is about all you are going to see from Apple.
I just don't think there is a balance where Apple can do what it does well with hardware and also do what google does to maximize profitability on its services without one negatively impacting the other. In the end you will have premium services that appeal to a subset of Apple hardware customers that generate about all the subscription revenue available in the market but still only attract a small subset of users while the rest of the world is happy to exchange personal data for likes and tolerate ads for content using Google or Facebook. And both camps will exist side by side using iPhones.
Comments
To my mind, Cook is trying to correct a serious error in judgement he made several year ago: paying dividends at all. I thought it was a bad idea at the time because it made Apple a target for whiners and institutional raiders.
What he's trying to do now is get rid of the whiners and raiders. Cook will not say anything to boost the stock price and he won't increase the dividend by more than a few paltry percentage points (if at all). What he will do is to continue to 'waste' money buying Apple shares at a knockdown price.
Icahn has dumped his shares. This is Cook's first major success in his strategy. As the share price sinks he'll buy more and more of the whiners and raiders will dump their shares driving the price down further. The shareholders left will be those who see the stock as a long-term growth proposition and not a quick profit day trade.
So to my mind, Cook is not wasting the money – he's getting rid of investors who think like you, which is much better for the company long term.
Yes, 'the bigger screen' comment comes up a lot from armchair CEOs. The big screen phone didn't just appear overnight; Apple had it designed and ready for years, but didn't release it until sales of the smaller screen phones started to level off. Releasing a larger screen phone when the smaller screen phone was still selling like hot cakes is bad business in Apple's view. But that is just their view. When you run a company that in a really bad quarter still made more money than Google, Facebook and Microsoft combined then Cook will listen to you.
You need to take a class in investing finance. Go calculate the $$$ shareholders would have in their pockets if the $120,000,000,000 had been given to the shareholders as a dividend. I'd gladly pay the taxes on new money in my pocket as opposed to having a pathetic 2% dividend.
$120,000,000,000 / 5,500,000,000 shares outstanding = $21 / share x your number of shares. compare that to the $2/share/year they have dribbled out under the current scheme.
Apple is simply vastly undervalued by the market - even considering this past down quarter. As more shares are retired, that multiple will increase again. While the market (not necessarily "Wall Street") is valuing shares based on an end-of-the world scenario, as that PE gets even lower with less shares, it will reach a point where momentum shifts.
As noted, if Apple was using sparse cash for this purpose, it would be silly. But they are generating more cash than could otherwise be managed. What most often does fail is large acquisitions.
BTW, what makes you think no company has "ever gone to such lengths" before? Of course they have. It doesn't happen all that often that a publically traded company voluntarily de-lists but it does happen.
2. See #1
3. Apple isn't required to "waste money on buybacks" now. They can stop if they want. I guess they don't "want".
4. Media coverage has two sides just as most things in life do. I don't recall anyone complaining when Apple got regular incredibly positive press coverage as the "World's most valuable company" or when TV business programs/channels regularly declared Apple to be the "it" stock for the past several years.
5. You seriously think Apple doesn't already have long-term goals, acting like the grasshopper who worries only about today?
By the way for anyone curious, there does not appear to be any requirement for a BOD to get shareholder approval before choosing to de-list from what I've read so far. Yeah, I actually look stuff up. But there are potentially costly and distracting legal ramifications and in the case of Apple I think "potentially" would be an understatement.
Good read here:
http://www.jur.uu.se/LinkClick.aspx?fileticket=TsxIArRtDP4=&tabid=5502&language=sv-SE
Grubbing in the gutter for nickels and dimes in ad revenue is not in Apple's DNA.
Smart money would be to wait until it stops dropping like a rock to buy back shares. Let it find a support level then buy. You can only manipulate the price for so long after that the market always tells the tale.
Ironic is hardly the word....
Strangely, you've timed it pretty much perfectly. Not sure if you know why, though....
Here's a clue:
http://ped30.com/2016/04/29/apple-iphone-yo2y-compare/
I just don't think there is a balance where Apple can do what it does well with hardware and also do what google does to maximize profitability on its services without one negatively impacting the other. In the end you will have premium services that appeal to a subset of Apple hardware customers that generate about all the subscription revenue available in the market but still only attract a small subset of users while the rest of the world is happy to exchange personal data for likes and tolerate ads for content using Google or Facebook. And both camps will exist side by side using iPhones.