carnegie

gatorguy said:

carnegie said:

gatorguy said:

larryjw said:

crowley said:

jasenj1 said:

My understanding is that buy backs are supposed to increase the value of the remaining shares. 

No, obviously not, otherwise companies would just buy back shares all the time.  The only way to increase the value of shares it to get the market to recognise increasing value in the company.  What share buy backs do is express a clear signal of the company's faith that the shares are undervalued, and therefore worth buying.

If the market believes the company (and all other things being equal), then more people want to buy shares, and the share value goes up.  If the market doesn't believe the company, or if other things (like for example, an idiot president) happen, then the share value may go down.

Analysts saying it's a bad investment are day trading idiots who think that because they have the privilege of hindsight, they are somehow geniuses.  Given Apple's P/E it was a fine investment, that has been undercut in the short term by political events. 

In theory, if the stock they bought was worth what they paid for it, the transaction was a wash -- they traded the cash asset for a stock asset. 

Except that's not what Apple did. There was no asset trade, ie a share of stock, when Apple repurchased it. That share was retired, burned, and buried. It has no remaining book value. The money was spent in what amounts to an attempt to artificially manipulate the stock value, and each member of the executive management team reaps significant personal benefits monetarily from it. 

The share is retired, in effect increasing the ownership in the company of each remaining shareholder. It's the same effect as if Apple had divided those repurchased shares up and distributed them to existing shareholders. Apple is buying an increased stake in the company on behalf of existing shareholders. They don't have to spend anything, yet they own more of the company - e.g., more of the liquidation value of the company or a larger share of the ongoing profits of the company.

Apple is returning capital to shareholders in the form of additional equity in the company. If someone would prefer cash instead of greater equity in the company, they can sell the appropriate amount of shares. They'll own just as much of the company as they did before and have what is effectively a cash distribution. In this way they get to control the tax consequences, for them, of the capital return Apple is doing.

As a base premise you're assuming that the buybacks actually increased the value of their stock's cash value, for which the evidence is scant IMO. $250B and five years later and their tech brethren who did not (as aggressively if at all) resort to the same use of their cash have performed much the same if not better in the stock market AFAICT. In the five years Apple has been repurchasing/retiring their own shares they've averaged a return of roughly 190%. That compares to 560% for Amazon, and 195% return on Alphabet neither of whom aggressively pursued the same strategies for using their cash assets.

Is there some evidence of how much Apple shares have been impacted dollarwise? is the price 15%, 25% higher, even more, than it would have been had the stock buybacks not occurred? If not is it possible (probable?) that the attempt at artificially manipulating demand via buybacks may not have been the most efficient way to return value to Apple stockholders? In a nutshell what has their "greater equity in the company" actually delivered for them?

With such a glut of cash (IMO not unlike gorging on food because, well, you can), could Apple be better served in the long run by marginally reducing product costs which likely increases market share?

I’ve addressed the counterfactual in other posts (here and in other threads): Do you think that Apple’s market cap would be $325 billion higher today if it had around $240 billion more in net cash on its balance sheet? Back in October, at its peak, would Apple’s market cap have been $500 billion higher if it had $240 billion more in net cash on its balance sheet.

We know how much concentration has resulted from the buybacks, and we know the effective costs of those buybacks (give or take a little, as we have to estimate offsetting effects of interest and dividend differences). So we can frame the question, when it comes to whether the buybacks have had a positive effect on Apple’s share price, in fairly simple terms.

As for your last inquiry, I think the opposite has long been the case. I think Apple has long left money on the table - by pricing much of its product line-up below what would be optimal (when it comes to near term profits) - in an effort to increase the rate of installed base growth. I think, for instance, that an across-the-board 10% decrease in prices wouldn’t result in the 25% or so increase in sales which would be needed to offset it.

For a while now Apple’s biggest competition has come from itself, e.g. from used Apple devices and the degree to which older devices remain in use. Apple is now taking advantage of that reality. It’s raised the range of pricing for its newer models and cleared out room toward the lower end (of its price range, not of the price range of the market in general) for used devices and newly sold older models to thrive. It’s not competing with itself as much as it used to, which leaves it without a lot of real competition. Those who don’t mind paying more can do so (and have the costs of their premium devices offset by longer use cycles or significant resale value). Those who do mind paying more can buy used or older models sold new. They can still feel like they’re getting quality devices and the benefits of being in the Apple ecosystem. Apple gets to make closer to what the market will bear on sales of its premium devices (i.e. it gets the money it used to leave on the table), and it gets to maintain a strong - for now still growing - installed base.

jbdragon said:

Corporations don't pay taxes, YOU DO!!! So you tax them more, they will just raise prices and YOU are the one that's actually paying. It's just a round about way in taxing YOU while making the politician look good. Oh look, he's getting those evil corporations who aren't paying taxes. Which is already a flat out lie. They want more money. In this case France and their failed policy's. Nothing like stealing more money from American company's as they sure can't seem to generate enough of their own.

beowulfschmidt said:

gatorguy said:

jbdragon said:

Corporations don't pay taxes, YOU DO!!! So you tax them more, they will just raise prices and YOU are the one that's actually paying.

If they raise prices then wouldn't that obligate them to even more taxes?

Besides that how do you raise prices after the sale occurred? Corporate taxes are paid on profits, which can only be determined after a sales period has closed.  How would you know how much to add in advance?

If I'm off-base maybe you can explain.

It's called "math".  You plug in the percentages and magnitude of the taxes, fees, tariffs, excise, "because we said so" payments, manufacturing costs, etc, decide how much profit you want, then voila the magic of math gives you the answer as to what price to charge.

Taxes will always be passed on to the consumer, no matter what form they might take.

Yeah, corporations don't exist but by the creation of humans and they only act at the direction of humans. They aren't really things acting on their own for their own purposes and benefit. They are either, depending on how one chooses to conceive them, associations of humans or things which humans use.

So whatever taxes they pay are, effectively paid by humans. But who those humans effectively paying the taxes are - i.e. what their relationship to a given corporation is - depends on the nature of the taxes in question. Many taxes are effectively paid by consumers, people buying from corporations. Others are effectively paid for by owners, shareholders of corporations.

Corporate income taxes are, for the most part, effectively paid by the owners of corporations. What is left to distribute to them is reduced by corporate income taxation. Then they, in most cases, pay taxes again on what is distributed to them. Because of how income taxes function, they can't really be passed on to consumers. To think that they are is to presume something that doesn't make much sense: That corporations choose to only make a set amount of profit. Even though they could make more, even though they believe different business decisions would create more profit (without long-term effects they wouldn't accept), they target an amount and make decisions that limit their profits to that amount.

If corporate income taxes are raised from, e.g., 25% to 30%, the way to maximize after-tax profit is the same as it was before: Maximize pre-tax profit. If X is greater than Y, then 75% of X is greater than 75% of Y as surely as 70% of X is greater than 70% of Y. Say a company is making $100 million a year before incomes taxes and $75 million a year after taxes. Income taxes are raised from 25% to 30%. So to make that same after-tax $75 million, it needs $107 million in pre-tax profit. If it thinks that raising prices would increase its pre-tax profits to $107 million (e.g., because it wouldn't hurt demand that much), then why wouldn't it raise prices regardless of the tax increase? Then, without the tax increase, it could make $80 million a year after taxes instead of $75 million. (This is overly-simplified to make the point. For instance, raising prices can have effects beyond effects on short-term profitability. But that's the case regardless of whether income taxes are raised; it's part of the consideration in any case.)

Some taxes on corporations are passed on to consumers. Some taxes on corporations are withheld from shareholders. It depends on how the taxes function.

airnerd said:

I don't have the solution, but sure wish there was an answer to all of this tech patent wild-west antics that have been going on for a couple of decades now.  I won't claim anyone as being a "patent troll", but the point of a patent is to protect ones invention or ideas in order to develop and profit from it.  It is NOT intended to be a "I thought of it first but don't do anything with it so now you have to constantly prove you aren't getting near it".  When we are to a point where a patent is limiting technology growth or stifling innovation because someone refuses to budge because they feel they can just have your entire product banned, we need reform.  

I'm not saying strip patents from everyone, or anyone, but something has to be done.  What that something is...I have no idea.  just sick of hearing things like this, and yes I know Apple does it as well to others.  But I don't view Apple as someone with tons of patents and no plans to ever develop or use them.  

Part of the solution, I think, is for standard setting organizations to require more specific - and better articulated - commitments when it comes to the licensing terms which SEP holders must offer and which SEP users would have to agree to (for the latter, that would be in order to be considered a willing licensee).

AppleInsider said:...

To put pressure on Qualcomm, Apple has been directing its manufacturers to withhold royalty payments, potentially in excess of $7 billion.

...

To be clear, Apple has denied this.

It's reasonable to think that Apple expected its contract manufacturers to stop making royalty payments to Qualcomm in response to Apple's actions (e.g., Apple withholding from contract manufacturers funds to compensate for royalty payments, and telling them it was doing that because of its dispute with Qualcomm). But Apple said in a court filing that it did not direct contract manufacturers to withhold payments from Qualcomm.

larryjw said:

carnegie said:

NT$601.4 billion is a 5.6% YoY increase for Foxconn for November. That's the smallest YoY increase Foxconn has seen since March and its last 6 monthly YoY increases had all been above 20%. So while it's good that Foxconn saw growth in November, I wouldn't read too much into that when it comes to how well iPhones are selling relative to what had been been expected. (I, of course, am not suggesting that they aren't selling as well as had been expected.)

It's a simple mathematical proof the YoY increases are never sustainable. Why? Because YoY increase is an exponential function. Substantial variation, including declines are normal and natural. If you don't see this variation, someone is cooking the books. 

Of course you’d expect variation in YoY growth rates. And if we were talking about comparing YoY growth for a given month to previous YoY growth for the same month, then what you say about exponentiality would apply.

But here we’re talking about comparing YoY growth for a given month to YoY growth for different months in the same year. So they could all be fairly large numbers without exponentiality coming into play. It’s 25% more than A, and 25% more than B, and 25% more than C, and 25% more than D rather than 25% more than 25% more than 25% more than 25% more than A.

When looking at revenue or income growth, we often compare YoY changes sequentially. For instance, if the YoY revenue growth for the third quarter is less than the YoY revenue growth for the second quarter, we might say that revenue growth is slowing.

That said, again, I’m not suggesting that this data points to worse-than-expected iPhone sales. But it also doesn’t necessarily mean good-as-expected iPhone sales. Something was causing very strong (YoY) revenue growth for Foxconn for each of the preceding 6 months and then didn’t cause very strong (YoY) revenue growth for November.