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Apple to Buy Back $10bn of Its Shares and Pay Dividend

samzenpus posted about 2 years ago | from the everyone-likes-money dept.

Businesses 301

floydman writes "Apple has said it will use its cash to start paying a dividend to shareholders and to buy back some of its shares. The technology giant said it would pay a quarterly dividend of $2.65 per share from July. It will buy back up to $10bn of its own shares starting in the company's next financial year, which begins on 30 September 2012. Apple CEO Tim Cook said, 'We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure. You'll see more of all of these in the future. Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business. So we are going to initiate a dividend and share repurchase program.'"

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In case anyone was wondering when Tim Cook... (1, Informative)

Anonymous Coward | about 2 years ago | (#39403161)

...would assert himself as his own CEO, keep in mind that this never would have happened under Steve Jobs.

Context? (4, Insightful)

TaoPhoenix (980487) | about 2 years ago | (#39403167)

Any finance experts here? What does this buyback do? It probably makes the remaining shares more valuable, but are there any nasty angles to this?

Re:Context? (4, Funny)

Anonymous Coward | about 2 years ago | (#39403215)

More importantly, if it reached over 50% ownership of its own shares would it become sentient?

Re:Context? (0)

Anonymous Coward | about 2 years ago | (#39403263)

No, repurchased shares are 'retired' and are not held or controlled by the board.

Re:Context? (1, Funny)

Anonymous Coward | about 2 years ago | (#39403355)

So, all they want to do is concentrate power? The one share to rule them all?

Re:Context? (1)

gl4ss (559668) | about 2 years ago | (#39403951)

So, all they want to do is concentrate power? The one share to rule them all?

essentially, all the people who own stock own the corporate buybacked stock. so yea, if you'd end up as the last person holding stock..

Re:Context? (2)

phantomfive (622387) | about 2 years ago | (#39403975)

No, repurchased shares are 'retired' and are not held or controlled by the board.

Not always, they can also be left in the treasury, available for reissue at a later date.

Re:Context? (1, Interesting)

Anonymous Coward | about 2 years ago | (#39403899)

When shares and capital collide, they vanish and in the process radiate investor relations marketing.

Control over the company is divided among fewer shares and the balance sheet total is reduced. "It becomes a smaller company that belongs to fewer shareholders." That's why buying back shares is fundamentally a bad sign. It means the company is running out of ideas what to do with the money. Of course sitting on the money when you're not doing anything with it is an even worse signal.

Re:Context? (0)

Anonymous Coward | about 2 years ago | (#39403931)

Buy low, sell high. Looks like a good time to get out.

Re:Context? (5, Informative)

LordKaT (619540) | about 2 years ago | (#39403241)

There are some medium-long term downsides to this, should Apple fall hard in the long term (ie; tablets prove to just be a trend, iPhone sales fall, etc...), but this is what investors have been waiting for. This is a fairly large buyback, which will inflate the price of the shares even more, but it's a small amount of money for Apple to be investing in itself.

This will more than likely force AAPL above $600 for the remainder of the financial year (and probably closer to $700).

Re:Context? (2, Insightful)

Anonymous Coward | about 2 years ago | (#39403397)

It's worth noting that at the current share price, $2.65/quarter amounts to a ~1.8% return from dividends. That's a pretty low rate of return. Which more-or-less means that the stock price is still very much based on expectations of future growth in the company (and thus increase in the value of the stock itself). This is a pretty sensible prediction: Apple are still well-positioned to make money and branch into new areas.

On the other hand, it does shift Apple stock ever-so-slightly into the land of more-stable/less-risky investment. With a few % dividend return, you can invest in AAPL and not worry so much about short-term successes or failures. This is indeed a rather cheap way for Apple to maintain the value of their stock, and draw in new investors.

Re:Context? (1, Insightful)

Anonymous Coward | about 2 years ago | (#39403707)

Apple market cap: $550 billion
Shareholder equity: $90 billion

That's a boatload of expected future earnings implied in that difference right there. The dividend return is total crap, and only a fool would buy back shares that are priced this high. (For the uninformed: you buy back shares when they are CHEAP so you can re-issue shares when the stock price is higher later on to keep investment money flowing through the business.) This is short-term thinking by Cook to maximize his parachute, plain and simple.

My best estimate is that Apple shares should be priced around $130-$150/share, not the idiotic $600 that people have bid it up to. If I had the cash to short Apple stock over the long term, I would do that.

You solved your own riddle (2, Interesting)

SuperKendall (25149) | about 2 years ago | (#39403883)

you buy back shares when they are CHEAP so you can re-issue shares when the stock price is higher later on

Yes, pretty obviously someone (or quite a few people) know a lot more about Apple's current share price being cheap or expensive. Since the only one in a real position to know is buying back shares, you end up looking rather foolish...

Re:Context? (5, Informative)

Anonymous Coward | about 2 years ago | (#39403657)

I have two Finance degrees and close to a Master's.

1) In theory the stock buyback would do nothing to the value of shares. The remaining shares would own a bigger part of the company, but this company is ten billion dollars less valuable. In an efficient market, this would offset

Fact: We do not operate in an efficient market.

2) Investors will look at this as a signal that the company is bullish on its future, and you will see a disproportionate rise in the stock.

Essentially, Apple is saying "our shares are undervalued". They have more information than the general public (hence the inefficient market comment). Apple says it is willing to buy at this low price, so th market says "time to buy".

Re:Context? (1)

LordKaT (619540) | about 2 years ago | (#39403689)

You have to understand something important here:

I'm karma whoring for the next Apple thread. :)

Re:Context? (1)

Ihmhi (1206036) | about 2 years ago | (#39403887)

You talk almost as if you were a sage or mystic, and it unsettles me all the more.

I get what you're saying about the market and all, but when I hear things like "consumer confidence" and all I feel as if the entirety of Wall Street is based on some sort of weird financial voodoo instead of any actual merit (on the part of companies).

Re:Context? (1)

SomeKDEUser (1243392) | about 2 years ago | (#39403995)

Whenever a politician/economist/pundit talks about "confidence", he is either deluded or lying. This "confidence" word is really useful like that. It means anything from "suckers are more willing to part with their money" to "magical thinking will save the day".

Re:Context? (5, Informative)

stevel (64802) | about 2 years ago | (#39403249)

Stock buybacks indeed make the shares more valuable. Paying dividends can entice some institutional investors to buy shares which they would not otherwise do. As long as Apple keeps sufficient cash on hand, this is a general win.

Re:Context? (0)

Anonymous Coward | about 2 years ago | (#39404021)

Having a lot of cash is not a good sign for a business though. It means they don't know what to do with it (ie. the management is clueless).

With that said, in this market it's hard to tell because after the last couple crashes businesses started hoarding cash due to the uncertainty.

How about hire some more people? There is still a massive amount of unemployed right now. Meanwhile businesses have been jacking up prices while simultaneously decreasing quality and value. Which in turn causes people to cut back even more, which causes businesses to increase prices, which causes people to cut back, ... This situation is an implosion waiting to happen.

Re:Context? (4, Interesting)

Billly Gates (198444) | about 2 years ago | (#39403299)

It means Apple (according to many guru's and those on Wall Street in this day and age) think they do not know how to invest in themselves and what is valuable. Instead they feel to give the money back to the shareholders as they can invest in the money better than they can. Apple's stock price went down after the bell opened, but did go up in pre-trading (why is that legal ?)

However, my opinions are more old fashioned and feel Apple should give money back to its owners after they invested the risk duh. Doing so in old school theoretical sense means they want less pressure on quarterly results and on just raising the share price and giving investors some of their earnings back eleviates this and allows for the same amount of money for slower growth from investors. Which is what the the thinking was even if that is rejected for newer investors as growth not revenue is everything.

If I made you a partner in a company but didn't pay you because Hairyfeet, might just pay you then you will be on my ass to rise the share price as you see no return anyway. If it goes up then you gain money. That is how Apple has been operating since 1997.

Apple is trying to eleviate that.

It also is a little disapointing as Apple could start a 4G network to compete with the big boys, use the money for more R&D, or pay their Foxconn employers more and educate them to work for Apple China through scholarships. But Apple did not want to take that risk.

Re:Context? (2)

glrotate (300695) | about 2 years ago | (#39403435)

Amen. This shows that Cook realizes that once the Jobs product pipeline has dried up, Apple will struggle with innovation.

He is basically beginning the transition to a stagnant company from a growing one.

Re:Context? (1, Insightful)

alen (225700) | about 2 years ago | (#39403949)

i have a lot of apple products at home, but what innovation?

nice laptops, check. they have been around for years
MP3 player? did it better than others
smart phone, apple just made it better
tablet, apple made it better as well.
TV? rumor is apple is going to make it better later this year
apple TV? don't like it too much. love my PS3 and xbox and roku seems better

is there some device i'm missing that i just have to have? do i really need a wearable computer?

Re:Context? (0)

Anonymous Coward | about 2 years ago | (#39403313)

getting ready to crash

Re:Context? (2, Interesting)

vlm (69642) | about 2 years ago | (#39403339)

Not arrogant enough to call myself an expert, but using made up numbers, if you had 100 shares outstanding, and $10B in the bank, this is claiming you have nothing in the pipeline...

Option 1 to raise the value of outstanding shares by investing : Spend the dough on R+D or marketing or creating new markets or buying a productive company or "productive activity in general"

Option 2 buy the shares, dropping the supply in the wild to 90 shares, lower supply at constant demand equals higher price.

In the short run opt 2 makes the most money. In the long run opt 1 destroys the company. To some extent opt 1 means they can't think of anything productive to do with the money, so they're giving it back. Frankly this might be true.

To some extent its a vote of non-confidence in the execs or general market pessimism... if the execs were enhancing shareholder value by 10% per year (made up number) then diluting the existing shares by issuing 1% more shares to give to the execs seems "OK" to the stockholders because they're still getting 9% rate of return (again, made up). However if you expect the stock to flatline or drop, then the stockholders will get pissed off at the idea of paying 1% of their capital to the execs... even if the rest of the market tanks 50% and apple flatlines, that capital loss will still piss off the shareholders.

Also note that we live in a centrally controlled economy and the tax implications are wildly different if the $1 lives in book value (cash per share) aka paper profit which is a capital gain at a date of your choice in the future, vs $1 in dividends this year taxable as dividend income this year. On the date of record or whatever the exact term is, the stock drops in price by about the value of the share. If your dividend tax rate is high enough you can sell before that date and buy after that date, at a standard commission of course for each trade, which might be less than your tax loss. Assuming you believe in relatively constant taxes and relatively constant valuation.

The TLDR version is they are pessimistic about the future and can't think of any way to avoid problems.

Re:Context? (1, Informative)

vlm (69642) | about 2 years ago | (#39403379)

In the long run opt 1 destroys the company. To some extent opt 1 means

Blast it I mean option 2.

Although known incompetence in management could mean trying to expand would just destroy the company, so some simply give the money back thru option 2 rather than trying to dotcom themselves... This is kind of rare due to peter principle but it does sometimes happen. Most of the time giving up on future growth means you're not expecting future growth means eventual death of the company

Re:Context? (4, Insightful)

tverbeek (457094) | about 2 years ago | (#39403501)

"To some extent opt 1 means they can't think of anything productive to do with the money, so they're giving it back. Frankly this might be true."

Or (getting in touch with reality briefly) it means that they can't think of anything that they need 100 billion dollars for, but they think that merely tens of billions of dollars, plus the ongoing profits from their money-printing iProducts, will be enough working capital for what they do have planned.

Re:Context? (1)

vlm (69642) | about 2 years ago | (#39403631)

Agreed. Its hard to believe, but if they're arrogant enough to think they're the highest ROI corporation in the entire world, then they can't make money by purchasing some other industry, even in a quasi-legal holding corporation kind of way, so they may as well give the money back.

Re:Context? (3, Insightful)

ILongForDarkness (1134931) | about 2 years ago | (#39403751)

Exactly. What worth 100B dollars could Apple buy that they also could have a good fit with? They aren't about to buy SAP or controlling interest in oracle, or 2 HP's, or 3 Dells, or 5 Nokias, etc. There just aren't enough big enough targets out there, and even if they are they are pretty much worthless because Apple wins by having their systems completely designed as a integrated whole in house. I can't see how Apple + a Facebook, or HP or something makes sense. They still would be two completely different companies so all the "synergies" that deal-makers always like to conjure up are not so easy to imagine.

Re:Context? (0)

Anonymous Coward | about 2 years ago | (#39403845)

I can see a Foxconn takeover making sense. Perhaps a chip foundry somewhere? Intel's assets in Israel would be a good fit, too, since we're talking pie in the sky stuff.

Re:Context? (2)

drinkypoo (153816) | about 2 years ago | (#39403989)

I can see a Foxconn takeover making sense.

No. That makes no sense. Then Apple would be directly responsible for the conditions there. Also, it's legally impossible.

Intel's assets in Israel would be a good fit, too, since we're talking pie in the sky stuff.

You mean, since we're talking pure, anonymous, cowardly bullshit. We're talking about one of the most contentious regions on the planet, Apple would only be buying themselves headaches.

Order of magnitude more (5, Insightful)

Anonymous Coward | about 2 years ago | (#39403769)

Not arrogant enough to call myself an expert, but using made up numbers, if you had 100 shares outstanding, and $10B in the bank, this is claiming you have nothing in the pipeline....

The problem is, Apple has $100B in the bank.

You just can't spend that kind of money, not without buying solid-gold toilet seats or other absurd assets. It's ridiculous. Apple has no problem funding ongoing R&D just out of what it makes quarter to quarter. No need to dip into the corporate savings account for that.

Buying back your own stock is basically saying, "Look,we have money to invest. We could invest it in gold, or US treasuries, or orange juice futures, but we think that the best possible investment in the world is Apple stock, so we're going to buy that."

Re:Context? (5, Informative)

Anonymous Coward | about 2 years ago | (#39403869)

Your TLDR version is wrong.

Corporate investments are (in theory) all about how to get the best return. Cash is a powerful asset, and can be used for all sorts of stuff. A company paying dividends/doing buybacks is signalling the market that they don't have an option that produces a return for shareholders that beats the market, for that particular piece of money.

Holding cash causes a loss in value due to the inflation. AAPL is saying that they don't have a market-beating option for that chunk of money. Thus, they give it back to the shareholders (so they can get a better return). Likewise, the buyback will push up stock value (a return for shareholders), at least in the short-term, and consolidates control. Which the company believes is a better use of the money right now.

Note that (I'm 99% sure) this is a special dividend - they aren't committed to it for ever and ever (like some companies). They still invest like crazy in R&D, and have said they will continue to do so. They just don't have $100B worth of R&D opportunities that will generate a market-beating ROI, in their opinion.

This doesn't say anything about pessimism or avoiding problems - it's an ROI thing. A regular dividend from a tech company would be a discouraging sign, esp. one with as much growth lately as AAPL, in the markets they play in. I think this just says they made a shitpile of money, and couldn't spend it fast enough on worthwhile stuff. That's all.

Re:Context? (0)

Anonymous Coward | about 2 years ago | (#39403343)

Less shares available (buyback) and more people interested in buying shares (because they pay dividends) means that their shares value will increase.

Re:Context? (2)

Space cowboy (13680) | about 2 years ago | (#39403361)

The stated intent of the buyback is to prevent dilution of outstanding shares when Apple gives RSU shares to its employees. I guess that means they spend $15B/year on their employee share bonuses.


Re:Context? (0)

squidflakes (905524) | about 2 years ago | (#39403389)

As others have said, it raises the price of the stock, but it does it through two mechanisms. First, it raises the price by scarcity. Fewer Apple shares being traded means the price goes up from demand. Apple is one of the small handfuls of companies that has never had a stock split and maintains a very high individual share value, and a surprisingly high demand.

Second, when the buy orders start to come in, and the price goes up from demand, this tends to drive interest. A staggering number of investors don't follow buy low-sell high, they tend to buy near the top of a stock's curve and sell near the bottom because of what is probably an emotional response to stock pricing. When the price is rising, they want to be part of the trend. When stock prices are falling, they hang on to shares with the hope that the stock will rebound.

Anyway, this means that any upward movement on the part of Apple stock will trigger a buy wave that will only send the price higher.

Hidden downsides?

Less cash-on-hand in case something goes wrong, but that is unlikely given Apple's zombie-like resilience, at least in the near term.
Stock holder intransigence. If they start getting used to a dividend, there will be some complaints the dividend ever stops. This isn't a huge deal but it has triggered sell-offs in the past when the company was least able to deal with them. (think Ford right around 2006. They stopped paying, institutional investors didn't see a value in the stock, trigger sell-off)

Re:Context? (0)

Anonymous Coward | about 2 years ago | (#39403665)

As others have said, it raises the price of the stock, but it does it through two mechanisms. First, it raises the price by scarcity. Fewer Apple shares being traded means the price goes up from demand. Apple is one of the small handfuls of companies that has never had a stock split and maintains a very high individual share value, and a surprisingly high demand.

AAPL has 2-1 split three times before.

Re:Context? (2)

blueg3 (192743) | about 2 years ago | (#39403417)

The buyback is intended to offset exercised employee stock options, so the net effect is intended to be that the existing shares retain their current value (rather than being diluted by the new shares).

Re:Context? (3, Informative)

LordSchnitzel (677741) | about 2 years ago | (#39403419)

No, it doesn't make the remaining shares any more valuable. Right now the market cap is ~$500 billion, and the liquid assets are known to be about $100B, so the non-liquid asset part of the company is ~$400 billion. When apple buys back the shares, the number of shares in circulation goes down, but so does the market cap, since now it's ~400 billion + ~90 billion assets. These should exactly match. You can imagine this as the board separating out the bits of the company that are apple's ip, employee capital, buildings etc, and the bits of the company that are just the ownership of a huge wadge of cash. They're getting rid of the latter without touching the former. You would expect this to not impact the share price in itself.

Re:Context? (2)

nedlohs (1335013) | about 2 years ago | (#39403453)

A share buyback shouldn't change the share price (though of course in practice...). It reduces the number of available shares but it also reduces the wroth of the company (it now has less cash) - by equal amounts.

If a company had 100 shares and a price of $10 and bought back 10 shares. Then there are now 90 shares, but the company has $100 less cash on hand. Before the buy back the company was valued at being wroth $10*100 = $1000. It should now be worth $1000-$100 = $900 - and there are 90 shares left so $900/90 = $10 is stil the share price.

It essentially works the same as a dividend payment, but reduces tax liability.

The main downside is that (like a dividend) it's an indication that Apple doesn't think it can generate better than market returns on the cash (since if it could that would be better value for shareholders than paying it out as a dividend/share buy back). But when you are talking about the amount of cash Apple has that shouldn't be news.

Re:Context? (1)

ILongForDarkness (1134931) | about 2 years ago | (#39403589)

It should make the shares more valuable. It could end up not getting fully adjusted for, or alternatively it could hype up the stock more (investors expecting even more buy backs in the future for example). But at least in theory all metrics increase (earnings per share, profit per share etc) and things should exactly adjust.

Personally I say ... about freaking time they did something with the money. It is okay to have a war chest, but you actually have to go to war sometime in a reasonable amount of time. Otherwise your investors are effectively paying for a money market account (or whatever income producing junk the company piles the money into). I don't need to pay broker commissions to get a GIC :-)

Re:Context? (3, Interesting)

Anonymous Coward | about 2 years ago | (#39403739)

Around February 2011, Jobs had to properly step back from the company as his illness was beginning to bite, he still hung around as best he could but this is the point where he really had to step away from the day to day running of the company, and Cook took over.

This is also about the point at which Apple's legal attacks really started to escalate, whilst there had been some before the sheer number and weight of the attacks - the amount of money being put into the legal attacks at this point increased massively.

Shortly after the iPad 2 was released, it was an "okay" update on the first one, but relatively lacklustre. It was hard to think much of that at the time, but it and the increase in legal attacks started to really set the stage for what was going on at Apple.

The June/July period came and went, with no iPhone release, it didn't seem too big a deal but when the iPhone4S eventually came, it came late and was a major dissapointment, being little more than a weak incremental upgrade, much like the iPad 2. Similarly, iOS 5 brought nothing new to the table, and contained mostly updates that simply copied long held Android features. But regardless, for the iPhone 4S it didn't really matter because it still sold- and in record numbers, but when you examine what happened here it's quite telling, todays news only further demonstrates Apple's problem.

They're out of ideas.

Here's why:

Ignoring the point that all hardware and software releases have brought really little new to the table, with Siri being perhaps the most innovative thing (but still ultimately little more than a voice to text interface for Woflram Alpha) you have to look at Apple's actions.

They started off by starting to sue serious competition like crazy - companies that were pushing out devices that were a genuine threat to their sales. The next issue was the realisation that the iPhone 4S looked really, really, weak, so to release on their usual yearly mid-year cycle would've not netted great sales, their plan was to delay it, and try and back up sales to people invested in the Apple ecosystem a few months such that the sales that would've been spread more evenly over the second half of the year in the usual iPhone release cycle were compressed into a much smaller period, making for great headline numbers, but at the expense of sales that dissapointed the markets in the earlier quarter.

Now step forward to today, and we've got Apple's announcement that they're going to spend money to inflate their share price, rather than continue to inflate it based on the continued strength of their innovation and the sales growth that has netted them.

I don't think anyone's going to argue that Apple is still going to be making an absolute bucket load of cash, but what's happened here is quite interesting - this is really the point at which it seems clear Apple has accepted that it's hit or nearing it's peak based on innovative product based growth, their last 3 key product refreshes (the iPhone 4S, and iPad 2 and 3) have been rather uninteresting.

I never really liked Jobs, but it's become clear that without him, Apple is just another tech company, and like Microsoft before them they've now peaked and are about to plateau. The share buy back is likely the point at which their share price will peak, and then they'll slowly decline as Microsoft's did before them to a level at which they'll stabilise - still placing them as a major technological company, but not the runaway "Apple's bigger than Polan" type of headline hysteria we see today.

They've had a good run but this last year coupled with the next year is their turning point. The change from innovation to lawsuits, delaying to build up expired contract demand, and now to spending 10% of their total cash pile to grow their share price artificially, rather than organically are the key points demonstrating a changing tide.

Many fanboys will tell you it's different, many will tell you that I'm wrong to suggest Apple product X wasn't lacklustre as I've claimed - that's fine, but I'm merely talking from a point of view of the markets, where prices declined on announcements of said products, and of course, by looking at the history of many companies that have come before them and done the exact same things. Put simply, a company doesn't buy back shares, and issue dividends, if it believes it can continue to grow it's shares organically by simply increasing it's profits and growing it's markets at the rate it has done.

Re:Context? (1)

DrLang21 (900992) | about 2 years ago | (#39404005)

The buyback probably won't have significant impact on the share value since the market cap is over 500 billion. What it will do is provide Apple with a financing safety net should they run into hard times again. They will have those shares that they can sell to raise capital.

The beginning of the end (0, Insightful)

Anonymous Coward | about 2 years ago | (#39403195)

That's how decline starts.

Lawsuits (2, Funny)

Nerdfest (867930) | about 2 years ago | (#39403201)

"We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure,"

Hmmmm ... strange there's no mention of their legal department. They seem to be investing more there than in research and development.

Re:Lawsuits (1)

jesseck (942036) | about 2 years ago | (#39403309)

increased research and development, acquisitions

That's your legal department- patents, copyrights, and buyouts. Of course, this also goes hand-in-hand with some real innovation, products, and legal involvement is standard with acquisitions.

Re:Lawsuits (0)

Anonymous Coward | about 2 years ago | (#39403477)

You missed the following quote:

Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business.

In business speak, you don't use the term "war chest" unless you're talking about lawsuits, either going on the attack or defense.

Re:Lawsuits (3, Funny)

rwise2112 (648849) | about 2 years ago | (#39403595)

you don't use the term "war chest" unless you're talking about lawsuits, either going on the attack or defense.

Or actual war. Maybe the iTroopers will march on Google.

Re:Lawsuits (0)

Anonymous Coward | about 2 years ago | (#39403753)

Its ok, as they'll only be half as effective but cost twice as much.

Re:Lawsuits (1, Informative)

Anonymous Coward | about 2 years ago | (#39403779)

In business speak, you don't use the term "war chest" unless you're talking about lawsuits, either going on the attack or defense.

That's interesting, mostly because you're completely stupid.

In business a war chest, or cash mountain is a stash of money set aside to deal with unexpected changes in the business environment, or to use when expansion possibilities arise. The term originates with the medieval practice of having a chest, literally, filled with money to open in time of war.
Today companies can use accumulated cash or rely on quickly raised debt which costs less to carry when you don't need it. This is not always a reasonable substitute, as the debt available to a company typically drops as a result of the same actions that require the war chest to be opened.

A "war chest" is a reserve of funds in case you need it - for acquisitions, research, or anything else. Of course, it sounds better to call it a "war chest" than "Tim Cook's special rainy day piggy bank."

Jesus fucking christ, you people will look for any excuse to paint Apple as nothing but a patent troll. Look at their products, and you can see that's clearly not the case, but then, nobody ever accused the fandroids of having an excess of common sense.

Re:Lawsuits (1)

Anonymous Coward | about 2 years ago | (#39403835)

And Apple doesn't really have R&D. They just have D.

woohoo (-1)

Anonymous Coward | about 2 years ago | (#39403203)

And finally Apple shares have a value dependent on the success of the company rather than whether other people want to buy or sell them. If only the rest of capitalism rememebered how it was supposed to work rather than turning to siphoning treasury funds.

Re:woohoo (1)

dabooda (412228) | about 2 years ago | (#39403359)

I sort of share your view but keep in mind that most investors will want a company to keep all of its profits and NOT pay dividends while the company is still able to make a larger return on that retained profit.

Apple has so much retained profit that it can't use it fast enough to stimulate growth. So the best thing to do is to pay some of that profit off as a dividend.

To put it another way: retaining profit and not paying dividends is the thing a company should do while it can still grow. If a company can make 30% return on equity (number out of thin air) then you want them to keep the equity they create so they can make another 30% next year. When that return on equity drops to below what you can get investing in another company or a bank account then give the investors the profits and let them put in other shares or just in a bank account.

Think of investing as a higher interest earning bank account that requires you to do a shit-tonne of analysis to make sure your money is always invested in the right place.

Probably won't affect cash position (5, Insightful)

busyqth (2566075) | about 2 years ago | (#39403225)

It looks like this will cost Apple about $10 Billion a year, but their cash position has been growing faster than that recently. So, I'm guessing all it will do is slow down the rate of growth of their cash.

Re:Probably won't affect cash position (3, Informative)

Space cowboy (13680) | about 2 years ago | (#39403335)

Its actually slightly higher than that - they're forecasting $45B over 3 years, but your point stands.


The bean counters are back (0)

bussdriver (620565) | about 2 years ago | (#39403445)

I thought it would take a little longer before the wall street bean counters started destroying Apple. Wonder how quickly Google will shift into super villain when their leadership goes...

Maybe Jobs was building up to buy back a big stake in itself freeing it from so much control from the bean counters which nearly killed it previously. Bad times need cash reserves; use savings fund or issue shares - but to pay dividends, that makes it into a big loan with the risk of having to pay for the borrowed money (instead of the gamblers paying for it.)

I realize modern MBA religion is 150% against conservatively structured business models and running fully leveraged is the only option (management never suffers from such risky positions they put everybody else into.)

Re:Probably won't affect cash position (1)

avandesande (143899) | about 2 years ago | (#39403463)

Ipad sales were horrible over the weekend and the stock buyback is done to preserve the stock options of the board of directors when the stock crashes.

Re:Probably won't affect cash position (1)

Space cowboy (13680) | about 2 years ago | (#39403591)

If you listened to the actual recording of the conversation, you'd hear someone (can't remember who) ask how iPad sales went. Tim Cook said he wasn't going to talk much about it on this conference call, but that Apple had a record opening weekend of iPad sales.

So, I don't think they were horrible...


Re:Probably won't affect cash position (0)

Anonymous Coward | about 2 years ago | (#39403703)

How is the flying pig project coming along?

Re:Probably won't affect cash position (0)

Anonymous Coward | about 2 years ago | (#39403939)

As it turns out, a sufficient thrust to weight ratio is surprisingly easy to achieve with off-the-shelf components and software. We're in the process of closing a deal for a significant batch of USAF surplus RATO systems and JDAM sets.

Integrating a whole-airframe parachute is planned for the next iteration.

Re:Probably won't affect cash position (1)

Kenja (541830) | about 2 years ago | (#39403663)

Depends. Now that they're actually paying their investors back they should see an increase in their stock price.

No toys? (0)

Anonymous Coward | about 2 years ago | (#39403271)

What, no DARPA-inspired cheetah bots and fleets of quadracopter-based Manhacks to hunt down Mike Daisey? Boring....

I seem to remember (5, Funny)

squidflakes (905524) | about 2 years ago | (#39403275)

Didn't Steve Jobs say something like "Apple will only pay dividends over my dead body."

Too soon?

Re:I seem to remember (-1)

lcam (848192) | about 2 years ago | (#39403495)

Technically it is over his dead body.

Re:I seem to remember (1)

Anonymous Coward | about 2 years ago | (#39403599)

And the joke sails right over your head.

intresting factoid (-1)

Anonymous Coward | about 2 years ago | (#39403285)

Apple Originaly didnt do Dividents, With Steve Jobs, they lost Jobs, they Started doing Dividends(company does horrible) , They got Jobs Back they stopped doing Dividends(company becomes monopoly in some markets), now Jobs Dies, They start doing Dividends again......so basicly apple is screwd

Re:intresting factoid (1)

Anonymous Coward | about 2 years ago | (#39403399)

Please learn: how to spell "interesting", "originally", "dividends", and "screwed".
Also, when it is appropriate to capitalize words, such as nouns (Apple, Steve Jobs), as opposed to every other word.

They've got it backwards (2)

Waffle Iron (339739) | about 2 years ago | (#39403303)

The fundamental principle behind stocks is to buy low, and sell high. Not the other way around.

Re:They've got it backwards (0)

Anonymous Coward | about 2 years ago | (#39403353)

not if they think the price will go higher. in which case today's price IS low.

Re:They've got it backwards (1)

Billly Gates (198444) | about 2 years ago | (#39403357)

Keep in mind Apple has buyout programs for its CEO and other employees that are long term oriented.

They will dillute the value of the shares. This is only a small payout and will keep the price high so the employees can earn their hard owned money without tanking the stock. It is commendable for them to do this as many 401ks are tied to their employees. Many CEO's payshit, but promise a nice stock buyback and 401k for their hard work, then turn around and dillute the shares and steal from their own employees when it goes public and the CEO buys a nice Porshe and a yatch.

Look up Zanga? What assholes, I would quit in discuss. As greedy as Apple is at least they respect their employees more and of course this investors do not want to loose their precious share price when employees start dilluting and cashing out shares.

Re:They've got it backwards (4, Interesting)

Sir_Sri (199544) | about 2 years ago | (#39403369)

You're thinking like a poor person. When you're rich, you buy at whatever price, but you buy enough to drive the price up even more, usually with someone else's money first, and then you sell.

In the case of Apple and their 100 billion dollar cash on hand, they're pretty much right in principle on this though. 100 billion dollars cash on hand isn't giving enough ROI, and people can make better use of that money themselves than Apple can, if apple could use 100 billion dollars for something it wouldn't have it lying around collecting interest on overnight bonds and crap like that.

The stock buyback is pretty normal, use some of the corporate cash to drive up the paper value of the company, thereby enriching shareholders without them having to pay tax. Paying a dividend of 1.7% of the value of the stock seems like they're trying to ease into this.

Re:They've got it backwards (2)

Anrego (830717) | about 2 years ago | (#39403563)

The stock market stopped making sense a long time ago.

It now operates in a seperate reality. The reality is completely ass-backwards, but everyone has agreed to work within it in the hopes that it favors them.

Re:They've got it backwards (1)

necro81 (917438) | about 2 years ago | (#39403791)

One philosophy of stock buybacks is for a company to execute it when it feels that it is undervalued (i.e., still buying low, compared to a future high). It is not unreasonable to think that Apple still has room to grow.

When I was a boy... (4, Insightful)

blind biker (1066130) | about 2 years ago | (#39403341)

When I was a boy of 11 or 12 years of age, I asked about how publicly traded companies and shares work. I was told that you own piece of a company through the shares, and so you receive a share of the profits, as well.

Somehow, this basic concept got completely wiped out by most hi-tech companies since then. So much so, in fact, that when Nokia or Apple does this payments, people are a bit puzzled.

Re:When I was a boy... (2, Informative)

Anonymous Coward | about 2 years ago | (#39403413)

I'd say you got a very basic breakdown of how stocks work when you are a young boy. Dividends aren't always a part of the package, and that was the case way back in the olden days before tech companies too. I'd venture to say that most people gain cash on their stocks by selling them or borrowing against their "worth" in their portfolio. Dividends are nice, but don't typically pay for yachts and East Side apartments.

Re:When I was a boy... (1)

DragonWriter (970822) | about 2 years ago | (#39403507)

When I was a boy of 11 or 12 years of age, I asked about how publicly traded companies and shares work. I was told that you own piece of a company through the shares, and so you receive a share of the profits, as well.

Somehow, this basic concept got completely wiped out by most hi-tech companies since then.

That's not a "basic concept", its a misrepresentation that probably was intended as a lie-told-to-children [wikipedia.org] but which failed in its own basic purpose.

Re:When I was a boy... (0)

Anonymous Coward | about 2 years ago | (#39403719)

No, that really is how public investment is supposed to work The profits might be paid thru dividends, or thru the secondary-market value of the stock going up (which is something that came along later), but profits-in-exchange-for-capital is precisely the original concept behind investment. By saying "no it isn't", you're telling what's know as a lie-told-to-investors, intended to muddy the waters, confuse them, and hopefully get away with their money.

Re:When I was a boy... (2)

busyqth (2566075) | about 2 years ago | (#39403555)

There is no difference in this regard between big business and small business. If you are the sole owner of a small business, then every year you have a choice of whether to reinvest all of your profits in the business or take some out for your personal use. Either can be a valid choice depending on the circumstances.

Re:When I was a boy... (2)

vlm (69642) | about 2 years ago | (#39403575)

Somehow, this basic concept got completely wiped out by ...

... socially engineered tax laws.

If a company book value is $10 I wanna decide when to pay taxes on that $10, not have them decide to dole out $1/year of taxable income or whatever. The difference in marginal tax rate can be very high in the US, a substantial amount of lost money. I'd be pissed if I was near retirement age and owned APPL because I'd lose "lots" of money to taxes.

If we were a little less central govt controlled, and there were no tax implications, I'd STILL argue that if I bought a billionth of APPL then the intelligent thing is for them not to waste time and money shuffling paper to pay a dividend and instead let me cash in my billionth when I want to. To some extent wanting commission-free dividend payout checks is old world thinking, like from the 70s when sales-commissions were triple digit fees... In the modern era commissions are low enough to not matter as much anymore.

I do own enough electric company stock to nearly pay my electric bill using the dividends... Yes that IS a lot of dough tied up in utility stock, like about a car's worth of stock... Its kind of like buying my own solar array (or, my own nuke, I guess) but there is much less maintenance work involved for me. I think it would be funny if they ever formalized the relationship and merged the dividend office with the payment office allowing me to directly apply my dividends to my bill... but no, I get a hefty quarterly check and pay a e-bill out of my checking account monthly. Maybe I could ask them to deliver my dividend check to the billing office "care of account number blah"? In my infinite spare time I'll look into that.

Re:When I was a boy... (1)

SpinyNorman (33776) | about 2 years ago | (#39403667)

There's a distinction between companies that are growing earnings fast (as tech companies often are) and those that are in solid businesses but with little growth (e.g. utlity companies, or mature tech companies like Microsoft and IBM whose fast growth days are probably behind them).

For the slow or non-growing companies that are plenty profitable but not actually growing, then paying out earnigns in the form of dividends to shareholders makes sense - you get little growth in the share price, but get your dividends as the reward for owning the stock.

However, for fast growing companies, a dividend doesn't really make sense - if the comany can reinvest profits and grow the company and share price at, say, 20% a year, then would you really prefer they use their cash to give you a 1-2% dividend instead? If the company can't usefully invest cash to grow the business faster, then maybe a share buyback makes sense if the stock is cheap or reasonably valued.

Of course there are also plenty of slower growing companies that fall in the middle of this spectrum, where a small dividend may make sense.

For Apple, whose stock people are buying because of it's explosive growth, to start pay a dividend, doesn't seem to make much sense. It's essentially saying that they have run out of ideas on how to grow the company (or at least have more cash than ideas), and they anticipate growth slowing such that a dividend is their best use of cash.

Re:When I was a boy... (1)

ath1901 (1570281) | about 2 years ago | (#39403695)

Exactly. The whole point of owning shares is to receive a part of the profits (dividends). Stock buy backs is also a way to reward stock owners since it increases the value of the remaining stocks.

The only reason to buy stocks in a non-dividend paying company is if you believe:
1. The company will grow and invest a lot and once their profits have multiplied they will pay huge dividends making up for the lost time.
2. A bigger fool will come along and buy your shares once the price has increased a lot.

This is a sound move of Apple. If they had continued refusing to pay dividends despite HUGE profits, all their investors would have to hope for (2). The question now is of course if the payoff is enough to motivate the share price ($500 per share, $2.65 quarterly, $10 bn buy back etc) but I leave that as an exercise for the reader...

Re:When I was a boy... (0)

Anonymous Coward | about 2 years ago | (#39403729)

That explanation makes perfect sense and is reasonable.. which is largely why it's false ;p

The stock market as I see it is a big game.

I mean the basic principle of it all spells this out. People buy stocks for the most part for the purpose of selling them to someone else, who has the same idea. It's very rare that someone actually wants a stock for any other purpose than selling it to someone else.

The whole second market confuses me. The first one makes sense.. you buy into a company which you think has a good idea in hopes that it pans out and you make a fortune. The second one, where people just perpetually bounce their stocks around at different prices .. it's eerie.

And at current share price (1)

MikeRT (947531) | about 2 years ago | (#39403421)

It's still only about a 0.5% return.

Exxon, which is about half as profitable (~8% profit vs Apple's ~17% profit margin), puts out a 2.2% yield.

I'm not a big fan of big oil, but one of the things that really gets me about the hypocrisy is that when people ask what big oil does with all of that profit, the answer is "they pay out fat dividends to their tens of millions of shareholders." Exxon is practically cheap as hell compared to many of its small competitors; 5-10% yields from healthy companies are easy to find.

Math fail. (0)

Anonymous Coward | about 2 years ago | (#39403601)

$2.65/qtr * 4 = $10.6/yr
AAPL's share price (as of 11:39AM EST) was $594, making a yield of 1.78%.

significance? (1)

blackfrancis75 (911664) | about 2 years ago | (#39403433)

The dividend is $2.60, per one APPL share at $565.
I don't trade stocks, but is this really a significant payout to shareholders?

Re:significance? (2)

iONiUM (530420) | about 2 years ago | (#39403481)

The price of the stock is unrelated, but the dividend in relation to the amount of cash apple has and their earnings is very low. But, that's the idea, it's a "token dividend", just to get the ball rolling. Presumably, they will increase the amount in the years to come, assuming they continue to be successful.

Re:significance? (1)

necro81 (917438) | about 2 years ago | (#39403871)

The price of the stock is unrelated

When evaluating whether a company is a good investment as a dividend stock, one will often look at the dividend compared to the share price, also called the yield. Lots of blue-chip companies have yields of 1 - 5%. One could think of it in similar terms to the yield on a bond. This is one reason why people are putting huge amounts of money into the stock market - despite the volatility of share prices (even though, on the whole, they've been trending upwards for a year or two), certain classes of stock are yielding much better than other places you could put your money (e.g., savings accounts, treasury bonds, etc.)

Re:significance? (1)

whoda (569082) | about 2 years ago | (#39403491)

For the funds that have a few million shares, it will make for a great year-end bonus for the fund manager.

Excellent move by Apple (1)

AdrianKemp (1988748) | about 2 years ago | (#39403531)

They've had a rough patch with the whole Foxconn and Jobs ordeals. Although the stock has performed amazingly well given the situation it never hurts to buy a little extra confidence.

Looks like no US factories (0)

Anonymous Coward | about 2 years ago | (#39403585)

Not that there was any hope anyhow but ironically this will make it nearly impossible for them to move operations back to the US since the cash is coming strictly from US accounts. Apparently they are unwilling to repatriat the money earned overseas so the plan will drain most of the US cash reserves. The joke is it could be an elaborate plan to bring the foreign money home by telling the government they need an exemption to repatriat the money so they can build US factories. Not likely but it would be a clever plan to force the government's hand to give them a massive tax break. In truth I think they were just running out of space in their mattress and had to do something with it all. It's not like you can just pay workers better wages with it:-)

Google, pay attention (3, Interesting)

rudy_wayne (414635) | about 2 years ago | (#39403617)

Larry Page needs to spend some time learning from Apple. I don't like Apple but I have to give them credit for one thing -- they haven't wasted billions of dollars on stupid pointless crap (driverless cars, etc) and buying a hundred companies a year that they shut down and abandon a year later.

Re:Google, pay attention (0)

Anonymous Coward | about 2 years ago | (#39403855)

I wish Google would pay a dividend.

If only I had been an Apple fanboy... (0)

Anonymous Coward | about 2 years ago | (#39403619)

I would have been buying shares of Apple in 1997. How could I have known? Most of the later Pre-G3 PowerMacs were shit, with only a few exceptions (9600). They seriously did seem doomed. Instead, someone gave me some shares of Gateway as a gift, my parents wouldn't let me sell it, and seven years later I got a check for twelve cents. Now I'd have to choose between getting a crown on a tooth and a share of Apple. I guess not everyone can win everytime.

Does this mean they will not invest in lawyers? (1)

erroneus (253617) | about 2 years ago | (#39403825)

Obviously they are now shifting their priorities a bit. So will this mean they aren't going to rely on lawyers to protect their territory and their flat things with rounded corners?

I was hoping... (5, Funny)

cmarkn (31706) | about 2 years ago | (#39403909)

they'd just take all that cash and buy Microsoft, lop off the deadwood at the top and spin off three or four little companies to build iOS apps.
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