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Apple to make an announcement regarding its cash balance!
Apple is fast approaching $100 billion in the bank, and they just announced a conference call to discuss the balance. Is it finally time for Apple shareholders to see a dividend? What do you think they're going to announce?
The call will be tomorrow morning. Early. 6:00 am PDT/9:00 am EDT
The call will be tomorrow morning. Early. 6:00 am PDT/9:00 am EDT
A dividend makes the most sense at this point. Apple uses a large amount of cash in their business operations (mostly to lock in component supply and pricing way in advance), but now that the company is generating more cash flow than it needs. A lot more. Perhaps the biggest benefit to issuing a dividend is that it would make the company attractive to an additional class of investors.
I think a case can be made for a stock buy back as well. Particularly, since the market doesn't seem to be taking the cash on hand into much account when valuing the company. The problem with a buy back is that this cash hoard isn't a one time issue. Apple is generating so much cash each quarter that even if they bought $40-50 billion in shares the balance sheet will likely be at around $100 billion this time next year. At some point they will either have to pay a dividend or take the company private.
I think a case can be made for a stock buy back as well. Particularly, since the market doesn't seem to be taking the cash on hand into much account when valuing the company. The problem with a buy back is that this cash hoard isn't a one time issue. Apple is generating so much cash each quarter that even if they bought $40-50 billion in shares the balance sheet will likely be at around $100 billion this time next year. At some point they will either have to pay a dividend or take the company private.
I think they may decide to finally issue a dividend, however I think it will represent a relatively modest (< 20% of total cash on hand) amount. They will continue to hoard cash to allow them to make huge component purchases as well as to buy companies that provide key competitive benefits (how is that they haven't bought Nuance yet???).
I know this is completely insane and won't happen in a million years, but why not take a loss on the iPad 2 and sell it at a competitive $200? Not only would they be eating the Kindle Fire's breakfast, lunch and dinner, but they'd expand their lead by leaps and bounds. They'd even make a significant dent in the education market if they'd announce this along with a partnership with a big textbook publisher.
I know this won't happen, but we can dare to dream!
I know this won't happen, but we can dare to dream!
One of the biggest reasons it won't happen is that it would devalue the brand. Apple's iPad is already selling at a price the competitors can't match (and still turn a profit). If Apple starts selling new iPads for $200, that becomes the benchmark price in the industry and it will never be able to sell one at a reasonable price again down the road. It also starts to make Macs pricey too.
I like the idea of partnering with a textbook publisher, and even offering a real educational discount on the iPads for students ... but selling it for a loss is a non-starter.
I like the idea of partnering with a textbook publisher, and even offering a real educational discount on the iPads for students ... but selling it for a loss is a non-starter.
Most definitely. Brand value holds more weight in the mindset of a consumer (even subconsciously) than almost anything.
They'll announce the'll cut prices and give Foxconn workers a bonus!
No way on both counts. They are not going to cut prices and they are not going to bring up Foxconn.
Clearly they are going to talk about the D-word. I would never give a dividend if I was them. They should be putting that cash to work buying companies that can make Apple's ecosystem even more delightful.
There are so many problems left for them to solve, from TVs to transportation. Why not buy Tesla for $5B and make Apple cars!? Seriously.
Buy AT&T and Boingo and make unlimited data service free for Apple product users for one low price.
Clearly they are going to talk about the D-word. I would never give a dividend if I was them. They should be putting that cash to work buying companies that can make Apple's ecosystem even more delightful.
There are so many problems left for them to solve, from TVs to transportation. Why not buy Tesla for $5B and make Apple cars!? Seriously.
Buy AT&T and Boingo and make unlimited data service free for Apple product users for one low price.
I think they should buy or build their own carrier and ditch AT&T, Verizon, and Sprint or they can reinvent the automobile.
Samsung this past friday just finished spinning off it's LCD business to a separate wholly owned company. (as seen here www.engadget.com/2012/03/16/samsung-shareholders-a... ). Am I the only one thinking that Apple wants to make their company more vertical by buying their own LCD factories? The timing fits rather nicely.
The responsible thing would be to pay out a healthy dividend. The idiotic thing would be to make a strategic takeover of an obvious competitor, say Google, for an obscene amount of money. The smart thing to do would be to make some long-term strategic purchases of not so obvious competitors that have solid footing in areas where is Apple is weakest, say Facebook, Yahoo and anyone else with innovative tech that will pave the way for the next "one more thing".
I should add that this call isn't so much about the $100 billion Apple already has on hand. This call is about what Apple is doing with their cash going forward. They can't continue to just pile up cash forever. Tomorrow they announce what they are going to do with there extra money. In the end, there are only two eventual outcomes: pay a dividend or go private.
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