Time for an Apple buyback?

“Eighteen-and-a-half billion dollars is a lot of money,” Arik Hesseldahl reports for BusinessWeek. “It’s more than the estimated 2007 gross domestic product of Nicaragua. It’s bigger than the estimated 2005 expenditures of no fewer than 20 U.S. states. It’s enough to give $60.78 to every person in the United States, and $2.77 to every person in the world.”

“And most importantly for Apple (AAPL) investors, it amounts to $21 for every share of company stock—and as of the end of most recent quarter, it’s the cash pile sitting in Apple’s coffers,” Hesseldahl reports. “Shareholders certainly have shared in Apple’s success over the years. The stock topped out at $199.83 on Dec. 28, an almost 19-fold increase over five years. Yet the growth in the company’s cash hoard is starting to make people wonder, What exactly will Apple do with all that money?”

Hesseldahl writes, “Apple ought to return some of that cash to its shareholders in the form of a buyback… An aggressive stock repurchase plan will do three good things for Apple shareholders.”

• It will send an unambiguous signal that management believes Apple’s best days are ahead
• Word of a buyback would probably give the stock price the kind of upward lift it needs
• Reducing the number of shares outstanding—currently about 879 million—would boost earnings per share.

Hesseldahl writes, “While I’m the first to praise Apple management for the smart way it has run the business over the last several years, its lack of plans for its cash is starting to ring hollow.”

Much more in the full article here.

[Thanks to MacDailyNews Reader “Alex” for the heads up.]

40 Comments

  1. How about using the money to further build the company’s infrastructure, stores, advertising, new product development, promising acquisitions and by the way, to hammer any patent violators into the ground so hard and fast that they can’t breathe.

  2. “its lack of plans for its cash is starting to ring hollow.”

    Interesting article, unitl this last statement. Does anyone honestly think that a company like Apple would NOT have plans for $18.5 B?

    Get real here folks, do you think Steve Jobs is going to wake up some morning and say ‘oh, shit’ I forgot about the cash reserves, maybe we ought to think of something to do with it?’

    The real statement here is that Apple hasn’t gone PUBLIC with its intentions, and that’s just the way Apple plays the game.

  3. What an ultra- Maroon! as Bugs Bunny would say. A stock buyback us usually used when the company is floundering and needs to float the stock quickly.

    Apple has been doing everything right. I am not sure who is keeping the stock price low, but thanks to them, I was able to buy a few shares at way lower than what it was.

    Just a thought.

  4. Yeah, this is just more armchair analysis from people with their own agendas, and more importantly, pages to fill.

    Apple needs to quickly expand at this point, not waste the biggest pile of cash in the companies history by giving it back to the investors to spend on more beamers and trips to Spain.

  5. Apple should do this. Apple should do that. Apple should buy this. Apple should sell that. If I have to suffer through one more article by some self-important asshat pundit, I’ll hurl chunks.

    There’s a good reason why Arik Hessendahl is a writer, not a corporate CEO. He couldn’t cut it in that world. So even though he’s never been a CEO or CFO of a Fortune 500 corporation, he and others like him feel they know everything and can make judgments on what Apple should do. In response, I have this to say:

    F*ck you, Arik, and others like you.

    Apple has succeeded brilliantly by creating markets on its own. The company is growing because of innovation and creativity, not by making large, typically disastrous acquisitions and mergers that are full of “synergies” and usually end up with companies led off the track of what they do best, lost profits and wasted corporate equity. (Maybe that’s why Microsoft’s desire to acquire Yahoo doesn’t worry me – I see a train wreck coming. Obviously, Arik and those like him don’t.) Investment genius Peter Lynch calls it deworsification.

    When Apple has made acquisitions, they have typically been with small companies in which the news seemed hardly noteworthy. But if you look at the various acquisitions Apple has made over the years, they have been typically opportunities to buy technology and knowledge on the cheap that the company has turned into huge profits. As an investor, THAT is the kind of strategy I want to see a company follow. The pundits and journalists want the big sexy mergers that make for great headlines. But if you look at these celebrity marriages, they typically last as long as Eddie Murphy’s last one. By then, Arik and his comrades have moved on to the next big story to hype. Yep, synergy. That’s what we need.

    Eighteen billion sounds like a lot. But if you factor in the strength of the dollar, or the lack thereof, in real terms, that amount is not really much different than the traditional $4-5 billion that Apple once had in its coffers. Cash is king, and a company with no debt and a lot of real cash on their books is not only a far better investment, but also positioned to ride terrible storms that could hit any company. It happened once to Apple. Perhaps old scars don’t heal easily.

    I hope Steve Jobs and Peter Oppenheimer laugh at the Arik Hessendahls of this world. When we look back, I think they’ll be vindicated.

  6. nothing wrong with a buyback – a smart co. knows when it is undevalued and greattimeto reward the shareholders – keep in mind SJ expressed deep concern in a n open letter about the losses to investors and employees. IBM is notin decline and it did it – also iPhone subscription is bringing in significant cash flow – time for a buyback i say!!!!!

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