The case for Apple to execute a large stock buyback

“Apple is sitting on a huge cash reserve — $24.5 billion as of September and growing at the rate of $8 to $10 billion a year – that’s doing almost nothing for it,” Philip Elmer-DeWitt writes for Fortune.

MacDailyNews Take: It’s actually providing insulation and flexibility.

Elmer-DeWitt continues, “The money is earning about $1.55% interest after taxes, according to a report issued Wednesday by Bernstein Research’s Toni Sacconaghi, at a time when the company’s stock is trading at a unusually low (for Apple) multiple of 15 times earnings. That makes conditions ideal for a massive buyback of Apple (AAPL) shares, says Sacconaghi.”

“Of course, Steve Jobs may have better ideas than Toni Sacconaghi about what $25 billion can do,” Elmer-DeWitt reports. “The last time Apple’s stock fell this sharply — plunging from nearly $40 a share in March 2000 to $7.44 in December 2000 – Jobs used the cash he had on hand to start a chain of Apple Stores.”

Full article here.

18 Comments

  1. @AAPL Dude

    I think that Apple buying Microsoft in the future would be a fun revenge fantasy, but it would be a poor business move for Apple.
    Apple would be buying a company (MS) with little to no future value, and when we see a very depleted MS 4 years in the future we will easily see what a mistake it would have been to put any money into a dying entity.

    Apple has already set checkmate to Microsoft, by continuing with Apple’s business plan of producing quality products based on innovation and consumer’s needs, not the needs of the engineers and the marketing department, and also protecting those products through Apple’s vigorous patent defense.

    Microsoft has always profited from theft, deception, and trying to manipulate the market to Microsoft’s profit, instead of the good of the consumer. This strategy is less and less effective.
    And Microsoft could not reverse this traditional strategy, even if Ballmer wanted to, and Ballmer doesn’t want to.

    Also, Apple will never step into the anti-compettion / monopoly trap by trying to buy the competition. Apple can just stay at arms-length and watch as the competition (Microsoft) continues to destroy itself.

    It’s not as thrilling perhaps, as a thrust of the sword, but we will have years of enjoyment watching Microsoft die a lingering death.

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