MacDailyNews Take: Bullshit. We’re AAPL shareholders (we know, can you believe it?) and we’re not exasperated or frustrated with Apple CEO Steve Jobs’ leadership or his decision to grow Apple’s cash pile into a mountain. Amazingly, we trust Steve Jobs over Toni “I Can’t Find Those Missing iPhones, Oh Wait, Whoops, They’re Not Missing” Sacconaghi.
P.E.D. continues, “Now he’s come up a new argument. So many institutional asset managers already own Apple, he says, that unless the company starts distributing some of that cash to shareholders, there will be nobody left to buy the stock.”
MacDailyNews Take: Yeah, just like there were no iPhones and then, suddenly, poof!, millions. Sacconaghi is a hack.
Full article here.
MacDailyNews Take: On Toni’s very best day, Gene Munster could defecate more cogent AAPL analysis.
[Thanks to MacDailyNews Readers “Dan K.” and “James W.” for the heads up.]
@Buster,
“I sense that their products are not as well put together as they used to be”
As someone who has been working with Apple products since the Apple ][ first came out, and is a certified Apple Service Technician, I can say that your sense is just plain wrong here. Apple products have always been above industry average, but currently, they’re in another league above the rest of the industry. This has to do with new manufacturing and material innovations Apple has come up with or licensed and adopted from others in the past few years. You really just can’t compare unibody aluminum to assembled plastic or gorilla glass to plastic screens.
While a lot of this is engineering and design, versus assembly, the customer satisfaction surveys which indicate problems as well as the responses to the problems are still way above the industry.
Somehow the “quality is getting worse” statement gets brought up every now and then since Apple first launched, and at times there have been product specific issues, but overall quality and reliability have trended upward compared to the industry and even Apple itself.
Expect this trend to continue as Apple products become more solid-state and experience fewer mechanical failures from 3rd party component vendors (hard drives, optical drives, etc…), even better materials (liquid metal), and other parts (magsafe tech being extended to LightPeak).
Apple is laser focused on quality and building superior products and has been for quite some time, not just in the user experience but in the quality of the product itself.
There will be nobody left to buy stock in the most dazzlingly successful investment story on the planet?!
Does Toni also not understand that AAPL stock, post-buyback, would not increase in worth to compensate for the loss of opportunity that the cash provides? Or that powerful growth trumps dividends?
Clearly common sense is not a requisite for work as an investment analyst.
@Macslut…I hear ya….and am glad …no relieved…to hear it from a professional. I had no doubt that Apple’s quality and reliability as well as customer service is light years better than the industry’s in general, I was more reflecting internally on early Apple vs current Apple where I saw fewer HD or power amplifier failures (two dual G5’s in the past month). The old 68020, -30 and -40 models just grew old before we replaced them. Never had a dead one.
Of course I am comparing apples and oranges (no pun intended) bringing in iPhones and iPods into the mix. I had to return two brand new iPhones to the store. They immediately swapped them no problem and the new ones have been working perfectly. It is unscientific low numbered surveys like that which had me thinking out loud.
Thanks for the news.
@MacSlut
Yeah, I don’t know where it comes from but these “Apple products aren’t made like they used to be” people are, simply put, full of shit.
No one makes hardware like Apple. No one. Any percieved defect is more a result of the hyperactive media attitude towards Apple than any real problem with Apple products.
@His Shadow…yep…clearly I am full of fecal matter. But at least I am not so extremely opinionated and defer to the advice of a professional.
@m159,
“Does Toni also not understand that AAPL stock, post-buyback, would not increase in worth to compensate for the loss of opportunity that the cash provides?”
Actually the cash, just sitting there earning really lousy interest, represents an opportunity cost.
And Toni isn’t suggesting this as the only thing Apple could do with the money, but rather has mentioned in many reports several things Apple could do with the money, or at least provide better guidance on what it intends to do. Any number of which would benefit investors.
Why do people (inc so called stock analysts) keep quoting the interest rate that Apple get as if its a high street bank account that it’s in?
You don’t have to be Einstein to work out that if you have $51 billion to invest then you can more or less tell the bank what rate you will get.
I have worked in banking for many years and I know that large multinational corporates with global business are able to negotiate very hard with their bankers and can often double the rate they get or even better.
Now if Apple bought back some of their stock (say $30 billion worth) and the stock overall dipped by say 5% (like it often does when the manipulators get involved) they would have lost $1.5 billion, lost the interest they would have gained in the current strategy, lost the ability to be agile, and generally have become just another big corp with no strategy to set them apart.
Their current position is the direct result of a carefully considered strategy successfully executed. That is what sets them apart and has resulted in a cash pile that could run a small country.
Stock buybacks are what companies do when they have no new innovations to offer to the market, and the executives are too greedy to reward the investors with a dividend.
Apple doesn’t fit the description.
While in general companies that hoard cash are essentially frittering away opportunities to make decent returns on investor money, Apple has been very good to its investors in the last decade. Take our money and keep innovating.
A friend and I started investing in AAPL with less that $15K each in 2003. With an occasional trade and a few options transactions I am now close to 7 figures and he is at 8 figures. Tony needs to STFU.
Apple is positioning itself for a major push, either an acquisition or a new service that will bypass the telcos, cable companies, and cell carriers. Steve’s vision is to end the crippling of hardware and the purposely limited bandwidth provided by those companies in order that they can nickel and dime their customers for anything they provide that is of value. His vision is, as with everything else, ease of use and an unbelievable customer experience. It’s going to take a lot of money to do that, and it’s a “bet the farm” strategy. I think those who bet against him will regret it.
@fenman,
The analysts are using the numbers reported in Apple’s financial statements. The return on cash is piss poor to begin with, but outrageously piss poor to the return on Apple’s business.
That’s the big part of the issue right there. The second part is that Apple isn’t providing clear guidance on what it intends to do with the cash horde or what strategy it intends to use to deal with the increasing incoming cash flow.
All of this increases uncertainty in regards to the stock and difficult for analysts to factor in to the equation for reporting on Apple.
If you think of Apple’s cash as a division of Apple, you’d see that it accounts for 17% of the value of the company. However, that division SUCKS and is giving piss poor performance not only compared to the rest of the company, but in regards to the market itself.
The complaint here, is that while Apple is skyrocketing forward, there’s this 17% drag on the stock. And this number is increasing rapidly as Apple continues to add to it quarter after quarter with no announced detailed plans to properly address it.
@macslut:
I disagree with your math. First, stock price reflects anticipated future earnings, which include some fuzzy math and speculator-driven guesstimates on what return Apple will get on its cash. Second, Apple is not getting a 0% return on its cash. Third, that cash comes in very handy to underwrite and finance internal manoeuvres that check-out and check-in cash in less than a fiscal year. Not having to go to the bank for operating expenses saves untold amounts of money. Just ask GM. Lastly, that cash is the biggest lever Apple has to get preferred treatment from suppliers. Given the choice between supplying the larger customer by unit sales versus the manufacturer with a lesser unit order but one that is willing to share startup costs and pay 30-net instead of 60-net is a HUGE issue that cannot be gleaned by looking at 3-month snapshots of the cash vault.
And yes, Apple is wise to not be telling anyone else how it uses its money. Why let Mikey and HP in on the secret?
@Mike,
“First, stock price reflects anticipated future earnings, which include some fuzzy math and speculator-driven guesstimates on what return Apple will get on its cash.”
Stock price reflects the value the market has placed on the company which is based in part on future earnings (including return on cash), but also on the value of the company itself, of which the cash is a part of.
“Second, Apple is not getting a 0% return on its cash.”
I didn’t say it was, but the fact is that Apple is getting a very low return on its cash, and combined with inflation represents a return that investors would complain about if looking just at the cash and its return. Again, as a division of Apple, the cash division would suck. If Apple were to spin off the cash division as its own company, it would have a market cap of $51 billion, or the exact amount of the cash.
“Third, that cash comes in very handy [snip]”
Cash comes in handy, and nobody is saying Apple shouldn’t have a sizable amount of cash on hand, but $51 billion is grossly excessive and if you look at their financial statements you’ll see they don’t need anything but a very small fraction of that for operations.
“And yes, Apple is wise to not be telling anyone else how it uses its money. Why let Mikey and HP in on the secret?”
Who is Apple here? It’s the *owners* of the company. The shareholders. The owners of the company should know what the management intends to do with $51 billion. Now, if management isn’t willing to provide that information to the people they work for, then the owners, investors, are going to start complaining. They’re also going to start asking to see results. While 83% of Apple is running beyond stellar, that 17% that’s sucking needs to be accounted for.
This guy is a big douche bag and you can read the lack of love from MDN to confirm this!