“Pick your word: Ludicrous. Insane. Unfathomable. Insulting,” Dennis K. Berman reports for The Wall Street Journal. “‘Egregious’ is the one preferred by Christopher Bonavico, who has accumulated $700 million in Apple Inc. stock at fund company Delaware Investments. Mr. Bonavico can’t stop raving about Apple, saying the company still could be undervalued by 30% despite its mammoth stock-market value of $320 billion.”
“But Mr. Bonavico is going public with deep frustrations over Apple’s cash pile, a $50 billion lode that is expected to swell to $70 billion by year-end,” Berman reports. “The vast sum exceeds the gross domestic product of two-thirds of the world’s countries—and all but 36 of the market values of companies in the Standard & Poor’s 500-stock index.”
“Apple won’t as much throw a penny back at shareholders via dividends or buybacks. So far, company executives, including the ailing Steve Jobs, have offered only vague, nearly dismissive koans about possible acquisitions and the need to remain flexible and conservative,” Berman reports. “Mr. Bonavico isn’t the only dissatisfied Apple investor. Behind the scenes, say people close to a number of top shareholders, dissent is growing over the fruits of the company’s historic success.”
“‘Optimal capital allocation doesn’t matter until it does,’ says Ken Broad, a fellow portfolio manager at Delaware Investments. He points out that the stock-based compensation culture of Silicon Valley has perverted the balance sheets of companies like Cisco Systems Inc. and Apple,” Berman reports. “Employee shares, carrying an expected return on equity of, say, 11%, are being issued en masse while cash continues to accumulate, returning less than 0.75% per year. It’s like taking a credit-card cash advance and putting it in a passbook savings account. ‘Who would ever do this in their personal lives?’ asks Mr. Broad… ‘I think it has been beyond the point of being rational for a while now,” says Bernstein Research analyst Toni Sacconaghi, who has been hammering on the issue since last summer.”
Full article here.
MacDailyNews Take: Think Different.™ That’s something that stuck-in-the-box analysts cannot seem to manage.
Of course that’s been suggested to us. We strongly believe that one or more very strategic opportunities may come along that we can take advantage – that we’re in a unique position to take advantage of because of our strong cash position. I think, we’ve demonstrated a really strong track record of being very disciplined with the use of cash. We don’t let it burn a hole in our pocket and we don’t allow it to motivate us to do stupid acquisitions. So, I think that we’d like to continue to keep our powder dry because we do feel that there are one or more strategic opportunities in the future. That’s the biggest reason. There is other reasons as well that we could go into but that’s the biggest one. – Apple CEO Steve Jobs during Apple’s Q410 financial results conference call, October 18, 2010.
[Bold emphasis added by MDN Ed.]
The only reason to spend the cash on a buyback would be as a reward to shareholders if the market freaks out about Jobs and the shares drop significantly. It dosen’t look like it will happen.
Maybe some shareholders, but certainly not me. I’m very happy the way Apple has managed their finances.
Wall Street wants the opportunity to play with that $50 billion.
Most shareholders prefer steady growth and are happy with Apple’ strategy. FACT.
@Christoper Bonavico
You smell like…. like greed.
Poor Steve jobs
These guys want a one-time dividend, and as soon as it happens, they’ll cash out. It’s guys like Bonavico who probably look for cash-rich companies who they can then pressure into making a one-time payout, so they can benefit.
Yep Bonavico sounds like a carpetbagger.
Dear Those Investors,
Please shut the hell up.
Thank you.
-c
I hate to say this but this greedy bastich and the other money whore are going to squeal louder now that Steve Jobs is on medical leave. These money launderers want to cash out right now because they mistakenly believe Apple is on the way down with Mr. Jobs. They want a big return while the going is good. Bastards!
A buyback or dividend is an especially bad idea at this moment. It would smell like chaos. A steady hand on the the same course is the right message.
One would be outright stupid to say if Apple had a 1% dividend or about $3.40 or roughly $3b that they still cannot do any strategic acquisition.
With over $50b on the balance sheet and generating another $20b or so a year, it is outright fraud that there is no dividend.
As an AAPL shareholder, I say hold onto the cash.
I personally feel in general that if a company pays a dividend it helps keep them honest. A dividend represents real value vs. the speculative value that a stock price has.
Of course, we used to teach our children to save, before corporate culture and credit took over this country.
Apple is prudently saving for the proverbial rainy day and all those greedy crumb-sucking fund managers want is in on the cash pile.
Typical, speaks to all that is wrong with our America today.
Profit-Greed
Actually, a regular divided would not eliminate the cash pile, it would only slow its growth, and would make sense.
That stockpile as I posted yesterday, is going to be needed by Apple if Steve is not around. The day that happens, the company will take a big financial hit for an undetermined amount of time and the savings will help keep the large sums of cash flowing to keep expensive innovation and key people who need big salaries there while the company proves itself successful without Steve.
These idiots who what that money dispersed are probably up to their own ears in debt themselves and have no safety net for themselves if they lose their jobs. Why should these people expect Apple to act any different than they do? Because Apple “Thinks Different.” Apple has a safety net also, for when they inevitably lose their “Jobs.”
People, companies, and the government need to stop spending just because they see money, until debt is the norm they can not escape from.
I am sorry to say this right now when Steve has medical probs – get well soon Steve – but…as a shareholder I do not like the 0.75% profit made from the ever growing cash pile.
At the bare minimum I expect Apple NOT to throw any money out the door, ’cause that’s what they are doing as long as they can’t even match the annual inflation rate (which they can’t right now).
Think about it…soon Apple has so much money that they could get 1 additional quarter of profit if they would invest it wisely ..one additional quarter compared to most other companies, now that would be something.
I don’t need any extra dividends/paybacks but it’s fair to expect Apple not to throw any money away…
Combine that with getting Woz back to Apple in some form or another and Apple would soon own the whole world:D
When will they ever learn!
Or just “GREED”, plain and simple.
What ChrissyOne said…
I’m unable to fathom this entitletard mentality that has shareholders imagining they’ve done anything to deserve a chunk of Apples profit.
Woz is a has been, with no professional capability that currently can serve Apple or it’s shareholders.
Apple’s cash is the guaranteed security and insurance of a healthy able and independent Apple. That serves investors better than a petty dividend, in the long run.
the high stock price and the cash hoard keep the value of this stock high and prevent an Apple bubble. I am sure if Apple split the stock 10 to 1 and issued a monster dividend the stock would double in 30 days. Then we would have no place to put new money. Apple would be trading at 50 times earnings like Amazon or Salesforce com – and there would be no more value story. Seems Jobs and co seems to know this — an I like it. It does not bother me if the stock stays undervalued for the next 20 years.
The brokers want the money to be spent because it puts equity back in the market and lines their wallets with fees.
Apple knows best – it buys small companies that have developed innovative solutions and fit with Apple’s future goals. The companies are cheap, it’s good investing in the future and it doesn’t waste money on large bloated corporations.
Are you serious? How dumb. Do you get the only way to get a “good return” at this point in Apple stock is to sell some that you’ve held for a while. Until you convert the shares to cash, you just have paper gains with no access to the funds. However, a dividend lets one keep their position and get current returns. Why is that so dastardly? Are you really that thick? Has MDN gotten to you too? Never seen so much group think – is there such thing as MDN RDF?
“The vast sum exceeds the gross domestic product of two-thirds of the world’s countries.”
And, yet, that’s not even close to ONE MONTH of the US Federal budget deficit.
Fscking GREEDY ANALYSTS and INVESTORS. These are the types of people who don’t give a SHIT about Apple or what Apple stands for, they just give a shit about making quick profits.
@sense
Nonsense. Let them run the company. They are doing a great job.
Greed is not good.
Those asking Apple for dividends are by no mean out of line. Shareholders are part owners, and profits are the fruit of their investment in a company. Regardless of the change in Apple stock value, those billions earned by Apple belong to the shareholders. Using words like greed to describe these people is ridiculous.
Both sides have good arguments for their point of view. These shareholder demands for dividends are only going to get louder if Apple doesn’t begin acting on it’s stated reason behind the stockpile: acquire something big.
People, what ARE you all so upset about? No one is saying “give all the money back to the shareholders”- just some of it. There are a LOT of companies who pay dividends (even in high-tech: Microsoft and Intel come to mind).
Dividends are not evil. It’s a way a company can repay investors for putting their money in the company. That Steve J. is traumatized by what happened with Apple’s cash flow in the ’80s and ’90s is no reason to dismiss some small dividend. In fact, by paying a dividend, the Apple actually increases the value of the stock (since not only does investing in Apple pay off with higher stock prices over time, but you get some of your investment back in the short term as well- this also increases the value of the stock).
Personally, I don’t have a problem with this (and as a shareholder, I’d love to get some immediate return on my investment).
Just my 2¢ worth…
Would you people demanding a buyback and/or dividends please go look at a chart of aapl for the past 5 years…… up almost 300%. Look at stock price of HP and MS. Have they moved even though they issue dividends and put billions in stock buybacks? NO
Now, go stand in the corner and shut the f* up. 🙁
It amazes me how short sighted these dividend hawks are. Apple’s cash horde has had the effect of turbocharging itself for the past decade. How many companies have racked up the kind of consecutive string of positive earnings growth quarters that Apple has? I’d venture to say not many, Apple has , over the past decade, managed to make strategic acquisitions that allow them to create products that change both the telecom and computing world. They have invested in strategic intellectual property and in factory capacity. This has had the effect of allowing them to produce advanced products that not only create new markets and categories but also stem the erosion of profit margins. The dividend hawks don’t see this so they would rather just kill the golden goose.
A one time dividend would be taxed at what , about 35%, you might as well raid your 401K for a high roller’s night in Vegas. The only one’s who will make out are institutional fund managers which by population represent maybe 5% of Apple share holders because they get to pay the tax piper later and pad their stats. The rest of us investors would suffer with the tax bill and and the following loss in stock value. If more industries thought and acted like Apple our economic situation as a country over the past decade might have been very different.
You, as an investor, want some money back?
Sell some shares. The market is very liquid.
To @Mr Tuttle, whoever you may be:
You assume that you are right and that others just “don’t get it” and are “dumb”.
Your position might make sense in the case of a company that’s competitive in selling baked beans or a Microsoft whose glory days are over and which now faces an uncertain future.
But Apple has been given your advice repeatedly, and I’m glad they have rejected it. My investments in shares of Apple have not resulted in dividend income. But the share prices appreciated. Yes, there have been times when I sold some and got real returns on the investment.
Meanwhile, Apple has made investments in growing their operations so that profits have gone up like a rocket, they have no debt and have liquid assets to make further growth investments when the time is right.
Many who have bought Apple shares could sell a portion that would result in recovery of their original investment plus a several-fold return, yet retain a larger portion of their shares for future appreciation. That doesn’t happen often in the baked bean business, dividends or no.
As I write this, Apple is down 3.75% on news of Steve Jobs’ health problems. I’m still way ahead on the appreciation of my shares. And because Jobs has built a corporate culture at Apple that reflects his own visions and management style, I expect Apple to continue performing very well for years to come.
My advice to you, @Mr Tuttle: don’t disparage those who are smarter than you; stick to baked beans.
” width=”19″ height=”19″ alt=”grin” style=”border:0;” />
If Apple where to begin loosing money on operations that horde of cash wouldn’t insulate the stock price for long. However offering a 3% dividend offers lots of value protection to the owners, that’s us the share holders. That level of dividend wouldn’t impinge Apple’s ability to continue operating as they currently do.
Under the current model Apple could possess as much as 100 billion by or at least during 2013. Unless they are inclined towards acquiring some really big targets what business sense does it make to have this much cash.
I don’t want Apple to start buying all the studios. While it would insure access to content I for one don’t want Apple controling content creation.
What good argument can be made that paying out 2 1/4 billion per quarter. This is less than half the current rate of accumulation.
@MacMan
(even in high-tech: Microsoft and Intel come to mind).
And just what is the current dividend price from Microsoft? $2.25?
Go get ’em Tiger. Enjoy your early retirement.
Apple has never paid dividends, and that history is thirty years old. Why would you buy a stock, knowing it does not pay dividends, then complain that it doesn’t pay dividends? Because you’re a whiny baby, that’s why, whether you’re a $700 million dollar whiny baby or a “my ten shares” whiny baby, you’re still a whiny baby. Even if you’re a big fund manager at a major financial institution you’re a whiny baby.
Now, I suggest all those whiny babies sell their enormously profitable stock, realize the ridiculous gain, and re-invest in companies who historically pay dividends – like MSFT or AT&T and see how that works out for them. Where is your money better off? Whiny babies – go have a nap!
dmz
This discussion would simply stop if Apple was able to report earning a bit more on the reserves. It is called a reserves to help with the unexpected after all.
However, I found it difficult to understand why they are earning a rate less than I am able to get for a 6 months CD in NYC.
Steve Get well soon, Apple management, thanks for a great job.
Guys, let’s be reasonable here. I’ve got a fair amount of Apple stock, and I’m long, meaning I keep it for a long time. I bought in the last time a big way back in mid 2004, and have made quite a lot of money without dividends, or cash givebacks.
But! Later today, when we see the results, Apple will have at least $56 billion in cash and investments. Most people here are opposed to Apple buying something really big. I know this because I’ve been here for quite some time. Same thing for some other sites.
So there is the problem in understanding just what Apple is thinking. Assuming that they won’t announce some major merger or acquisition, unlikely, as we would have read some rumors of that already, when might they do this? Well, whenever they do, they will have at least another $5 billion to use. If they aren’t going to be making so e very large move, then what purpose I’d this money for?
I understand Jobs saying as the recession began that they needed if for a reserve during that difficult time. But we are not there anymore. Apple could give $20 billion back to shareholders every year, and still have over $55 billion in the bank if in fact, they don’t plan on using much. Before they did have$50 billion, I wasn’t concerned, but now I am. It’s true they are earning very little on this. Possibly about keeping even with inflation. That’s not good. I’d like to see them put more into R&D, but that won’t dent it much. Even building ten new server farms the size of what they have in N Carolina every year won’t make a dent.
So, what will they buy that they need so much cash for?
@dmz
Here Here! A toast to you!
For all his whinging, Mr Bonavico still sees fit to invest $700 million in Apple.
HA! You are funny because your response actually never gives a solid reason why some portion of the cash the company generates should not be dividended out to shareholders.
If the company has $55B today and will generate another another $20B or so this year, does having a $3-4B dividend actually hurt the company’s ability to achieve every single one of their goals? The answer is of course not. The stock would still perform based on the underlying business, so in spite of the dividend, you could still make a ton of money in the appreciation.
It boggles my mind why an appropriate capital allocation structure would not be pursued when the company is sitting here generating tons of FCF and holding all that cash on its balance sheet at less than 1% return – all the while giving new shares to insiders when the ROE on those shares is something like 10-11%.
Hmmm, receiving 1% on cash and paying out shares with 10-11% ROE? And you are calling me stupid? Many of the comments on those board are dumb and they are bereft of any logic. Why this is made out to be a binary event is typical of the groupthink on these fansites. A small portion of their FCF paid out to investors will do nothing to harm the business, and saying that it would is right up there with some of the dumber things being said in this board.
Groupthink, eh? Yours is a pretty good example of, in your own parlance, methink. I didn’t give you a “solid reason why some portion of the cash the company generates should not be dividended out to shareholders” because it doesn’t matter what reason I came up with because I’m not Apple.
Your logical, rational outlining of of Apple’s capital position is redundant – we, that is you and I and everyone else, the “group” are not Apple. Get over it. If you wanted dividends, then you should have bought stock that pays dividends, end of my argument.
Maybe you, and only you, all on your own and without the group, should be wondering why Apple is amassing this War Chest. Then you could tell us, the group, why they aren’t suddenly, after thirty years of sticking to this policy, deciding to pay you a dividend on your hard-earned…? Well, you get the idea, I hope.
I have no personal knowledge, but in my opinion, my own opinion, if that’s allowed in my group, is Apple is not Microsoft. That is, the acquisition-and-merger model is not Apple’s m.o.. Sure, they could take Adobe, or Oracle, and they may, or they could put the money into infrastructure, or the Space Program – who knows? I know I don’t, and I’m pretty sure you don’t, so why not just wait and see? Apple’s good at surprises, and those surprises are reflected in your “ROI”.
dmz
p.s. no one called you stupid, that would be name-calling. Now go take your nap and we, the group, all hope you’re feeling better afterwards.
@BillD
You seem to have flip-flopped on your previous argument AGAINST tuttle to WITH tuttle. WTF? Your two entries do not even sound as if written by the same writer – hijacked? bipolar? What gives?
dmz
These stupid people should not even be allowed to own Apple shares.
IF YOU ARE NOT HAPPY WITH APPLE AND THE STOCK SELL YOUR AAPL RIGHT NOW!!! AND GO AND BUY MSFT THEY PAY A NICE DIVIDEND BUT THE STOCK PERFORMANCE IS CRAP SO STOP WHINIG ABOUT IT. THERE IS NO REASON AT ALL FOR APPLE TO PAY A DIVIDEND AS LONG AS THEY GROW LIKE THIS. ALSO REMEBER THAT THOSE 50 BILLION IS A PART OF THE SHARE PRICE OF AAPL!!
That’s why I won’t own Apple.
Sure I shorted a couple thousand shares when Jobs went out on his latest cancer battle (too bad the announcement happened on a holiday or the shares may have really gotten hammered)
But I’ll be happy when the few grand I made and just invest in some good quality Dividend Stocks.
Too bad Apple is so freakin greedy.
I can’t wait until all the long-time macheads get frustrated and revolt, maybe take Linux’s Linus as their new demi-god.
Maybe they’re keeping that much in reserve so they can make Steve Jobs the world’s first bionic man?