)”Apple CEO Tim Cook has a problem, a $98 billion problem,” Poornima Gupta reports for Reuters.
“Just 18 months ago, Apple’s $46 billion mountain of cash – while huge by most standards – attracted only muted complaints from investors, who did call for a dividend or share buyback, but were mostly happy with the meteoric rise in the stock price,” Gupta reports. “But with the growing cash balance now a much bigger overhang on the stock, widely considered to be undervalued, investors are clamoring more vocally for Cook to put the money to work.”
Gupta reports, “Apple’s runaway success presents Cook with his first real public test as chief executive officer – figuring out what to do with the money. Apple’s cash balance is now a quarter of its $415 billion market capitalization and roughly equals California’s 2012-2013 state budget. And even though $64 billion of Apple’s cash is overseas – meaning it will have to pay a hefty tax to bring it into the United States – calls for a dividend on Wall Street grew louder after the company said on Tuesday it was in “active discussions” internally on what to do with the money. Wall Street is strongly in favor of Apple returning the money to shareholders through buybacks or dividends, even if it is only a one-time deal.”
Read more in the full article here.
[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]
Would prefer that they use it to get rid of Google and Android while saving a few $$ to direct towards kicking Samsung’s ass as a warning to others.
I believe Apple’s real competitor and next crop of challengers will emerge not from Korea, but from China and Foxconn.
FFS another me-too writer. The only ‘problem’ is those who want something for nothing and analysts who grok nothing about Apple.
Move along, nothing to see here.
I own Apple stock and I am very happy. No buy back please, I want to retain my stock.
Let it grow to a trillion. They are spending the cash on investments such as recently purchasing the SSD company in Israel, building up iCloud, and it looks like they are expanding the datacenter by constructing a second one in Oregon. Apple doesn’t need to spend for the sake of spending. It should make sense. I love the fact that Apple runs lean and they produce quickly, yet the quality is epic. That should never change direction. It might make sense for Apple to buy AMD and in doing so they get Nvidia. They could control the entire channel. I would never want to see Apple do what AOL did in the late 90s or Yahoo in the early 2000s. Just because you have cash to burn, doesn’t mean you have to fall into that trap. If anything Apple should by back as much as possible of their own stock. Currently they can buy back 25%. Eventually they can afford to buy it all back and pull themselves off the NASDAQ.
First, Apple did not buy an SSD company. They bought a company that does designs for specific interfaces for NAND memory. Thus they can design and have built their own interfaces to SSDs as well as other solid state devices (hint, hint).
Second IF Apple were to buy AMD it would NOT get Nvidia. AMD and Nvidia are direct competitors in the GPU market. What they would get is the old ATI group. This would be an advantage, but they would also get all the AMD CPU baggage — something that is losing money right now. Probably not a good move.
Third, Apple needs to acquire technologies, not companies. These must be technologies that move *Apple* forward. These must not be moves that might give Apple a small business advantage but “rescues” the company they buy.
Third, buying a lot of stock back is ONLY done if it is done to prop up or rescue a stock. There is absolutely NO other reason to do a huge buy back. There is absolutely no reason for Apple to buy even 5% of its stock back let alone 25%.
Finally, unless a very small number of people each worth well over 10 billion were to finance a buyout of Apple, it will never be a private company again. In theory it could happen, but Samsung coming up with a band new, unique smartphone design that is 100x better than anything Apple puts out is more likely than Apple going private in the foreseeable future. Such a thing might have happened back in the lowest point of the “dark days” when Apple could have been purchased lock, stock & barrel for under $10 billion, but it won’t happen now.
Seek out the very best people in R&D then hire them.
Seek out technologies best suited for future needs then acquire them.
Stay smart, Apple. Stay sharp. Invest in what’s to come.
Sounds good to me.
Tim Cook doesn’t have any sort of problem regarding the $98 billion. Far from it being a problem, it’s a massive advantage.
Apple has never followed the advice of analysts and Tim Cook won’t either. He has said that it has recently been discussed and there is currently nothing to be said on the subject.
I would venture to suggest that one of the reasons why Apple is so successful is that it does not do what other companies do and therefore the advice from commentators who may have expertise relating to conventional companies is inappropriate when applied to Apple – but that doesn’t stop them spouting off pointlessly.
BINGO so totally right on. Wall Street and Analyst = Greed.
They are only interested in their own interest at the moment. All else is beyond them. That is why they do not get Apple.
en
they don’t get apple because apple is alien freakery to their farm boy logic. It’s like expecting a somali fisherman to relate to Einstein.
I would say that perhaps that these Wall Street crooks should stop assuming they know more than Apple. They clearly don’t. They should be taking advice FROM Apple, not be trying to GIVE them advice.
I would not presume to give Lance Armstrong tips on how to ride a bike, nor Michael Phelps how to swim, nor Tiger Woods how to play golf. Why do these clueless analysts think they know more than a company which has been growing off the charts consistently over the past 7+ years? What do they really have to contribute here?
That is exactly right! Who is there on Earth that is qualified to give advice to Apple? It seems that only God knows more than Apple and Wall Street analysts or any other analysts aren’t God.
As a stockholder, I’m quite pleased, but I also feel my investment is undervalued and the experts say that would change if Apple would offer a dividend.
While I trusted Steve and not Tim to lead the company, I don’t know that I agree Apple needs to hold onto $100B.
Why not offer a small dividend? Why not give 10% back to shareholders? I realize that by saying this, I’m not blindly following Apple as many on this forum do. But, seeing my portfolio surge to $500-525 per share for add significant value while still leaving AAPL with a horde of cash.
Ultimately, a good CEO & CFO don’t just satisfy the customer an employees, they also satisfy investors. I’m not implying I’m not satisfied at $450, but I’d be thrilled if the stock better reflected the company’s value. I’d imagine anyone who owns significan shares would agree.
Some here won’t agree, but I think even a one time dividend equivalent to 10% of their existing cash horde would go a long way toward helping the stock price grow. As a stock holder it is frustrating to see the stock only rise 6% after posting one of the most blockbuster quarterly profit numbers in US corporate history. AAPL is so severely undervalued right now that it’s not even funny anymore.
Sorry but it does not work that way…. today.
A dividend is blood in the water, the sharks come, buy 100,000 shares, get their blood money, then quickly sell before the price drops to reflect that the company is worth billions less.
They may even complain (after selling their shares) that the company is worth so much less just to drive the price down…. then buy back in.
That is the new version of making wealth in America. There is nothing produced, just making money out of your losing money. PERIOD>
Good point…seen that happen to many other companies that offer special dividends. The short-term opportunists jump in to steal some of that cash pile from the long-term investors owning the company for months or years. I don’t want Apple to give away that very, very, very hard-earned cash to these short-term hedge fund managers like K. Finerman.
Spot On!
Dude better buy some gold! The dollar will be dead soon with sudden devaluations along the way.
You bet! Apple should put their money into Bitcoin!
(j/k)
——RM
Clearly, Wall Street has had and continues to have the best grasp and understanding of Apple stock and how to value its earnings, run its day to day operations and predict its viability. We should carefully listen to this retreaded dividend advice “guaranteed” to up Apple’s stock price. Then, like lemmings, follow these experts off the cliff they keep jumping off of quarter after quarter. Please, the best Apple can do is the opposite of what the Wall Street experts recommend. They have no credibility. I love the framing of Tim Cook’s “first crisis” being that he has 100 billion dollars to figure out how to spend. I’m truly impressed with the author’s ability to turn a 100 billion dollar cash pile into a problem. What FUD.
Personally, I don’t think that a dividend or share buy-back would be terrible, and I do wish they would make it more affordable for small investors by a split.
But Apple’s record is incredibly successful and the first rule is “If it isn’t broke…don’t fix it”, so it’s ok with me if they continue to build their cash cushion.
Money makes money. And that’s what banks do if they are managed properly. The reason why banks got into trouble is that they do not behave like banks but got themselves involved in all manner of Ponzi schemes. Banks all over the world are broken, taught by Wall Street on how to cheat customers and corrupt governments.
Apple could buy a mid-range bank with low encumbrances or minimum debt and slowly grow and change the industry. There were many industries that critics, at first, scoffed Apple for being involved. With the right people that Apple hired at the helm, Apple is now the golden standard in all these industries.
For those who are clamoring for a dividend, Apple could invest its huge hoard of cash in its own bank and then distribute the profits earned as dividends to its shareholders every year or even quarters. In this way, Apple does not need to destroy its cash hoard but put it to work hard for the benefit of its shareholders. The perennial and pesky question of what Apple is going to do with its cash hoard would then become an academic debate of the past. How about it, Apple? You can have your cake and eat it too.
These so-called Wall Street geniuses are damn stupid and that’s why Wall Street is a freaking mess. Their short-term outlook for everything is disgusting. Look at Netflix today. That stock is flying like a multi-stage booster. Next week it will probably be heading down again. This is the type of company that Wall Street values. Apple is getting totally dissed for being a solid company with really strong long-term prospects. I don’t trust Wall Street at all with it being filled with liars and crooks always trying to deceive the conservative individual investor.
The more I think about it, the more I like your idea! I cannot think of a sector more deserving of being transformed and changed for the benefit of consumers (and Apple shareholders, of course) than the financial services and banking sector! Apple could utilize their customary gold standard customer service, and transformative technology innovation, to take over and dominate the banking industry! And like you say, none of these pesky analysts could ever again say “what will you do with all that cash?” Seriously, you should write a letter to Tim Cook with your idea!
Sounds good to me.
I agree. They could probably take the quality segment of the market quite easily. They clearly have the capacity to manage huge volumes of money and they have integrity as well.
Since when is having too much cash a problem? Besides, the bulk of Apple cash is subject to repatriation taxes, so what’s the hurry to lose a chunk just because some jackass investors are getting antsy. I’d just like Apple to split. Not for me, but only in case there would be more individual buyers of the stock that are too scared to pay $500 for a share. Why is it that Google investors and Intuitive Surgical investors have no problem paying for full shares but Apple investors do? I don’t get that at all.
Apple is going to stay undervalued unless they get into a different line of business, so all these bandaids to get more money from Apple are probably a waste of time. Apple knows how to make money and I don’t know diddly. I haven’t had to make a decision or lift a finger for nearly ten years and have seen my Apple investment climb like no other. I consider myself lucky I got in when I did. I just hope Apple makes the proper decisions to strengthen the company, no matter what they decide to do with that cash. I’d be happy if they could lock out most of Android products, but that might take some time. I still feel that the Apple executives know what they’re doing without my shareholder input, so I have nothing more to say about the subject.
The lack of understanding of this issue is amazing. First, Apple does not have $90 billion in cash laying around. They are not short term liquid to the tune of $90 billion. The stock is not undervalued. A dividend only increases the short term price of a stock.
The good thing now is that Apple is positioned better to fend off the challenges of short sellers because their assets are more than short margins can accommodate.
Leave me and my Apple stock alone.
I dunno, maybe they could buy Nicaragua? Rename it Applonia?
Yes, nothing like subtracting from a long term advantage for a short term gain.
I don’t know anything about stock prices, investing, P/E ratios, or any other stock related acronym. However, I do know that Apple gains an advantage from being able to spend billions on supply chain or any number of $300-700 million strategic acquisitions. Of course, these expenditures don’t make much of a dent in the hoard, but that is the point.
Investment is a long term strategy and Apple is trying to ensure their long term success.
I’m strongly in favor of muzzling “Wall Street” those greedy crooks already have done enough damage to the world economy. They can go stick their “cries” where the sun don’t shine, and keep them there.
part of the job of being a public company is to increase and answer to shareholders. This can be with increase stock values or offering a dividend. Until Apple Inc isn’t a growth company growing 20-25% a year in stock price, dividends shouldn’t be considered.
having cash is NOT a problem. Maximizing revenues by investing foolishly their cash is a problem (buying AMD/Adobe/MSFT/DELL/Yahoo/Google is foolish).
Apple Inc’s mandate is to build the coolest and most interesting things. making money in the process to fund their interests. Being an investor lets me ride on their success in my 0.00000001% way with my small amount of shares.
As for stock splits, that’s pointless. The stock is actually more stable as a large stock price. swings are in percentage wise more tame. In dollar values it looks large but that’s perception not reality. If I invest $10k in AAPL stock, it’s still 10k. That $10K can be represented in 20 shares or 2000 shares, it’s still $10k.
This is true but financial institutions are not going to buy much more AAPL. Bringing in more ordinary investors would help bring AAPL’s stock price to a valuation more fitting a company with their growth rate. Novice investors perceive the stock to be too expensive.
AAPL is an institutional play. All the retail players are minor in the big scope of things
handing out a dividend would bring in MORE institutional play as many funds have mandates to buy and hold dividend yield stocks.
that has more impact than a stock split and bringing in novice investors.
I think AAPL would trade at a higher valuation if it paid a regular dividend. But i’m no expert.
There’s times I’d like to see Apple buy back all it’s stock just so it wouldn’t be plagued by all these opinions on what it should do with the money, or about what it’s worth. But then there wouldn’t be much left to read about on this site.
Dump the cash in a huge bin and swim around in it like Scrooge McDuck!
——RM
Cook does NOT have a $98 billion dollar problem.
To the contrary, Apple has a $98 billion dollar war chest!
Apple could (without a significant dent):
* Spend $5 billion on legal fees defending its IP (I know lawyers are stupidly expensive, but $5 billion is still a LOT of legal action)
* Buy a full year’s supply of a new screen technology or memory technology or cooling technology so that they have a full year’s lead on any other competitor.
* Pay for the latest chip technologies or implementations in all their new chip designs (no more being one generation back).
* Buy specific technologies through strategic acquisitions
* Form joint ventures where appropriate and fund however much of the venture was advantageous to Apple
* Fund new standards development (e.g., OpenCL)
etc.
etc.
War chest. Right on. I think you are seeing what Apple is thinking—and doing.