“Over the past seven months, Apple has been engulfed in an endless spiral of negativity. Whereas once the Mac maker could do no wrong, overwhelming investor fear about deceleration and market saturation got the best of Apple, quickly turning it into a shunned stock,” Evan Niu writes for The Motley Fool.
“With fiscal second quarter earnings and the long-awaited cash announcement, Apple just changed everything,” Niu writes. “Perhaps the biggest announcement is that Apple has more than doubled its capital return program, at long last addressing shareholder criticism about capital allocation. As a fan of superlatives, Apple pointed out that this is the ‘largest single share repurchase authorization in history.’ That’s an incredible $50 billion increase in buyback clearance. That increase alone is over an eighth of Apple’s entire market cap right now. Apple also boosted its regularly quarterly dividend by a modest 15% to $3.05 per share.”
“In order to pursue this program without touching overseas cash, Apple is making a bold move and taking on debt. The company didn’t specify details, but CFO Peter Oppenheimer noted that one of the primary benefits would be to reduce Apple’s overall cost of capital, a point I outlined previously after estimating Apple’s cost of equity around 10% using the capital asset pricing model. Management and the board felt that ‘investing in Apple was the best’ option,” Niu writes. “To that end, Apple has earned an AA+ credit rating from Standard & Poor’s, the same rating as the U.S. government. The paper that Apple issues will be safe, indeed.”
Niu writes, “In many ways, investors are now looking at a new Apple. The capital return program represents a dramatic shift in Apple’s capital structure. At the same time, Cook acknowledged the potential of new frontiers that the company is facing and will likely tap in the near future.”
Read more in the full article here.
[Thanks to MacDailyNews Readers “Fred Mertz,” “Arline M.,” and “JES42” for the heads up.]
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Why Apple’s Q213 earnings make it a fist-pounding buy – April 23, 2013
Piper Jaffray’s Munster: Apple’s going into a good year – April 23, 2013
Apple opens bank vault to dole out $100 billion to shareholders; $60 billion in buybacks the largest in history – April 23, 2013
Debt-free Apple plans to borrow to finance massive capital-return program – April 23, 2013
Apple beats Street on EPS and revenue; ups quarterly dividend by 15%; ups buybacks to $60 billion – April 23, 2013
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“To that end, Apple has earned an AA+ credit rating from Standard & Poor’s, the same rating as the U.S. government.
Ouch!
But Apple hasn’t waged a useless war, so it should be ahead of the US government.
Yes it did..a legal thermonuclear war at that. Legal wars are the worst kind 😉
And Mötley Fool has been one of the prime purveyors of bogus negativity.
Hey, we just call it like everyone else is calling it!
Which is sad. The majority is not always right.
Wall Street just juiced Apple for $Bs. Now they have what they wanted….watch that stock price rise to a new plateau…when it will start the whole thing all over again…
But!
…huge share buy-back scheme -and quickly!
Net effect?…long term?…
Apple one up.
I like what they decided to do. Buying back shares clears out those who are sitting on the fence and is a step towards privatization. And those who really want to own the stock will get bigger dividend checks.
That said they could have bought my company with 1/10th of that money and I would have been happy 😉
Yep, and bigger dividend will sweeten the waiting period for lng investors, till AAPL is back in record territory.
So let me see if I understand. Wall Street prefers a company with billions in debt to a company with a massive cash horde?!?!?!
Seriously, WTF?!?!?!
The MBA types will explain it all to us and since their type did such a good job with fiscal policy and the economy in general leading up to 2008, why pray tell wouldn’t you trust their judgement? Talk about reality distortion! Anyhow, all that stuff about money having value, is just an illusion, so don’t fret about it.
Guess so.
And you just nailed the problem
Most of that massive cash horde has a huge tax rate attached to it… borrowing that kind of money has an almost insignificant interest rate compared to what the US Gov. would take. Financially, it’s a much smarter move.
Apple can leave the cash horde “overseas” and just invest in international operations. The US Gov really needs to consider letting Apple bring that money home so they can invest domestically – hopefully creating jobs and such.
We all know if the government gets its hands on that money, it’ll just be mismanaged anyway, so why not let some of these companies repatriate it?
66% of Apple’s revenue in 2Q came from outside the USA.
That’s the way the U.S. economy is run nowadays. It prefers to see consumers overextend themselves with credit rather than carefully saving money. It’s been said that the more money is put into circulation, the better the economy is. I really don’t understand that type of economics because that’s not the way I was raised. I learned from very conservative parents who were stable money earners. They never over-extended themselves, but they never had lots of fancy cars and clothing, either. Just the basics.
So, yes, Wall Street seems to be run by gamblers and risk takers who don’t like the idea of cash hoards unless that cash hoard is in their own pockets. That’s just the way greed works. I wish Apple would use their cash to expand the business and move further away from hardware but I guess it’s not going to happen.
Eh, this is a useless move really that will only prop up the stock and hopefully stop the slow decline for a while. What a waste of the money. Apple should have made some serious purchases instead. Think of apple buying into ATT in a significant way, they would then have some control over wireless, broadband and television content. Or purchasing Disney, etc.
as useless as Apple BoD, msft did a twin buyback 40B and 30+B
back in 2006 and 2008 didn’t help them at all, that’s more than
what Apple announced yesterday.
Look at how AAPL is treated by Wall Street today!
The difference is Microsoft in general makes terrible products.
Quit voting for yourself. AAPL is buying back 100 billion.
Totally agree…
The fact that Cook couldn’t find a better way to use Apple’s cash reflects poorly on his vision of the future. Buybacks are what mature, slow growth companies do to prop up their stock price. I think even less of Cook than i did before following this latest stock manipulation move. Yes, i used the word “manipulation”. Cook is acting like a lackey for greedy wall street trader scum.
Everyone with any shred of admiration for Apple would have preferred Apple to remain debt-free, ignore short term stock price, and growth through new product introduction and global expansion. Cook can’t even explain what’s taking so long to roll out a family of iPhones. Pathetic leadership.
Same rating as the US Government? Great, just great. That and $1.25 will refill your Dr. Pepper at the gas station.
That isn’t damning with faint praise, its pouring salt into an open wound.
Oh, I’ve got to stop reading. There is so much wrong everywhere- when it comes to tech, make mine Apple. They can have my money. I don’t gamble on horses, stocks, or play games. Why don’t people look into the real problems- lack of innovation and corruption?
All that happened is that Apple is a big success. If there’s anything people hate, it’s big successes. Or for that matter, just big things. Businesses can be good or evil, but either way, people tend to hate the big ones.
Apple is a software company. The feint is that analyst focus on New and improved hardware. They have forgotten the lessons of the iTunes which was the actual moneymaker. Just imagine the new storage facilities that will soon be unleashed and monetized. New iOs will actually bypass the cellular connections and without having to buy the Blackberry company.