“Apple’s latest quarterly report showed savvy investors two things clearly,” John Shinal reports for USA Today. “The first is that the entity run by CEO Tim Cook essentially has been transformed from Apple, the company, into Apple, the bank.”
“The vault of that bank is now wide open, and Cook is sharing Apple’s massive and growing cash hoard — worth $68 billion (and climbing) at the end of June — with its shareholders in the form of fat quarterly dividends and even larger share repurchases,” Shinal reports. “The quarterly results also showed, however, that while no income investor should be without Apple stock in their portfolio, no growth investor should be anywhere near it. By every standard measure of operations, the company’s fiscal third quarter (which ended June 29) was a disaster.”
Shinal reports, “To his credit, Cook (and the company’s board of directors) has recognized that Apple is in a mature, slow-growth phase right now, and has wisely decided to share the past fruits of the company’s success with common shareholders. For starters, it has paid an aggregate of $7.5 billion in cash dividends this fiscal year, and Apple boosted that dividend to $3.05 a share in its most recent quarter, from $2.65 a share paid in the prior two quarters.”
“What’s more, Apple’s board in April increased to $60 billion the amount allotted for share repurchases, according to the filing, up from the $10 billion the company first announced last year. As of June 29, Apple had spent $18 billion of that money buying back its own stock,” Shinal reports. “And, for good measure, the Bank of Apple in May issued $17 billion in bonds, according to its filing, padding its balance sheet to a degree that would make any Federal Reserve banker smile.”
Read more in the full article here.
As a Mac user and casual AAPL investor, I would like Apple to use their “cash” to continue to fund its R&D. Of course, for greedy blood sucking Wall Street Anal-ysts, they want Apple return most of them, if not ALL, back to Wall Street.
my 2 cents…
Apple has no shortage of funding for R&D activity. Unlike Microsoft and some other companies I could mention, Apple doesn’t just throw money at R&D in the hopes that they more they spend, they more they’ll get. Apple’s R&D is far more focused and effective.
-jcr
Mostly agree though i do think they need to broaden their horizons a little in an age where services in particular amongst other developments are going to be ever more important. They totally ignored potential growth areas, especially novel implications, there for too long I feel, which seems silly considering the amount of money that is now having to be fed back to investors to keep them happy which could have been better spent.
With a market cap north of $400 billion, it’s hard to think of AAPL as a growth stock. And that’s the way it should be. The harder question is can Apple grow?
I’m pretty sure they can.
Ten years ago, no one thought that Apple could really grow. Apple was a mature company with no real growth left, right?
Gee, guess what? Now they are saying that Apple is a mature company with no real growth left. Why, you might ask? They answer “That’s the way it is with big companies.” (as if they knew something.) These same pundits said that Steve Jobs couldn’t turn Apple around and that the iPod was doomed and that the iPhone was doomed and that the Apple store was doomed and that the iPad was doomed and that Apple can’t continue to innovate and that . . .
Apple can and will grow. Slow, steady and long term.
Lots of stuff on the horizon. Game changers.
The major barrier to Apple’s growth is the ability and willingness to knock off Apple’s IP with impunity aided and abetted by ITC and the court system and the extortionate and illegal FRAND demands from the likes of Googarola and Samesung. Without the theft of Apple IP and illegal use of Oracle Java Applets, there would be no Android competition and Apple’ smart phone share would be north of 80% and Apple’s stock would be north of $1,000.
With Google trying to muscle in on Apple’s iPhone and iPad empire does anyone think that Apple should start crowding Google in the search engine and ad business. Supposedly one of the reasons for Google’s high P/E is because a search engine gives much higher profit margins. So along with Apple’s hardware business and the complaints that Apple’s profit margins are dropping, why shouldn’t Apple squeeze into the search engine and ad business. Apple certainly has an awful lot of devices to deliver ads to. Even Microsoft has Bing, so what’s stopping Apple? Wouldn’t a search engine add new growth just as it has for Google.
Wall Street is constantly giving reasons why Apple’s hardware business is doomed or why they refuse to give Apple a higher P/E ratio. Shouldn’t Apple try to alleviate some of those criticisms by taking the cash and building out the business to fill in those missing areas? I so badly want Apple to use that overseas reserve cash for creating server farms in Europe. With it they could start getting more into cloud services. It would be better than just letting the cash sit in some bank drawing next to no interest.
How is it that Amazon gets into so many different businesses to keep the company growing and yet Apple can’t manage that much. Apple could at least strengthen its supposedly weak areas at least to keep Wall Street off its back since they don’t believe that Apple can never come out with another hit product. Wouldn’t it make some sort of sense for Apple to at least partially build itself into a company that doesn’t have to rely on hit products just to hold its share value?
laughing boy the success of apple is in the fact that they don’t merchandize us to death at every turn! my work is what i want to look at on my screen not every tom dick and harry’s fake viagra. asking apple to start loading half-ware and ad supplemented stuff is evil . free apps that advertise go right into my trash this approach is a bleed over from pc thinking that has been a detriment to the mac community .
Well they have invested in Ads and not made a big impression so far but if opportunity arrises its there ready to exploit. Search engine, yes something the potential of which they should have foreseen perhaps but too late now, MS are wasting many millions on it and they are far better placed to exploit the existing formula. Apple will need to circumnavigate it and that will take a long time but Siri eventually and maps and other developments including iRadio can help do just that over time.
“Apple could at least strengthen its supposedly weak areas at least to keep Wall Street off its back”
Why would Wall Street get off Apple’s back? What they do is equivalent to a situation where somehow we all think we get to vote on what the weather will be.
I would rather be a one person company doing a couple of million a year in sales, and let my customers do the voting by what they buy from me.
Having said that, I respect Apple for having the common sense to have significant cash reserves so they can react to future events, whatever they may be.
Unless we get into a “Cyprus” situation where the government can just come in and confiscate however much they want, but stockholders would be subject to the same thing. Yes, it can happen, think GM.
There’s a critical difference: Apple earns its money while banks just take it from others.
first if apple chartered itself as a bank the 100 billion in cash would become reserves and give the apple bank a lending power of 10 times that amount apple credit cards could rival master charge and be more fair and less rapacious than visa ,mastercard ,capital 1 on rates for apple customers . part of the problem with our country and economy is that guys like mitt Romney are using this legal trick to kite the value of their personal fortunes and investment banks like Bain capital are using the leverage to buy ,liquidate,rape pension funds ,rinse and repeat. i think apple could revolutionize the credit industry by just being fair about it . a good thing. think about 4and 5% mortgages from apple citybank be dammed. this idea of the money never actually being loaned out by a bank is not really grasped by the public very well the law states that a bank must have 10% of the money it loans out in reserve this allows the bank to basically print the rest of a mortgage right there at the desk as they give you a check to close your purchase . the federal reserve is a specal case because it requires no reserve to print the money . conversely it has no account to deposit “profits” into when funds are paid (with interest) to the fed the money simply disappears from existence. interest paid to regular banks is added to the reserve to allow more loans or given away in bonuses and salaries . the interesting thing with an apple bank is they would at least have their own skin in the game un like the banks we all use every day . they use our skin to play their game when we hand over the 10 or 20% deposit to the banker. If apple wanted to really change the world and give us poor wage slaves a choice to do business with someone who is not a usurer all i can sat is “think different ” Mr Cook
Just add Shinal’s name to the LONG list of continually mis-informed reporters who exhibit the complete LACK OF FINANCIAL OR TECHNICAL KNOWLEDGE when covering Apple. These clowns just keep pouring out of the woodwork…
The only disaster is this piece of FUD.
Apple did not lose money and considering no new products were released it was a great quarter. Apple did not have any product failures like Microsoft. Apple has new products coming this fall and more in 2014. Apple’s hobby product the Apple TV keeps out selling the competition without even trying. And has a huge market lead over everyone. So again I say what disaster? FUD!!!!!!
By every standard measure of operations, the company’s fiscal third quarter (which ended June 29) was a disaster.”
By every standard that you just made up – in spite of the fact that the stock price is increasing, telling us just how much your phoney standards are worth.