Apple plows U.S. tax cuts into record share buybacks

“Apple Inc lavished cash on its shareholders like no company in history in the first three months of the year and it intends to keep doing so, making the iPhone maker’s investors the clearest winners yet from last year’s sweeping U.S. corporate tax cuts,” Noel Randewich reports for Reuters. “With a mountain of overseas cash suddenly freed up by the tax overhaul, Apple bought back $23.5 billion of its own stock in the March quarter, a record amount for any U.S. company, according to S&P Dow Jones Indices, and it added $100 billion to its target for future repurchases. It also doled out another $3.2 billion in dividends and will boost them by 16 percent going forward.”

“The amount Apple spent buying its shares in those three months exceeded the stock market value of most companies in the S&P 500 index, including household names like Kroger Co, Best Buy Co Inc and Hershey Co.,” Randewich reports. “The decision to turn over record amounts of cash to shareholders was a direct results of the Tax Cuts and Jobs Act passed by Republican lawmakers in December.”

“The biggest overhaul of the U.S. tax code in over 30 years, the new law slashes the corporate income tax rate to 21 percent from 35 percent, and charges multinationals a one-time tax on profits held overseas. As a result, analysts had expected Apple to repatriate most of its $252 billion in cash abroad,” Randewich reports. “In its quarterly report on Tuesday, Apple said it would earmark $100 billion for a new share repurchase program, succeeding a $210 billion buyback program that started in 2012 and will wrap up this quarter – roughly nine months ahead of schedule.”

“Apple’s program dwarfs others even as stock repurchase efforts kick into high gear,” Randewich reports. “By comparison, U.S. companies in April announced a combined total of $50.4 billion in new buyback plans, up from $38.1 billion worth of planned buybacks announced in April 2017, according to TrimTabs Investment Research.”

Read more in the full article here.

MacDailyNews Take: As the number of shares declines, the value of remaining shares theoretically increases – supply and demand – but it also tamps down Apple’s market value (race to one trillion) if the share price stagnates (or, as happened multiple times this year, is talked down by pundits and herd-like analysts based on specious data points).

SEE ALSO:
Uh, yeah, about those iPhone X ‘concerns’ from analysts: Never mind – May 1, 2018
Apple beats Street with best Q2 ever – May 1, 2018
Apple’s iPhone X isn’t selling well – or is it? – April 21, 2018
Apple’s iPhone X to be discontinued this year, analyst claims – April 20, 2018
Morgan Stanley: Apple stock may fall on ‘materially’ weaker iPhone sales – April 20, 2018
Apple’s iPhone X made 5 times the profit of 600 Android OEMs combined – April 18, 2018
Apple’s iPhone captured 86% of global handset profits in Q417; iPhone X alone took 35% of global handset profits – April 17, 2018
Bernstein: Ams AG is biggest winner in Apple’s TrueDepth Camera system – April 10, 2018
Apple’s iPhone X is the UK’s most popular smartphone – April 9, 2018
Apple’s iPhone X sales continue to disappoint, some analysts say – March 22, 2018
Ignore the iPhone X naysayers – March 10, 2018
Will the naysayers admit they were wrong about Apple’s iPhone X? – February 5, 2018
Do iPhone X sales spell trouble for Apple? – January 30, 2018
Apple supplier says report of iPhone X production cuts was overstated – January 30, 2018
Another January, another misleading iPhone supply cuts story from Nikkei – January 29, 2018
Apple stock drops after Nikkei report of iPhone X production cut – January 29, 2018
Reports of Apple cutting iPhone X orders make no sense – January 2, 2018
Apple stock tumbles on one poorly-sourced report of low iPhone X demand – December 26, 2017
Apple and suppliers shares drop on report of weak iPhone X demand – December 26, 2017

19 Comments

  1. It be nice if Apple could buy all their shares so manipulators dont get to play roller coaster speculation like they have been doing for a long time now

    1. all that would do is benefit the execs who run the company, who could collect even higher salaries and benefits.

      if they bought all the shares we would no longer be shareholders, nor benefit from their rise in value.

      besides there is no guarantee that even if the company went private that that would lead to better products – they might even get worse without shareholders bitching about their mis steps.

      1. Absolutely, i totally agree and given you 5 stars. However in this instance thanks to the current leadership at Apple, all the shareholders bitching have not been listened too. Infact share holders are getting a bum ride thanks to speculators. Apple’s quality control both software and hardware has declined. iTunes is a scary mess, and it used to be a delight. This is just one software example. Hardware, the Mac is neglected. So many missteps combined with speculators behaving like vultures and hyenas looking for spoils.

      2. OR….they might be able to concentrate on long term goals instead of the next quarter, stockholder’s meeting, financial report, making shiny bells and whistles to grow their market to keep investors giddy.

        Can go either way, it’s all up to their leadership.

  2. Apple’s buyback does little to affect the individual stock price as evidenced by the last few years. It does extremely little for the small investor (those holding a few thousand shares or less). It’s just evidence that the bean counters and marketers are 100% in control of Apple.

    Apple would be much better off spending 1 – 2% of that getting bugs fixed and products out the door. (Yes, there will always be bugs, but why so many now? And, why are some products taking YEARS to develop?)

    Note that there was an easily measureable drop in Mac sales. Why? Because nothing significant has been announced in a long time. Hell, for practical purposes some things have not been truly updated for over five years. Related products are being dropped.

    We are not in the “post PC era” yet no matter how much Apple execs think we are. We are in the transition and that transition won’t be complete until at least 2025. Even then there will be a small, but significant need for desktop machines with a slightly larger need for true laptops (not tablets masquerading as laptops).

    With reports stating the calendar Q1 2018 total PC market dropped by about 2% year-over-year and the Mac sales dropped by 3% year-over-year the percentage of Macs being sold in the market dropped. With Macs having an upper single digit market share how can this be anything but bad?

    So what if the overall dollar sales for Macs was effectively level. That’s selling fewer, more expensive Macs. It was probably bolstered by those few Mac “professionals” who settle for the iMac Pro.

    Selling fewer at a higher price each. Note my often stated comments about Cook = Sculley 2.0. Eventually that comes back to bite you.

    1. Agree. Use the money WISELY to improve buggy software, expand product lines rather that killing them off and pour more resources into the ROCK of Apple. That would be every Mac on the neglected line.

      It is PAINFULLY obvious Cook as CEO is only interested in two things and certainly not the finer tech products the company makes that he is clueless about and does not use (i e. Macs).

      1. Appease the liberals and the various movements like “me too”, “black lives matter”, LGBT and the the rest of the SJW portfolio.
      2. Appease MONEY. That would be the BOD, shareholders and Wall Street.

      This whole exercise seems to be more about appeasing his many masters, that can turn critics on a dime, rather than smartly growing the company and services. Noted the buybacks will not move the share price or get them closer to 1T market value.

      Seems like too much money wasted, but the bottom line for Cook he keeps his one trick pony pitiful performance job. At least for now …

  3. Randewich assertions regarding the impacts of the Tax Cuts and Jobs Act is highly exaggerated. As stated in other articles, Apple has been aggressively pursuing stock buybacks (to the tune of $275B) and dividends for years. Certainly, the Tax Cuts and Jobs Act introduces additional capital into the plan. But it did so by basically enforcing taxation of overseas profits – Apple was compelled to repatriate earnings in the sense that the overseas earnings are now taxed regardless of where they are held. I am not saying that this is a bad thing…it is one of the less objectionable parts of the new tax law. But the sudden influx of cash is a one-time event. Do not start planning as if the manna will continue falling from the sky in the years to come. Instead, that is when the deficit increases will begin to take effect.

  4. No matter how good the iPhone and iPad are there are always going to be those who prefer using desktop computers for home use and I’m one of them. Apple simply dismissing the desktop computer seems foolish. All Apple has to do is update their own computers on a timely basis and I’m sure they’ll see more consumers buying them. It just seems as though Apple is throwing away revenue opportunities that right there in front of them.

    1. I too would prefer Apple to spend more time and energy on Macs but it is important to consider some facts:
      1. The iPhone touches more customers than any other Apple device. Aside from the revenue it brings in, it helps sell services and other products.
      2. The iPhone is used by many Windows users – as a disruptive device, it helps being in new users to the Mac platform.
      3. Growing Mac market share by 25% would add 1M Macs to quarterly sales. With an ASP of $1500, that would add $1.5B per quarter. Compared to the iPhone not so much. It also impacts the relative cost of R&D.

      So you can see why the emphasis on the Mac is so little. On a purely financial basis it is hard to justify more focus on the Mac. The reliance on iPhones is a bit dangerous.
      In the past Apple have slowly lowered the price on Macs which has helped increase market share and push competitors into lower profit areas. I will that Apple would continue to do that which means releasing new versions of both high and low end Macs and in both portable and desktop formats.

      1. You make valid point about the Mac and iPhone. I would like Apple to offer the last gen 15inch retina mac (non touch bar) with maxed out i7 processor and 1TB SSD for the same price of £1899 which is where the 256GB SSD starts

    1. Oh my, you linked an article by David Trainer! You need to look up some of the nonsense he’s written before citing him as a support for your opinion. I vaguely recall he came up with some measure of value, that showed Apple was about to collapse.

      Okay, looked it up, he used ROIC, Return on Invested Capital, back in 2013, to claim Apple was about to collapse to $34 in post-split dollars.

      http://www.businessinsider.com/david-trainer-on-apples-stock-2013-5

      1. Regardless of his other writings, the Buybacks he cites- GE & AT&T -are quite accurate.
        Buybacks are not the most efficient use of money by a stock corporation. Those who already own stock gain more from increased dividends or reinvestment in the business. People with future stock options benefit more from buybacks- that would be Apple executives and board members.

  5. “With a mountain of overseas cash suddenly freed up by the tax overhaul, Apple bought back $23.5 billion of its own stock in the March quarter, a record amount for any U.S. company, according to S&P Dow Jones Indices, and it added $100 billion to its target for future repurchases.

    The decision to turn over record amounts of cash to shareholders was a direct results of the Tax Cuts and Jobs Act passed by Republican lawmakers in December.”
    Uhm, no. The Reuters reporter is getting ahead of himself. The money spent this past quarter on share buybacks was announced a year ago, before any tax cut was in place. It wasn’t “suddenly freed up”.

    This is the sort of embellishment and over-interpretation that reporters need to stop. Next year’s article, can say that the tax cuts, freed up the $100 billion in share buybacks, not this year’s.

  6. Shareholders are of absolutely no value to Apple’s operations, adding nothing to its profits yet it rewards shareholders with its own money for doing nothing yet enriching them to that extent. Apple makes money by making useful products while shareholders make money by making nothing that a consumer or the commons can use. Apple does not need shareholders. The apposite is true, that shareholders need Apple. The buy back serves Apple because it’s reintegrating itself but, unfortunately, rewards some slimy shareholders because it increases the value of their shares.

  7. The way to increase stock price is to increase sales and profit. The best way to increase sales is to keep your product line fresh and top of the line and stop killing products that your customers like. Think, MacPro and Airport.

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