Apple Conference Call

http://www.apple.com/pr/library/2012/03/18Apple-Conference-Call.html

by hawke • 14 years ago

70 85 14 years ago

apple.com

cosjef• 14 years ago

Apple about to announce dividend program?

copious• 14 years ago

I think they'd be more likely to buy back stock than to start granting dividends.

objclxt• 14 years ago

My two worthless cents: an acquisition. Who they'll acquire is anyone's guess...a carrier (probably not), a content provider (maybe), or something more technical (my insane guess: ARM).

Not that I know more than anyone else, but I don't feel Apple really paying a dividend out. They've never really seemed too beholden to shareholders in the past (well, the Steve Jobs past anyway), and I think they'd rather invest the cash in something that would benefit the business more. It's not as if the share price is in a bad place, after all!

blantonl2• 14 years ago

let's hope not, because stock buy backs can be interpreted as a signal that management thinks tremendous earnings growth is behind the company.

rpledge• 14 years ago

That's my guess. Or else they'll announce that they're starting a space program!

My understanding is that ably $66 billion is offshore. I really expected them to sit on the cash until the US government gave them some sort of tax amnesty

uvTwitch• 14 years ago

A space program is about the only worthwhile thing apple could do with that money. The world doesn't need any more novel distractions, or rich investors.

ojbyrne• 14 years ago

Perhaps that's what they're going to announce. Some kind of understanding with the feds that lets them bring back money to the US.

ams6110• 14 years ago

Don't rule out something completely boneheaded. Jobs isn't there anymore. Remember Netflix/Quikster

cobychapple2• 14 years ago

Completely wild, uninformed, and ignorant guess: They'll buy Twitter or Intel.

liamk2• 14 years ago

In some ways I wish you were right, but I think anti-competition watch dogs may not approve of them buying Intel.

cobychapple2• 14 years ago

Well, they could always use some of that cash to buy the anti-competition watch dogs too ;)

krakensden• 14 years ago

Intel's market cap is about twice their cash reserves, isn't it?

meastham• 14 years ago

Less than twice, but still substantially more. Apple has $98bn [1] on hand and Intel's market cap is 138.54bn [2]

[1] http://www.chicagotribune.com/business/sns-rt-us-applebre82f...

[2] http://www.google.com/finance?q=intel

culturestate• 14 years ago

The only major software company I can fathom Apple buying is Adobe, and even in that case there'd have to be a seismic shift in Apple's strategy.

protomyth3• 14 years ago

If they bought Adobe, then the enterprise marketing at Apple would really be in for a change (Adobe has some big enterprise offerings). AMD / ATI is easily in their range.

uptown• 14 years ago

It could be Adobe. They've dumped Flash. They've embracing the iPad and released some truly innovative apps. Despite the historical rift between them and Apple, their tools are still the go-to suite for virtually every app created for iOS, and a strong contender when users seek alternatives to Apple's offerings like the Final Cut Pro X thing. Then there's this:

"I'm dying to do a blog on ADBE stock but can't do so now (we're in a quiet period). Maybe Monday, after earnings."

https://twitter.com/#!/kasthomas/status/180773095903207425

And the tweet right before that one:

"AAPL still cheap at $585. If you believe in next year's earnings == $50/share and a P/E multiple of 15, the stock should be at 750."

https://twitter.com/#!/kasthomas/status/180772911911682048

cageface2• 14 years ago

If anything Apple seems to be moving away from Intel chips and emphasizing their own ARM designs. Much more likely they will release an ARM-based laptop.

philwelch5• 14 years ago

Nope--running x86 software natively (see: Windows, Linux) is still a competitive necessity. If Apple wanted their laptops to run on embedded-class processors with an x86-incompatible ISA and no other venders than themselves, they would have stayed with PowerPC.

dkrich6• 14 years ago

On one hand they couldn't afford Intel, and on the other, Twitter wouldn't even be a blip on their cash reserves.

Steko• 14 years ago

If there was any kind of major merger would this just be a conference call?

trimbo3• 14 years ago

Dividend, book it. Major shareholders are probably getting antsy about it.

Just an example, if they paid out $50bn in a one time divvy, Fidelity would get around $2.6 billion.

gwright5• 14 years ago

And the value of Fidelity's Apple stock would go down by $2.6 billion. The $100 billion in cash is currently factored into the share price. Dispurse the cash and the market will discount the share price to match.

Personally I'm hoping for something more interesting than a special dividend. It does seem strange to have the announcement before the trading day begins though. I would think any big announcement would come after the close of trading.

Edit: Clarified that it is Fidelity's Apple stock that would be revalued.

joshu2• 14 years ago

Apple's market cap would go down by the amount of the dividend but it doesn't follow that Fidelity's stock price would drop, as their market cap does not reflect the value of their holdings.

cynicalkane2• 14 years ago

Factoring cash into share prices is fine if you're in Econ 101 or you're Warren Buffet, but in practice stocks usually go up when they announce an increase in expectations in dividend payouts. At some point the market does not trust firms to manage their extra cash to line shareholders' pockets rather than their own, and beyond that point the market wants to see dividends paid out.

trimbo3• 14 years ago

And the value of Fidelity's Apple stock would go down by $2.6 billion.

That's not what happened with Microsoft did a one-time dividend of $30bn. On July 19th, 2004, their stock price was 27.94. They announced it on July 20, 2004. The stock closed on 28.86 on July 21. The stock ran up to almost $30, and the day of the dividend dropped to 27.39.

On July 19th, their value was $301.7bn

On November 15th, it was $297.8bn.

(Numbers computed by Wolfram Alpha.. kaching!)

Believe it or not, there is value in ongoing dividends that makes "Fidelity's Apple stock would go down by $2.6" incorrect. Income funds, for example, would not buy Apple right now because it's not a "yield" stock. If they pay a dividend, those funds can then buy it under their prospectus. This opens up the overall pool of buyers for the stock and can stabilize and even raise the value over time.

(edit: formatting)

martingordon• 14 years ago

It's likely a dividend or a major infrastructure investment. If it were a major user-facing acquisition (such as a carrier or media company) or a new initiative they would have done an event for it.

beatle5• 14 years ago

More likely a major share repurchase. check my other post below for an explanation.

mrkmcknz• 14 years ago

I hold some AAPL options albeit 2013 ones but this is making me super nervous!

runako3• 14 years ago

So you're holding 2013 puts? :-)

wilfra• 14 years ago

As this is being announced prior to the market open on a Monday you can be sure this is good news (at least to investors and Wall Street) and the stock will go up. Bad news is released after the markets close on a Friday.

shimon_e• 14 years ago

They are going to buy out foxconn. :P Well maybe not.

Then again foxconn is supposed to add 1 million assembly robots.

Maybe they will buy out their factories.

malandrew2• 14 years ago

Buying a position in a company like Samsung (solid-state memory or screen tech), Foxconn (manufacturing), LG Display (screen tech) makes sense. Apple is a hardware company, so pretty much all their investments are in hardware or software that increases the value of or margins on their hardware (like chips designers and firms that increase the value of OS X or iOS, which in turn increases the value of Mac and iOS based devices)

IMHO Foxconn makes more sense than any other investment because Apple is directly contributing or jointly inventing cutting edge manufacturing technology with Foxconn. An example of such technologies is the precision cut aluminum enclosures of the aluminum Macbooks.

An investment in Foxconn would suggest that Apple has a desire for being the hardware basis for a lot more devices in a person's life than just a computer or smartphone device. Since the future is an internet of things, the best way to get a foothold in the premium end of the internet of things is to have a solid foothold in the largest and most capable manufacturer of electronic things.

On the other hand, Foxconn has a $1.1 trillion market cap, so they could at most purchase a bit less than 10%.

A sizable position in Foxconn could also virtually guarantee that Apple is the only company that will have access to manufacturing technology and quality in volume that is always 1-2 generations ahead of its peers. You can't compete with Apple on quality if you can't get access to the hardware manufacturing capabilities until after Apple abandons it and moves onto newer better technologies. It's the equivalent of a hardware checkmate.

liamk2• 14 years ago

I'm not sure where you've read that Foxconn has a 1.1 trillion market cap. According to Bloomberg they have a cap of 149.5B [1]. Which makes significantly more sense than Foxconn being worth way more than Apple!

[1] http://investing.businessweek.com/research/stocks/snapshot/s...

dkrich6• 14 years ago

I think a dividend is imminent because at the rate of inflation that is likely to occur over the next several years, holding that much cash is a huge mistake. If there isn't a use for it in the long-term, and they can reasonably expect to print more, I agree that they should start dispersing it to shareholders.

Typically I would think the beginning of a dividend program to be a signal that the company has hit an innovation wall and doesn't know what to do with its cash. I think this doesn't really apply to Apple because cash is going to continue to flow freely into it a ridiculous rate for the foreseeable future. Hardware is extremely profitable, and they are still better positioned than anybody else to ride the shift to mobile. I still think Apple is a strong buy.

beatle5• 14 years ago

>at the rate of inflation that is likely to occur over the next several years, holding that much cash is a huge mistake

Actually majority of Apple's cash is invested in long-term and short-term securities so they are protected from inflation.

I don't think Apple will pay a dividend.

1. the Massive increase in Apple's stock price is more than enough compensation for shareholders. A dividend will just be drop in the bucket compared to the capital gains investors are going to earn in the next months or years. Paying dividends at this stage is a waste of money.

2. Apple's PE is around 16. AAPL is still VERY cheap. Compared to Google(20) and Amazon(134), both companies not nearly as profitable as Apple.

3. There is still a lot of room for growth (TVs, China, NFC, etc.).

4. Stock buybacks is more tax-efficient compared to paying dividends since the investors will have to pay the 15% tax rate if they get paid dividends.

5. Share repurchase may FURTHER increase stock price since it will increase EPS, ROE (Return on Equity) and ROA (Return on Asset) and decrease PE. Improved financial ratios will make the stock look even more attractive to investors.

CONCLUSION:

Given these 5 factors. I believe Apple WILL NOT pay a dividend.

Apple will instead perform a share repurchase.

apaprocki2• 14 years ago

Completely with you and I hope it is a repurchase. Given the tax situation I don't see how a dividend would really be an effective use of the cash.

xenophanes• 14 years ago

Amazon's PE is very misleading. Their revenues are much higher than their profits and can be monetized more in the future. They aren't trying to maximize profits, currently.

dkrich6• 14 years ago

Well, looks like we were both right.

DavidSJ2• 14 years ago

at the rate of inflation that is likely to occur over the next several years, holding that much cash is a huge mistake

Market expectations for inflation are usually factored into interest rates already. While the market could be wrong, Apple probably shouldn't get into the business of speculating on inflation rates.

beatle5• 14 years ago

>Market expectations for inflation are usually factored into interest rates already.

Actually that is not true. Historically Interest rates on currency-based investments have not caught up with inflation and taxes. Majority of Apple's cash is invested in long-term securities though so their investment is protected from inflation.

philwelch5• 14 years ago

> at the rate of inflation that is likely to occur over the next several years

Do you have a reliable source on this?

> Typically I would think the beginning of a dividend program to be a signal that the company has hit an innovation wall and doesn't know what to do with its cash. I think this doesn't really apply to Apple because cash is going to continue to flow freely into it a ridiculous rate for the foreseeable future.

Apple's been building up this cash stockpile for so long that it's pretty clear they've long had more than they know what to do with. Having a cash position isn't really necessary either--at this point in time Apple could easily borrow at rates much lower than their expected return on investment anyway.

dkrich6• 14 years ago

> Do you have a reliable source on this?

Yes- it's called the Federal Budget. When the US continually runs a deficit and prints money to make up the difference, that cash goes into the economy without any real output in GDP. That causes currency devaluation, and in turn, inflation.

Towards the end of 2008, $700 billion dollars were injected into the economy while the US was in the midst of running a multi-trillion dollar deficit. Taxes weren't raised, so that money came (an continues to come) from thin air. There is virtually no chance inflation does not steadily increase in the coming years. I can confidently say that because I see no reason to believe that there will either be a sudden burst in GDP to increase tax revenues, a reduction in spending, or an increase in tax rates sufficient to make up the difference. Remember, economic effects tend to lag. The mortgage crisis occurred after several years of irresponsible borrowing and lending.

jsz0• 14 years ago

I think part of this will be a major initiative to invest in education. We know Jobs was interested in re-inventing education and we also know he told President Obama he couldn't find enough qualified workers. The for-profit education market is booming right now. Could this be a sort of iSchool focused on engineering, computer science, design, etc? Apple could make a really good argument to their shareholders that they must invest in the next-generation of Apple workers to continue growing.

brisance2• 14 years ago

My uninformed opinion is that Apple will either announce a dividend or a stock split.

In theory a stock split/reverse-split has no impact on a stock's price movement, but those studies were done in the 90s. More recent studies on various stock exchanges have shown that splits/reverse splits have a statistically significant impact on price movement, with splits signaling a bullish move.

Splits may also help in narrowing the bid-ask spread which improves price discovery.

On the other hand, splitting a stock will increase transaction costs of delta-neutral hedged portfolios since strike prices of derivatives are closer and more delta are needed.

bgentry• 14 years ago

A stock split doesn't really have anything to do with their massive pile of cash, and they said that's all they'll be discussing on this call.

A dividend, while not out of the question, has not been something they've acted willing to consider in the past. That would be quite the change in their stance.

brisance2• 14 years ago

You are right of course. I was thinking a split followed by the announcement of a dividend. In this way hedge funds and index funds can offload some of their AAPL exposure to retail investors who do seek a dividend.

I think Apple under Tim Cook is quite different, and is taking shareholders' interests very seriously. Why else would they adopt the resolution to have Apple directors being voted in by majority in the last shareholder meeting?[1]

[1] http://www.bloomberg.com/news/2012-02-23/apple-ceo-cook-says...

jaysonelliot• 14 years ago

Of all the speculation I've heard, my favorite is this bit of dreaming from TheNextWeb:

"Then there is the chance that Apple has decided to do something insanely revolutionary with its cash: figure out a factory template that will allow it, and other tech companies, to bring manufacturing back to the U.S.. This is right up CEO Tim Cook’s alley, as COO, he completely reinvented Apple’s manufacturing and supply chain. It also fits with the legacy of Steve Jobs’ vision of the NeXT factory, making products on U.S. soil."

http://thenextweb.com/apple/2012/03/19/acquire-reward-or-rev...

beatle5• 14 years ago

That would be the best use of their cash. but not the most capital efficient. Wall Street won't like it.

marquis2• 14 years ago

Until the towns and cities that grown up around new industries bloom and generate wealth? I was listening to a radio interview where an the idea was discussed where GDP should be decommissioned for GDE: gross domestic environment, where wealth is determined on the general health of your people and natural resources. Then I would have no problem with day-traders making money hand over fist because a new forest preserve or public transport system was allocated.

jonhendry• 14 years ago

The NeXT factory was mostly robots, so I'm not sure what the benefit to the US would be, in terms of jobs.

ksec• 14 years ago

Buying Back Stocks or Dividend doesn't do any good for Apple, Apart from its shareholders.

I am thinking on Worldwide Data Carrier Network. But Apple doesn't own ANY frequency spectrum. And there isn't a single worldwide common Whitespace for them to use.

Buying Intel isn't out of reach. You only need 51% of Intel Stocks. And Apple can afford that. IT fits them in many ways. And i think Intel is pretty cheap for its price in terms of investment.

Although i doubt that is realistically possible.

Apple Conference Call

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