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The Almighty Buck Apple

Apple To Launch Largest Stock Repurchasing Plan In History 282

Posted by Soulskill
from the not-sure-if-confidence-or-overconfidence dept.
An anonymous reader writes "In conjunction with its earnings report for the second quarter of 2013, Apple issued a press release announcing some major plans for its ever growing stockpile of cash. It is increasing its quarterly dividend payout to investors by 15%. What's more, the company will spend $60 billion in stock repurchases, making it in Apple's words, 'the largest single share repurchase authorization in history.'"
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Apple To Launch Largest Stock Repurchasing Plan In History

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  • Dumbest idea, ever (Score:2, Insightful)

    by faragon (789704)
    In my opinion, they just will burn their cash. It is inevitable: they must lower device prices, so their shares will fall. No way out.
    • Re: (Score:3, Insightful)

      by bloodhawk (813939)
      It isn't dumb, I don't like Apple but it is actually a smart move. They need to return shareholder value as their growth proposition going forward is uncertain or potentially even negative. The choices are return shareholder value through dividend and buybacks or watch the stock slide.
      • by proverbialcow (177020) on Tuesday April 23, 2013 @06:14PM (#43531011) Journal
        Agreed. Repurchasing and boosting the dividend when the stock traded above $700 might have been a good idea; doing so when it's hovering around $400 with a PEG ratio of 47% is a good idea. Buying back your own stock at a discount to what it's worth, while simultaneously returning cash to shareholders and appeasing a huge PITA activist investor? That's smart.

        Financing the buyback with debt is a tiny bit worrisome, but Apple's probably just taking advantage of the low interest rates their high credit rating and hoard of cash afford them.
        • by smash (1351)
          Along that line of thinking, maybe apple has been holding out on new products, waiting for the stock price to crash before buying it back cheap and launching the new shiny?
        • by phantomfive (622387) on Tuesday April 23, 2013 @11:00PM (#43533233) Journal

          Financing the buyback with debt is a tiny bit worrisome,

          I'm willing to bet they are doing that because a good portion of their cash hoard is outside the United States, and if they brought it back in, they'd have to pay taxes on it.

    • by mosb1000 (710161)

      What else are they supposed to do with it? Selling hardware at a loss is always a loosing proposition, and there's no way you can spend that amount of money efficiently on R&D. Their only options, really, are sitting on it or giving it to their investors.

    • by mysidia (191772)

      In my opinion, they just will burn their cash. It is inevitable: they must lower device prices, so their shares will fall. No way out.

      Not necessarily.... if the lower price is more optimal than the current price, lowering the price may net them greater profit due to increased sales (although smaller margin per sale).

      They might capture the market still willing to pay more, by offering a 'better' more appealing version still at the higher price.

      Their stock price could in fact go up

  • by mederbil (1756400) on Tuesday April 23, 2013 @05:44PM (#43530731)

    But I'm glad I invested in Bitcoin.

  • by Hentes (2461350)

    Why do they increase the divident if they want to purchase their stock? They are driving up the price they will have to pay.

    • Do the executives get paid in or own any stock?

    • by mosb1000 (710161)

      Repurchasing stock is meant to increase shareholder value, raising the dividend is meant to do the same. Apple investors have been asking when they will get to see some of the money Apple's been making. This is all meant to keep their investors happy.

      • Re:Why? (Score:4, Insightful)

        by Tough Love (215404) on Tuesday April 23, 2013 @06:23PM (#43531089)

        Repurchasing stock is meant to increase shareholder value, raising the dividend is meant to do the same.

        The latter is completely wrong (other than tax treatment, dividends have a neutral effect on shardholder value). The former is correct only because a company acting rationally will only purchase its own stock if it is confident that the stock is undervalued. It is far from clear to me that Apple's stock is undervalued.

    • Re: (Score:3, Informative)

      by Tough Love (215404)

      It is a myth that dividends drive up the price of stock. The simple relation is this: after the dividend is paid, the company no longer has the money so the stock is worth less. You can easily verify this, just look at the price of any stable company on the ex div date. It will be lower by roughly the dividend.

      • Re: (Score:3, Informative)

        by Alomex (148003)

        You are wrong. Stocks that pay dividends show this wave pattern where the price rises just before the dividend as it approaches. However this crest pattern does not preclude nor negate a long term gain in the stock price.

        • Re:Why? (Score:4, Informative)

          by Tough Love (215404) on Tuesday April 23, 2013 @06:55PM (#43531337)

          If a stock rises as the dividend date gets closer, purely because of the dividend then those new buyers are just gullible, and the everybody who failed to value the company accurately is just stupid. Proof: if we could rely on a stock price increasing just before the dividend then we would bid up the price right now, well before the dividend. And so the stock would not rise in advance of the dividend because it was already fully valued. See?

          If you don't see, then I have a perpetual motion machine to sell you.

          • by 0123456 (636235)

            Proof: if we could rely on a stock price increasing just before the dividend then we would bid up the price right now, well before the dividend.

            And how do you plan to do that?

            OK, you buy a bunch of shares today and push the pirce up. Then the price starts to fall as you stop buying. Now you have to keep buying more to keep the price high, and try to dump them all shortly after the dividend, when everyone else is.

            In which alternate reality does this make any sense?

            • What I described has a simple, two word name: efficient market. Say, did you ever read a finance textbook? Or try wikipedia/a. [wikipedia.org]

              • by mysidia (191772)

                What I described has a simple, two word name: efficient market. Say, did you ever read a finance textbook?

                Apparently you missed the "Just kidding" section, or the part, where they actually explain, that in the real world, there is actually no such thing as a truly efficient market. There are some cases where market behavior is close to that of what an efficient market would be deemed to be, however, there are massively many counterexamples.

          • Re: (Score:2, Interesting)

            by Tough Love (215404)

            If a stock rises as the dividend date gets closer, purely because of the dividend then those new buyers are just gullible, and the everybody who failed to value the company accurately is just stupid. Proof: if we could rely on a stock price increasing just before the dividend then we would bid up the price right now, well before the dividend. And so the stock would not rise in advance of the dividend because it was already fully valued. See?

            It is a mystery to me why somebody with mod points would feel offended by having basic financial facts explained to them.

          • Re:Why? (Score:5, Insightful)

            by Alomex (148003) on Tuesday April 23, 2013 @07:21PM (#43531575) Homepage

            , purely because of the dividend then those new buyers are just gullible,

            Nope. The dividend is the reward for holding the stock for a full quarter. Thus the stock price at the beginning of the quarter would be the amount that makes the dividend comparable to the interest rate the stock price would earn if it owned corporate debt.

            However as the date of the dividend approaches the former owner wants a larger part of this reward because it held the stock for most of the quarter, while the new holder naturally expects less of it.

            In the extreme, if I buy the stock a second before the dividend is issued I would get a hefty return for having done nothing unless the price rose.

            Your proof is all wrong because it fails to consider the cost of holding the stock instead of say corporate debt.

            • by mysidia (191772)

              Nope. The dividend is the reward for holding the stock for a full quarter. Thus the stock price at the beginning of the quarter would be the amount that makes the dividend comparable to the interest rate the stock price would earn if it owned corporate debt.

              Different investors are going to view this differently, and in some sense... it depends if the dividend is a sharing of quarterly profit, something like an interest payment.... or an actual capital distribution that lowers the holders' cost basis in

              • by Alomex (148003)

                I don't think you can be assured of a run up in price ahead of the ex dividend... if you could, savvy arbitrage folks would exploit that through shorting, before ex dividend, which would tend to nullify that effect.

                The run up is such that exactly matches the cost of shorting (borrowing the shares). That is the mistake that you and the OP keep on making: there is a cost of capital to exploit the run up in price, so it matches exactly that of the run up. Since the cost of capital for an instant is nearly zero, the run up is nearly exactly equal to the dividend just before the dividend payment is issued.

      • Re: (Score:2, Insightful)

        by Tough Love (215404)

        Wow, this is weird. Apple spinmods modding down anybody who explains that dividends do not drive up a stock price, they do the opposite?

  • Current: $406.160.01%

    Volume         High                       Low
    6,049,276     $ 429.90 (17:02:34 PM)     $ 398.1597 (16:13:10 PM)
  • Companies exist to make money for their shareholders. Sometimes they run out of productive things to do with the money they have, so the most responsible thing to do is return it to shareholders. Apple's strategy is to make a lot of money now, not invest for some far future payoff.
    • If Apple's only goal was to make money, they'd sell things with a far higher profit margin, like sugared water.

      I hope Tim Cook remembers what drove Steve Jobs when he approved products or threw them back to the drawing board.

    • Companies exist to make money for their shareholders. Sometimes they run out of productive things to do with the money they have, so the most responsible thing to do is return it to shareholders. Apple's strategy is to make a lot of money now, not invest for some far future payoff.

      Well Apple was doing both. In the quarter they just reported there were massive increases in capital expenditures, looks like another product is around the corner.

    • by Anonymous Coward on Tuesday April 23, 2013 @06:36PM (#43531185)

      No. No they do not.
      This is the biggest lie ever told to the American public, and anyone telling you this should never be trusted. (Yes. This is a large list.)

      Companies exist to promote commerce, create useful goods, and provide a livelihood for their employees. Owners and stock holders are allowed (This is a revokable privilege, not a right) to make money to provide incentive to facilitate the above functions. Anything less is a criminal enterprise.

      When we deviated so far in to the "making money" and "shareholder value" ideas is the day this country started to fall apart.

      This is not an argument. This is advice. Ignore it at your own peril, America.

  • by m.dillon (147925) on Tuesday April 23, 2013 @07:07PM (#43531449) Homepage

    Stick to your roots guys, this isn't a stock forum and 99% of the people here clearly don't know one blessed thing about investing, how companies work, or even what these big numbers actually mean.

    Actually its worse then that, but I'm being politic.

    -Matt

  • Governments should fix the loopholes that allows Apple to pay too little taxes. Obviously this company has more money than ideas of how to spend it.

"Why should we subsidize intellectual curiosity?" -Ronald Reagan

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