Apple Has Too Much Money 570
Hugh Pickens writes "AP reports that last week during a question-and-answer session at the company's annual shareholders' meeting CEO Tim Cook said he believes Apple has more money than it needs and his next challenge is to figure out whether Apple should break from the cash-hoarding ways of his predecessor, the late Steve Jobs, and dip into its $98 billion bank account to pay shareholders a dividend this year. 'Frankly speaking, it's more than we need to run the company.' The question of how to handle Apple's cash stockpile is a touchy one, partly because company co-founder Jobs had steadfastly brushed aside suggestions that the company restore its quarterly dividend which Jobs suspended in 1995 when it was in such deep trouble that it needed to hold on to every cent to keep from going bankrupt. Marketwatch analyst Mark Hulbert writes that a compelling case can be made that a huge cash hoard actually represents grave danger for Apple. That's because too much cash often burns a hole in managers' pockets, and they end up doing a poor job of investing that cash—engaging instead in foolish pursuits like empire building. Hulbert adds that a good strategy for ensuring that Apple remains a hungry, growth-oriented entrepreneurial company might be for it to distribute much of its cash to shareholders."
Re:Maybe distribute some money to customers... (Score:4, Informative)
Prices are deduced by how much people value the products and are ready to pay for them, not by how much it costs to produce them.
Re:Poor timing (Score:5, Informative)
Perhaps they wouldn't have the "problem" of having such a colossal cash mountain if all workers in the supply chain were paid a fair wage?
Do you know what is a fair wage in China is? Most people only look at the wage in US dollars and immediately claim to be unfair without ever looking at what people are paid relatively in China. The wages at Foxconn plants are slightly better than average for factory workers in China. Apple pays those that work on their products more than competitors do at Foxconn.
Re:1995? (Score:5, Informative)
That's because Jobs didn't suspended the dividend. It was ended by Gil Amelio:
http://news.google.com/newspapers?nid=1755&dat=19960214&id=sRYcAAAAIBAJ&sjid=6HwEAAAAIBAJ&pg=3973,6289068 [google.com]
Re:Poor timing (Score:5, Informative)
to keep already highly valued share prices inflated.
By P/E ratio Apple is valued less than Google, Amazon, Verizon, ATT, Oracle, LinkedIn, NetFlix. It is one of the CHEAPEST tech stocks in the markets it competes in (devices, media, mobile), even though it continues to see phenomenal growth.
Re:The stockholders can't afford a dividend (Score:4, Informative)
Sounds like more right-wing clap-trap about the underprivileged and under-appriciated 1%. Your going to have to do better than generalities to claim that 80% of the value of a dividend would be eaten in taxes. First my understanding is that Apple only pays the difference in corporate taxes from what it pays overseas and what the US tax if all the money had been made here. So that takes a good chunk out of your 30%. Secondly long-term cap gains is 15% but that shouldn't be added on to the cost of the dividend to the shareholder, since the shareholder gets that on any dividend. I never heard of this 35% tax (80 - 30 - 15 = 35) of which you refer to for simply issuing a dividend.
I would be leery too if I were them of issuing dividends, but not for tax reasons. The principle appears to have served them well. They are probably working on some sort of optimal ratio of cash to operational costs (or some other relevant factor) to aim for and then figure out a dividend that can glide to that ratio so they don't feel the need to yank it back later when the competition starts to tighten up again.
Dividend payments thought would also engender some good will towards them. Just like when Microsoft started paying dividends the effect was seen in personal income on a national levels, an Apple dividend would help spur the US economy.
Re:how much could i pay you to justify (Score:5, Informative)
making you work 80 hours a week, making you live in a tiny room with 20 other people, make you use dangerous chemicals that damage your brain, threaten you with prison for even talking about a union, etc?
1. I'd like to see evidence of working 80 hours at week. Plus Foxconn actually pays overtime for every additional hour worked; many companies in the USA don't pay anything for overtime.
2. Foxconn doesn't make anyone live in a tiny room with 20 other people. They offer accomodation in dormitories with 8 people per room, at a cost of less than 10 hours salary per month. Perfect for someone who wants to work for 3, 6 or 12 months, save as much money as possible, and return to their home village with a big pile of cash. These people are free to find other accomodation, which will cost them more.
3. There are no dangerous chemicals in use anywhere in the USA. Not anywhere. Never. Ever. Do you believe that? Shit happens, and responsible companies like Apple act when shit happens.
4. Chinese employees are free to join a union. The company even has to pay for the majority of union fees. Now it is true that you can't start a union other than the state union, but you _can_ join a union.
Re:Another fly on the wall heard from (Score:5, Informative)
Re:Another fly on the wall heard from (Score:4, Informative)
So far, Tim Cook hasn't really done anything significant one way or another and has been kind of 'coasting' on the companies success.
Tim Cook has been Chief Operating Officer. Now that means different things to different companies but for Apple, that position is responsible for running the day to day operations of the company. He has to deal with the gritty details of running Apple in areas like supply chain logistics which are boring as hell to most people. One of the details that emerged about Cook after he was named interim CEO by Jobs was Cook is responsible for the current advantage Apple has when it comes to parts. Through negotiations, Apple made long term contracts with Flash memory makers many years ago that locked them into stable supplies at stable prices. He was probably instrumental in securing the vast majority of the world's 10" displays that went into the iPad. This advantage helped them with costs and supplies in making their 10" tablet and why few other makers offered a 10" version initially and those that could had to start at prices higher than Apple. It's not an attention-getting position but a vital one. If he was getting publicity then he was doing the wrong job.
Re:Some ideas (Score:4, Informative)
Most, possibly, but at least Google with its two types of shares is reasonably immune to that: Larry and Sergey alone still control more than 50% of the voting power.
Foot In Mouth (Score:4, Informative)
They would not, in any terms, give away what they develop on their own.
Grand Central Dispatch
Zeroconf (bonjour)
LLVM
The list goes on and on... Apple continues very much to give away a lot of things as open source.
Re:The stockholders can't afford a dividend (Score:3, Informative)
One doesn't get to pay long-term capital gains rates on dividends, so the appropriate figure to use is the marginal rate. As an Apple shareholder, for me, that is over 30%.
Only if you flip your shares within 30 days of the dividend. If you hold for more than a 30 day window surrounding the div, it will almost certainly be "qualified" for th 15% rate cap. This is why Romney's effective tax rate is 15%: both cap gains and most dividends are taxed at 15%. When a company makes a major, one-time dividend, investors may even end up with capital losses on the share price to offset the dividend.