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Apple Conference Call

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Re: Apple Conference Call

#41

Post by gwright »

cynicalkane wrote: post #33
gwright wrote: post #19

Earlier quoted context omitted.

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…

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.

My understanding is that the stock price is actually adjusted downward by the per/share dividend on the ex-dividend date. For regular small dividends this change is not really noticible in the noise of regular trading but for large/special dividends it is.

For example, look at the historical stock prices for Microsoft in 2004 when they issued a $3.08/share dividend: http://finance.yahoo.com/q/hp?s=MSFT&a=10&b=1&c=...

You can see that the difference between the close on Nov 12 and the open on Nov 15 is $2.63 where the difference in the surrounding days in about 20 times less.

Re: Apple Conference Call

#42

Post by malandrew »

shimon_e wrote: post #37

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.

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.

Re: Apple Conference Call

#43

Post by jsz0 »

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.

Re: Apple Conference Call

#44

Post by cynicalkane »

gwright wrote: post #41
cynicalkane wrote: post #33

Earlier quoted context omitted.

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.

My understanding is that the stock price is actually adjusted downward by the per/share dividend on the ex-dividend date. For regular small dividends this change is not really noticible in the noise of regular trading but for large/special dividends it is. For example, look at the historical stock prices for Microsoft in 2004 when they issued a $3.08/share dividend: http://finance.yahoo.com/q/hp?s=MSFT&a=10&b=1&c=...…

This is correct, but the thread is about changes in dividend policy, not ex-dividend dates.

Re: Apple Conference Call

#46

Post by SkyMarshal »

uvTwitch wrote: post #24
rpledge wrote: post #4

Earlier quoted context omitted.

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

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.

Nitpick - the world needs all the rich investors it can get, just not any more rich speculators.

(where investor = someone looking to finance innovation and long-term value/wealth creation; and speculator = someone looking to get rich quick on market volatility, pump & dump, etc.)

Re: Apple Conference Call

#47

Post by liamk »

malandrew wrote: post #42
shimon_e wrote: post #37

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.

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 base…

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...

Re: Apple Conference Call

#48

Post by beatle »

dkrich wrote: post #40

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 inno…

>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.

Re: Apple Conference Call

#49

Post by DavidSJ »

dkrich wrote: post #40

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 inno…

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.

Re: Apple Conference Call

#50

Post by philwelch »

dkrich wrote: post #40

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 inno…

> 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.

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