Apple's 2011 Annual Report: More Hiring, More Sales, No Dividends Coming

223730 apple logoApple today filed its 2011 annual report with the U.S. Securities and Exchange Commission, and the document reveals a few interesting tidbits of information:

- Apple now has 60,400 full time equivalent employees, up from 46,600 last year. The company also went from employing 2,800 full-time equivalent temporary employees and contractors to 2,900. 36,000 employees are in the retail division, up from 26,500 last year.

- Apple went from 317 stores at the end of fiscal 2010 to 357 stores at the end of fiscal 2011, an addition of 40 stores. The average number of employees per store also grew from 83.6 to 100.8.

- Ad spending grew from $691 million to $933 million, while dropping as a percentage of revenues to 0.8% from 1.0%. Research and development expenses were up 36% to $2.4 billion -- however, as a percentage of revenues R&D fell from 3% to 2.2%.

- As this document is designed mainly for prospective and current investors in the company, Apple also lists a number of risk factors that could affect investments in the company. These include "if [Apple] is found to have infringed on intellectual property rights", "support from third-party software developers", "the Company’s ability to obtain components in sufficient quantities", and numerous more.

- "As of September 24, 2011, the Company owned or leased approximately 13.2 million square feet of building space, primarily in the U.S., and to a lesser extent, in Europe, Japan, Canada, and the Asia-Pacific regions. Of that amount approximately 7.0 million square feet was leased building space, which includes approximately 3.0 million square feet related to retail store space. Of the Company’s owned building space, approximately 2.6 million square feet that is located in Cupertino, California will be demolished to build a second corporate campus. Additionally, the Company owns a total of 584 acres of land in various locations."

- Finally, "the Company anticipates that for the foreseeable future it will retain any earnings for use in the operation of its business" rather than paying any dividends or stock buybacks.

Top Rated Comments

you people smh Avatar
141 months ago
Paying dividends = less cash.
Not paying dividends = more cash.

For every dollar of dividend per share that Apple pays out, the share price will drop by one dollar.

This is just laughably incorrect, and written with such confidence too. wow.
Score: 4 Votes (Like | Disagree)
staypuffinpc Avatar
141 months ago
dividends?

Wall Street to Apple, "I thought you would pay dividends!"

Apple to Wall Street, "Think differently."
Score: 4 Votes (Like | Disagree)
ThunderSkunk Avatar
141 months ago
Come on Apple, do something cool with all that capital. OS XI with content-awareness and an AI assistant an stuff. Build cylons. Just... do something...
Score: 4 Votes (Like | Disagree)
anberlinairlift Avatar
141 months ago
Genius Bar tech for Apple; the dream job for a computer-nerd Apple fan like myself. It's too bad that the journey to Mordor would be an easier one than the journey to my nearest Apple Store.
Score: 4 Votes (Like | Disagree)
Avatar74 Avatar
141 months ago
Paying dividend reduces the capital value of the company.

Shares are now so divorced from the idea of owning part of the company now that it does not really make much sense to pay dividend to the "current" owner of the shares as they are bought and sold on a daily basis. They have become commodities in of themselves.

The only companies that pay dividends are those with a dropping or stagnant share price. MSFT is one such company.
I tend to look at this another way, based on Warren Buffett's view of dividends.

Assume that Company A and Company B are both good at generating operating cash flow from quarter to quarter.

However, Company A has a transient management and doesn't necessarily do better than the S&P in terms of growing the book value of the business.

Company B has fairly solid management and consistently outperforms the S&P in terms of the real growth of the business in terms of book and/or enterprise value.

In Company A's case, I want the dividends, because I can turn around and generate a better return from the cash from those dividends than the company is generating for the value of my shares... and ultimately the market price. It may seem like value and price are divorced from one another, but institutional buyers use the same methods I do to triangulate the actual carrying value of the company, and so they tend to set a baseline of fair market value that influences the overall market capitalization because no M&A guy in his right mind is going to recommend paying more than their estimate of intrinsic value to buy such a company outright.

In Company B's case, I want them to manage that money for me because they're long term thinkers who know how and where to invest that money in the growth of their business which in turn influences the company's ability to generate continued operating cash flow. And this IS important to the prospect of getting a return at a later date in terms of market price growth because few people are going to keep bidding up a total dog of a company that doesn't keep generating operating cash. Think of the working capital (inventory) and book value (assets minus liabilities and intangibles) as the cash generating engine, and operating cash flows as the cash generated by that engine (as opposed to financing or investing activities).

But all this also requires coming to a realistic triangulation of the intrinsic value of the company. Given all the above factors, and that I know Tim Cook has incentives to stay for ten years, taking into account the expected shrinkage of the growth rate of Apple's operating cash flows, and that Apple has about four more years of Jobs'-influenced products in the pipeline, after which they'll reach some kind of terminal growth rate in the single digits, a moderate estimate puts them at about $386 per share... or less than their current trading price.

For this reason, I'm not buying Apple stock at this time... even more liberal estimates, which put intrinsic value around $450 per share, don't give me the margin of safety I look for in long term investments. I'd much rather find something grossly underpriced by the market relative to its actual strength as a business.

With Apple already one of the two most expensive companies in terms of market capitalization, they've got a lot more downside than upside.... and I don't count on the market to tell me what price I *should* pay for a piece of a company.
Score: 3 Votes (Like | Disagree)
samcraig Avatar
141 months ago
No it won't. Those same idiots have been calling for a dividend for years. Growth companies don't pay dividends.

Define growth company. Because Walmart has always paid dividends. Perhaps they don't fit your growth company "now" - but they've paid dividends since pretty much day 1.
Score: 3 Votes (Like | Disagree)

Popular Stories

iPhone 14 Pro Purple Rear Flat MacRumors Exclusive

iPhone 14 Pro Predicted to Start With Increased 256GB Storage Alongside Rumored Price Increase

Wednesday August 10, 2022 11:14 am PDT by
Earlier today, analyst Ming-Chi Kuo claimed iPhone 14 Pro models will be more expensive than iPhone 13 Pro models. Kuo did not reveal exact pricing, but he said that the average selling price of all four iPhone 14 models will increase by about 15% overall. While higher prices would be disappointing for customers, it is possible the iPhone 14 Pro and iPhone 14 Pro Max will offer increased...
iPhone 14 Pro Lineup Feature Silver

Kuo: Apple to Increase Prices of iPhone 14 Pro Models

Wednesday August 10, 2022 8:22 am PDT by
Apple plans to increase the prices of iPhone 14 Pro models compared to iPhone 13 Pro models, according to analyst Ming-Chi Kuo. Kuo did not reveal exact pricing for the iPhone 14 Pro models. However, in a tweet today, he estimated that the average selling price of the iPhone 14 lineup as a whole will increase by about 15% compared to the iPhone 13 lineup. In the United States, the iPhone...
iPhone 14 Pro Purple Front and Back MacRumors Exclusive feature

iPhone 14 Is Just a Few Weeks Away: Three Tips to Prepare for the New iPhone

Wednesday August 10, 2022 4:08 am PDT by
The launch of the new iPhone 14 is just a few weeks away, meaning millions of iPhone customers will soon upgrade their existing iPhone or perhaps get an iPhone for the first time. Exclusive MacRumors iPhone 14 Pro renders by graphic designer Ian Zelbo Whether upgrading from an older model or this is your first iPhone, we've rounded up a few tips to help you prepare for the next flagship...
battery percentage ios 16

Here's Why the iPhone Battery Status Icon in iOS 16 Is So Controversial

Wednesday August 10, 2022 4:34 am PDT by
In the latest iOS 16 beta, Apple has updated the status bar battery icon on iPhones with Face ID to display the exact percentage remaining rather than just a visual representation of battery level, and while the change has been largely welcomed, some users are unhappy with the way it has been implemented. In iOS 15 and earlier, battery percent has not been present on iPhones that have...
Apple Watch Body Temperature Finished

'High-Accuracy' Apple Watch Temperature Sensor Revealed by Patent Filing Just Weeks Before Series 8 Unveiling

Wednesday August 10, 2022 5:39 am PDT by
Apple has been granted a patent for a temperature sensor suitable for the Apple Watch, just weeks before the company is expected to unveil the Apple Watch Series 8 with body temperature sensing capabilities. The newly granted patent, spotted by MyHealthyApple, was filed with the United States Patent and Trademark Office and is titled "Temperature gradient sensing in electronic devices."...