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Alongside today's earnings release, Apple also announced a major increase in its capital return program, boosting the previous $45 billion program to $100 program.
The company announced a 15% increase in dividend payments, but Apple is making a significant increase in its stock buyback initiative, taking advantage of the company's depressed stock price to reduce the amount of stock available on the market.
The Company expects to utilize a total of $100 billion of cash under the expanded program by the end of calendar 2015. This represents a $55 billion increase to the program announced last year and translates to an average rate of $30 billion per year from the time of the first dividend payment in August 2012 through December 2015.
As part of this program, the Board has increased its share repurchase authorization to $60 billion from the $10 billion level announced last year. This is the largest single share repurchase authorization in history and is expected to be executed by the end of calendar 2015. Apple also expects to utilize about $1 billion annually to net-share-settle vesting restricted stock units.
As part of the newly-expanded capital return program, Apple does plan to take on debt and will announced its plans on that aspect of the program at a later date.
“We are very fortunate to be in a position to more than double the size of the capital return program we announced last year,” said Tim Cook, Apple’s CEO. “We believe so strongly that repurchasing our shares represents an attractive use of our capital that we have dedicated the vast majority of the increase in our capital return program to share repurchases.”
Apple notes that it will continue to evaluate its capital return strategy on an annual basis and will look to optimize the use of excess cash through its mix dividends, stock buybacks, and settling of restricted stock unit grants to employees.
Following Apple's announcement, Moody's gave Apple an Aa1 credit rating with a stable outlook, indicating that the company's obligations should be considered of high quality and hold low credit risk.
Top Rated Comments
(View all)It would have been better if Apple just focused on making products and strengthening the business, seems strange that it became such a priority to get rid of the cash. What will happen a few years down the line, what if they can't generate same revenues anymore? The cash should have been left alone because the more money Apple has the safer the position they will be in the future.
That WAS the plan. Apple had survived the '90s with no shortage of luck and fortunate attraction of capital on what Jobs executed as combination royal gamble and sympathy play. Once bitten (ha ha), Apple seemed content to make sure it had sufficient funds on hand to weather the next dozen challenges from Microsoft-esque nemeses anywhere, be they Google, Samsung, or whichever opportunistic conglomerate arose next.
Then, Einhorn's shenanigans made it clear that, much like Heorot, the Mead Hall in the epic "Beowulf," Apple's cash hoard was too much of a target for the Grendel we know as Wall Street looters and pillagers. Rather than seeing its treasure bled away by such brigandry, Apple is using that cash to wrest control away from Wall Street and reduce the aggregate clout of external shareholders, increasing the company's freedom to do what it wants long-term. If Apple's cash hoard had been big enough to take the company private, be assured, Cook would have made it happen. Then, under no pressure whatever from Wall Street and beholden only to its own sales performance going forward, Apple would have been free to pursue all the blue sky research it wanted and reap the rewards of any consumer applications developed thereby.
And that still might happen. But it could take a while before it does.
Can someone please explain this to me in English? :/
They buy their own stock so less people have it, thus making it more of a rare commodity, increasing its value.
I think that's how it works, anyway. :confused:
That's a stupid move.
The only reason a corporation needs shareholders, or a high stock price, as a living entity, is to have cash for its development.
Returning cash means the shareholders are a burden on the operations of the company instead of being a help, and to be at the mercy of Wall Street if it needs later more cash.
Keeping 60 billions cash means Apple don't need to heed shareholders for 5 years at least.
I can't understand why Tim Cook would do this, the shareholders are not stupid enough to request a change of management. Except if he wants to inflate the management stock options, but even that is very short term, he can't announce 60 billions buy back everyday.
Of course Apple doesn't need it's shareholders NOW, but they needed or wanted the cash infusion when they went public. The shareholders are collectively the company. That's like getting a loan to open a business, the business is widely successful then not wanting to pay back the bank since you don't need the loan anymore, it doesn't work that way.
About shareholders not being stupid enough to vote out management although in my opinion it would be a horrible idea, I think you under estimate the possibility. Who knows it is possible that the company would be more successful under new management, again I highly doubt it, but seeing an equity drop this much causes people to get emotional and want the head of someone warranted or not.
... Apple is making a significant increase in its stock buyback initiative, taking advantage of the company's depressed stock price ...
The real culprit behind all this mindless anti-Apple bullishness?
Could be Apple itself, working to get a better deal on its own stock.
Think of it this way. AAPL is still higher than when Tim Cook took over.
Apple's hardware, software, and services are selling extremely well.
And all of this in the middle of a worldwide recession.
What better time for Apple to buy back its own stock for the ride up?
Not just over the next few quarters. For the next decade or more,
as the world economy gradually recovers. Just in time for the full
Apple television solution to start disrupting the TV industry...
I can see Apple going private in 5-10 years time and not needing to be beholden to Wall Street. Interesting move indeed.
Impossible. The amount of money involved is extremely high. Too high for Apple, even.
They buy their own stock so less people have it, thus making it more of a rare commodity, increasing its value.
That is what they say - but how has it worked so far? I think it is a boondoggle waste of money.I think that's how it works, anyway. :confused:
They have roughly 1 billion shares in the market
Spending $50 billion will buy back 125 million shares @ $400 share.
They will now have 875 million shares on the market PLUS new incentive shares for employees. $50,000,000,000 just disappeared from the balance sheet, investors don't have squat to show for it.
If Apple had spent $50,000,000,000 on a special dividend = $51 per share.
This is a ripoff.