

Apple Conference Call - hawke
http://www.apple.com/pr/library/2012/03/18Apple-Conference-Call.html

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martingordon
It's likely a dividend or a major infrastructure investment. If it were a
major user-facing acquisition (such as a carrier or media company) or a new
initiative they would have done an event for it.

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beatle
More likely a major share repurchase. check my other post below for an
explanation.

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jaysonelliot
Of all the speculation I've heard, my favorite is this bit of dreaming from
TheNextWeb:

"Then there is the chance that Apple has decided to do something insanely
revolutionary with its cash: figure out a factory template that will allow it,
and other tech companies, to bring manufacturing back to the U.S.. This is
right up CEO Tim Cook’s alley, as COO, he completely reinvented Apple’s
manufacturing and supply chain. It also fits with the legacy of Steve Jobs’
vision of the NeXT factory, making products on U.S. soil."

[http://thenextweb.com/apple/2012/03/19/acquire-reward-or-
rev...](http://thenextweb.com/apple/2012/03/19/acquire-reward-or-
revolutionize-thoughts-on-what-apple-will-do-with-its-100b-in-cash-tomorrow/)

~~~
beatle
That would be the best use of their cash. but not the most capital efficient.
Wall Street won't like it.

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marquis
Until the towns and cities that grown up around new industries bloom and
generate wealth? I was listening to a radio interview where an the idea was
discussed where GDP should be decommissioned for GDE: gross domestic
environment, where wealth is determined on the general health of your people
and natural resources. Then I would have no problem with day-traders making
money hand over fist because a new forest preserve or public transport system
was allocated.

~~~
twoodfin
A public transport system powered by rainbows, no doubt.

I have no idea what you're suggesting, practically. Wealth isn't "determined"
by some arbitrary choice of economic statistic. Wealth is a store of value to
the person who owns it. If you value forest preserves there are organizations
who will happily take your money to create and expand them for you.

~~~
marquis
>Wealth is a store of value to the person who owns it

Which is presently accurately measured by our fiat system? Were the Dutch
crazy to base their early stock market on tulip bulbs? Considering a
historical perspective I don't see what's so different about choosing 'how
many trees I have in my forest' vs. 'how much gold I have'. There are
perfectly measurable elements in a human/humane society to base wealth off,
especially as measuring technology improves. Maybe I should get better
interest returns if I go for a decent 20 minute jog every day? I don't see why
our future can't be one of measuring wealth on something else entirely (and
yes I am being glib about using forests and jogging as an example but I think
we're all clever enough to figure something out).

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twoodfin
I just have no idea what you're suggesting. It seems incoherent to me. You
value what you value, I value what I value, and money and markets are how we
exchange things we value less for things we value more.

If you want to start a bank that pays people better interest rates for running
every day, what's stopping you?

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trimbo
Dividend, book it. Major shareholders are probably getting antsy about it.

Just an example, if they paid out $50bn in a one time divvy, Fidelity would
get around $2.6 billion.

~~~
gwright
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 after the close of
trading.

Edit: Clarified that it is Fidelity's Apple stock that would be revalued.

~~~
cynicalkane
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.

~~~
gwright
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=...](http://finance.yahoo.com/q/hp?s=MSFT&a=10&b=1&c=2004&d=10&e=29&f=2004&g=d)

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.

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

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cosjef
Apple about to announce dividend program?

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rpledge
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

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uvTwitch
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.

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SkyMarshal
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.)

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dkrich
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 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.
Hardware is extremely profitable, and they are still better positioned than
anybody else to ride the shift to mobile. I still think Apple is a strong buy.

~~~
beatle
>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.

~~~
dkrich
Well, looks like we were both right.

~~~
beatle
looks like it :)

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brisance
My uninformed opinion is that Apple will either announce a dividend or a stock
split.

In theory a stock split/reverse-split has no impact on a stock's price
movement, but those studies were done in the 90s. More recent studies on
various stock exchanges have shown that splits/reverse splits have a
statistically significant impact on price movement, with splits signaling a
bullish move.

Splits may also help in narrowing the bid-ask spread which improves price
discovery.

On the other hand, splitting a stock will increase transaction costs of delta-
neutral hedged portfolios since strike prices of derivatives are closer and
more delta are needed.

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bgentry
A stock split doesn't really have anything to do with their massive pile of
cash, and they said that's all they'll be discussing on this call.

A dividend, while not out of the question, has not been something they've
acted willing to consider in the past. That would be quite the change in their
stance.

~~~
brisance
You are right of course. I was thinking a split followed by the announcement
of a dividend. In this way hedge funds and index funds can offload some of
their AAPL exposure to retail investors who do seek a dividend.

I think Apple under Tim Cook is quite different, and is taking shareholders'
interests very seriously. Why else would they adopt the resolution to have
Apple directors being voted in by majority in the last shareholder meeting?[1]

[1] [http://www.bloomberg.com/news/2012-02-23/apple-ceo-cook-
says...](http://www.bloomberg.com/news/2012-02-23/apple-ceo-cook-says-iphone-
maker-s-cash-more-than-what-s-needed-to-operate.html)

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ksec
Buying Back Stocks or Dividend doesn't do any good for Apple, Apart from its
shareholders.

I am thinking on Worldwide Data Carrier Network. But Apple doesn't own ANY
frequency spectrum. And there isn't a single worldwide common Whitespace for
them to use.

Buying Intel isn't out of reach. You only need 51% of Intel Stocks. And Apple
can afford that. IT fits them in many ways. And i think Intel is pretty cheap
for its price in terms of investment.

Although i doubt that is realistically possible.

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shimon_e
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.

~~~
malandrew
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.

~~~
liamk
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...](http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=2354:TT)

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apaprocki
The market cap is in exchange-local currency. 147.76B TWD is about 5B USD.

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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.

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cobychapple
Completely wild, uninformed, and ignorant guess: They'll buy Twitter or Intel.

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culturestate
The only major software company I can fathom Apple buying is Adobe, and even
in that case there'd have to be a seismic shift in Apple's strategy.

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protomyth
If they bought Adobe, then the enterprise marketing at Apple would really be
in for a change (Adobe has some big enterprise offerings). AMD / ATI is easily
in their range.

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squidsoup
Adobe have been actively downsizing their enterprise offerings and refocusing
on media.

“Adobe has made a decisive choice to move away from traditional enterprise
software markets and to focus on digital marketing and media. It will also
shift aggressively to a cloud delivery model. These moves follow an August
2011 message to customers that Adobe would no longer update LiveCycle Content
Services ES2. These actions signal that LiveCycle Process Management ES2 and
LiveCycle Content Services ES2 are no longer important to the company’s
strategic direction.” <http://www.gartner.com/id=1850714>

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wilfra
As this is being announced prior to the market open on a Monday you can be
sure this is good news (at least to investors and Wall Street) and the stock
will go up. Bad news is released after the markets close on a Friday.

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mrkmcknz
I hold some AAPL options albeit 2013 ones but this is making me super nervous!

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runako
So you're holding 2013 puts? :-)

