{"id":158,"date":"2012-03-20T02:11:00","date_gmt":"2012-03-20T02:11:00","guid":{"rendered":"https:\/\/www.appleoutsider.com\/?p=158"},"modified":"2020-08-07T03:23:00","modified_gmt":"2020-08-07T03:23:00","slug":"cash","status":"publish","type":"post","link":"https:\/\/www.appleoutsider.com\/2012\/03\/20\/cash\/","title":{"rendered":"Back to the Shareholders"},"content":{"rendered":"\n

This past Sunday, Apple\u00a0abruptly scheduled<\/a>\u00a0a Monday morning conference call \u201cto announce the outcome of the Company\u2019s discussions concerning its cash balance.\u201d The call, followed by a\u00a0press release<\/a>, announced two initiatives: a $2.65 per share quarterly dividend and a $10 billion stock buyback.\u00a0Macworld<\/a>\u00a0has a full transcript of the call; audio from Apple is\u00a0here.<\/a><\/p>\n\n\n\n

The announcement itself was intriguing. Why a conference call? What\u2019s wrong with the press release? (I asked this on Twitter \u00a0regarding both\u00a0dividends\u00a0and\u00a0buybacks.)\u00a0When Apple stands up to talk, people expect something big. Anything less is bound to disappoint someone. I can\u2019t imagine investors receiving this news differently in print versus audio form. It felt like a departure from Apple\u2019s typical\u00a0controlled communication style. Maybe Tim Cook just likes\u00a0talking to investors<\/a>.<\/p>\n\n\n\n

The Buyback<\/h3>\n\n\n\n

Cook and Peter Oppenheimer repeatedly cited \u201cdilution from our employee equity program\u201d as the reason for a buyback, and it\u2019s a good reason. Stock compensation remains instrumental to attracting and retaining talent, and Apple needs to keep that incentive strong. Horace Dediu has\u00a0a nic<\/a>e<\/a> breakdown<\/a>\u00a0on the buyback numbers.<\/p>\n\n\n\n

People love to talk about Apple \u201ctaking itself private\u201d as the cash pile grows. Steve Jobs famously loathed shareholder meetings, so it\u2019s fun to think about. But it makes no sense. If Apple bought itself out, it would have no free shares to reward employees with, and no cash left to replace those shares with bonuses.<\/p>\n\n\n\n

The Dividend<\/h3>\n\n\n\n

At face value, I don\u2019t get it. Just\u00a0look at this chart<\/a>. If you\u2019ve consistently sworn off Apple shares just for lack of a dividend, I question your sanity. If you have Apple shares, and are still holding your hand out in the face of these stratospheric gains, your hubris is breathtaking.\u00a0Apple has always acted in its own interests, and spent money in places that it believed would yield benefits for the business. A dividend does not do that. How can they just start throwing away billions of dollars a year?<\/p>\n\n\n\n

One thing a dividend does is encourage long-term investment, which could help stabilize the stock price. It\u2019s bound to slow down\u00a0sooner or later<\/a>. The question is, when will that happen, and how dramatically? Perhaps Apple is attempting to impact that part of its destiny as it does any other. Reducing heavy speculation on the stock could cut down on future dramatic corrections, which would be good for Apple\u2019s \u201creal\u201d investors \u2014 especially its employees, whose compensation is tied to the stock.<\/p>\n\n\n\n

Apple grants restricted stock units (RSUs) to employees. These are shares at market value, as opposed to options, which have a strike price. With options, the stock needs to grow above the strike price before the employee makes any money. By contrast, the employee can sell RSUs at any price and get all the money.  The use of RSUs makes growth nearly irrelevant to employee compensation.<\/p>\n\n\n\n

At this stage, then, management is incentivized to prevent the stock from crashing rather than keep it climbing; to keep those shares, which Apple is about to spend a lot of money buying back, stable.\u00a0Viewed in this light, and alongside the buyback, a dividend does invest in the business and its employees, while also pleasing the open mic comedians who descend on Town Hall every February. It also feels more like Apple-style thinking, which is to say not your average executive team that mortgages everything\u00a0just to make the stock go up<\/a>.<\/p>\n\n\n\n

Apple said Monday\u2019s news was all about cash, but it was really about stock. It highlights the company\u2019s shift from an underdog-turned-juggernaut, to the world\u2019s biggest company securing its position as the world\u2019s biggest company.<\/p>\n","protected":false},"excerpt":{"rendered":"

This past Sunday, Apple\u00a0abruptly scheduled\u00a0a Monday morning conference call \u201cto announce the outcome of the Company\u2019s discussions concerning its cash balance.\u201d The call, followed by a\u00a0press release, announced two initiatives: a $2.65 per share quarterly dividend and a $10 billion stock buyback.\u00a0Macworld\u00a0has a full transcript of the call; audio from Apple is\u00a0here. The announcement itself […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[4],"tags":[],"_links":{"self":[{"href":"https:\/\/www.appleoutsider.com\/wp-json\/wp\/v2\/posts\/158"}],"collection":[{"href":"https:\/\/www.appleoutsider.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.appleoutsider.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.appleoutsider.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.appleoutsider.com\/wp-json\/wp\/v2\/comments?post=158"}],"version-history":[{"count":0,"href":"https:\/\/www.appleoutsider.com\/wp-json\/wp\/v2\/posts\/158\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.appleoutsider.com\/wp-json\/wp\/v2\/media?parent=158"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.appleoutsider.com\/wp-json\/wp\/v2\/categories?post=158"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.appleoutsider.com\/wp-json\/wp\/v2\/tags?post=158"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}