By Rip Empson
Last night, the news broke that Apple (NASDAQ:AAPL) would be holding an “impromptu” conference call to talk about just what it plans to do with that nearly $100 billion in cash reserves it has in Scrooge McDuck’s Money Bin. Of course, Slate told us that Apple’s decision would be “a really big deal.” And, albeit without pyrotechnics, it was a big deal. For existing and new shareholders alike.
The conference call this morning was designed to discuss Apple’s decision, which it had announced via sneaky press release earlier in the morning, revealing that it will be initiating a quarterly dividend of $2.65 per share, along with a $10 billion share repurchase program commencing in September 2012. At $2.5 billion per quarter and $10 billion over the year, Apple will become one of the largest dividend payers of all companies, according to Cook and CFO Peter Oppenheimer.
Apple CEO Tim Cook started off the call by reading a statement this morning talking about Apple’s prospects, which, along with the purpose of the call, was the equivalent of my calling you up to count my money. Apple is, of course, performing well — across all categories. And as to Apple’s recent announcement of the iPad 3, er, iPad, Tim Cook said “we had a record weekend,” but wouldn’t say more.
After looking at what the company could do, while maintaining a war chest, they felt they had plenty of money to run the business, and initiate a dividend, and increase the shareholder bank in the process. So, part of Apple’s stated plan is to not only make long-time shareholders (and employees) happy, but to make the stock appealing to new investors, which is slightly humorous considering how widely held Apple’s stock is already. But there’s no doubt this adds some incentive.
One caller asked the executives if the company was looking to maintain a specific amount of cash in the bank to ensure its fiscal well-being. “There isn’t a magic number that we’re trying to keep in terms of cash balance,” the CEO replied. And obviously, offering the dividend and buyback programs give Apple an end-around on paying domestic taxes on the repatriation of foreign money.
Meanwhile, domestic cash is earmarked for “creating great products,” as well as maintaining a war chest for future opportunities.
What’s more, when asked if they would be considering stock splits, Cook said “there is very little evidence that it supports the stock,” but the company — and this was repeated umpteen times — will continue to evaluate this option, as well as every other option as it befits its shareholders.
While it was unclear last night just what Apple would do with its cash, with speculations ranging all over the board, many figured that it would be announcing either a dividend or buyback program. And, in the end, with nearly $100B in the bank, it decided to do both.