You worry about the back covers, I'll worry about the front covers.
That might be my favorite quote from Adam Lashinsky's Inside Apple. In a nutshell, Jobs directed that snipe at his marketing people, letting them know that he would take care of the important advertising. They could focus on the mundane formality of buying up space on the backs of magazines.
Make no mistake about it, this past Monday marked the saddest day in Apple (AAPL) history since the passing of Steve Jobs. It might not have an immediate or even near-term impact, but, over the long-term Tim Cook proved that he's just another IBM (IBM) alumni.
This dividend, for all intents and purposes, means nothing to most AAPL retail shareholders. On 100 shares of a stock that has appreciated like AAPL, the $1,060 of income is a spit in the bucket. Of course, if you are a heavy hitter, you can live off of the dividend and put a kid or two through college on it. Funny how these things tend to work out that way.
I'm not really sure why such a large faction of retail, or so it seems, wanted this dividend so badly. I guess I just come from a different school of thought. But, here's the key. I come from the Steve Jobs school of thought. And if Tim Cook abandons that, which it seems he has, the end of Apple's uncontested dominance will come sooner rather than later.
Because I want to be clear to AAPL fanboys, bulls and bears alike, I will methodically lay out my points.
First, this does not spell short- or even near-to-mid-term doom. It's likely that AAPL ends the year above, possibly well above, $600 on what should be an extended string of solid earnings reports. While I would not call you crazy for selling the stock now, I would consider somebody who holds or buys at these levels perfectly sane and logical.
I am not a reactionary investor. By that I mean I would never make the hasty, knee-jerk decision to call AAPL a sell on the basis of something that will have an indirect impact, especially when the company will not feel the impact, most likely for some time.
That said, second, and certainly most importantly ... I have yet to see more than one analysis of this move by Cook that actually has a handle on why it is such a disastrous move. Everybody wants to make an argument for - or even against - the dividend and buyback on the basis of numbers. That shows that most people simply do not get it and they, like Cook, do not think like Jobs. Frankly, if I hear the word "prudent" used in association with this one more time, I might heave.
Supporters of the dividend and buyback trot out the same old tired lines - it's a good use of capital. "Apple clearly has enough money left over to run the business." This does not mean growth is over. And so on.
Even when a writer raises a critical eye (before ultimately supporting Cook's move), she uses numbers in the analysis:
Of course, that's when Jobs was looking at $40 billion and a stock price of $200. Who's to say that Jobs wouldn't have entertained a dividend seriously when seeing the data that Cook is looking at: cash of almost $100 billion, stock hovering around $600, and a company that is the largest in the world, valued at $555 billion? Jobs was famous for his forceful opinions that sometimes conflicted with reality, but, as his biography pointed out, he could also be quick to change his mind ...
Jobs was known for his extremes, but Cook and his CFO Peter Oppenheimer found a middle road: A way to satisfy Wall Street's criticism of its too-large cash hoard, but in a manner that allows the company to stay flexible. Apple will still have around $50 billion in cash in 2015 - Microsoft (MSFT), for example, has around $50 billion in cash and they don't worry about having cash around.
Yawn. If you have read Lashinsky's book or know anything about Jobs, you will recognize that I am not being wholly disrespectful with the following assessment. Folks who trot out the same old arguments regarding Apple's cash, based on MBA textbooks, are bozos. That's what Jobs would have said.
From Inside Apple, Lashinsky writes:
Common sense suggests that Apple simply cannot cope, in the long term, with the loss of Steve Jobs. Jobs identified himself as an entrepreneur. (His death certificate listed "entrepreneur" as his occupation.) He held a fondness for entrepreneurs because he thought they were special. He would seek them out, to meet with and give advice even to those he thought Apple would crush. They were the heroes in a world full of bozos. In that light, it's shocking that not one member of today's Apple executive team is an entrepreneur. Tim Cook is an IBMer, for gosh sakes. Scott Forstall worked for Jobs his entire life. Jony Ive brilliantly served his client, and even taught him a thing or two. The wrappers may have been Ives, but the burgers were from Steve Jobs.
So in the post-Jobs era, Apple is a massive entrepreneurial enterprise, but its people generally are not entrepreneurs ...
And, led by Cook, they proved it on Monday. If dead people really "roll in their graves" when something they disapprove of takes place back on Earth, Jobs is in full motion. If they can put curses on people who are still alive, Apple's executive office better be on the lookout.
Apple had its first George Costanza moment in the post-Steve Jobs era. It asked itself "What would Steve do?" and then, it did the opposite. But, it's about more than making moves that go against everything Jobs believed. It's about the slow and methodical, yet unintentional dismantling of a culture and a company that everybody agrees Jobs built, using a unique brilliance, not an all-too-common, by-the-book style.
To argue that Tim Cook "put his stamp" on Apple by going with the dividend and buy back is patently absurd. This is hardly original. Cook put everybody's mark but his own on the company with this move. It's even more frightening to think that Cook might actually agree with the crowd that he followed. Not surprisingly, Lashinky provides the one analysis that actually understands this line of thinking (via Fortune magazine):
... no matter how many times I asked smart money types and careful Apple watchers what they thought Apple would do, nobody seemed to have any creative ideas ...
So instead, Apple announced the most usual of financial behaviors Monday morning, before the sun had come up in California ... Apple "listened" to what shareholders wanted, (CFO Peter) Oppenheimer said ...
Apple under Steve Jobs was so good at so many things. Listening wasn't one of them, and Jobs wore that trait as a badge of honor. He knew what was best - even if he didn't - and that's the way it was. A normal company listens, of course. March 19, 2012, marks the day we saw a tiny example of an Apple that is normal.
So very well-stated. Lashinsky also pointed something out that's apropos to my earlier contention that this dividend only truly benefits the big money: A UBS wealth-management note about Apple soliciting the opinions of big investors - all of whom wanted this dividend - is what led me to conclude in early February that this dividend was imminent.
In the near-term, which we might ultimately measure in years, not months, Apple, the company, and AAPL, the stock, will likely continue to dominate and rise. The cultural shift that Cook triggered on Monday morning, however, is akin to the process a neighborhood goes through when it slowly becomes "bad." House by house, lawn by lawn and, more importantly, behavior by behavior, what once made something great begins to erode until one day, you wake up and see little more than a shell of its former self.
On Sunday night, when Apple scheduled its press conference, I took to Twitter and Seeking Alpha via StockTalks and noted that, to my dismay, the company would likely "return capital to shareholders." A few hours after going to sleep, I woke up, as I often do, at about three in the morning, thinking of the day ahead. I asked myself what could Apple do this morning to truly set itself apart. What could Apple do to keep itself weird? What could Cook do to actually put his mark on the company he took over from Jobs?
I had a bunch of ideas. None of them included anything I had heard others previously float. Instead, I went down the following path. I thought about the things Cook did shortly after Jobs' death. Addressing the "team" in a series of memos. Giving people days off. Agreeing to match charitable contributions. Taking the initiative in the China labor conditions controversy. I could get behind each of these things, not because I agreed with the moves (I did not always agree), but because I could tell, based on the little I know about the man, that they reflected Cook's unique personality. He was putting his mark on Apple, but not running the risk of profoundly changing it in negative fashion.
I thought of Intel (INTC) and its creative use of cash over the last year. I thought of the company's "investment fund," which has thrown good money at good ideas, ranging from ultrabooks to automotive technology. I contrasted that with Sirius XM's (SIRI) unimaginative insistence on using cash to either make an acquisition or "return capital to shareholders." And I thought that some sort of Apple investment fund, with goals and initiatives nobody ever could have expected made sense.
I even let my socially liberal side slip out and influence my almost-fully emerged fiscally conservative tendencies. I let myself go for a second and imagined, how incredible it would be if Apple used a fraction of its cash to close the State of California's $13 billion budget gap or, at the very least, spent billions the state does not have on public education because, in the long run, that would benefit not only Apple, but society.
While I am not putting my stamp of approval on these somewhat fleeting thoughts, I am saying that something, anything other than what everybody wanted and what every other company does, even if that anything was nothing, would have been better than what Cook decided to do. Sadly, Cook hardly remade Apple in his own name by succumbing to shareholder and public pressure. Instead, he set himself up to enter the history books as the CEO who presided over Apple's long, slow decline. He might not be a full-fledged "bozo," but he's definitely a "back cover" kind of guy.
For more color on why I think an Apple dividend is a bad idea, see:
MBAs, Gimmicks And Apple's Culture (February 27, 2012)
Why Apple Should Not Pay A Dividend (Or Do Anything Else Incredibly Stupid) (February 24, 2012)
Disclosure: I am long INTC.