Apple to raise more debt for cash returns; Cook open to big acquisitions

Apple (AAPL) aims to deliver annual dividend hikes going forward, new CFO Luca Maestri states on the CC. With the company's domestic cash balance now at $18B, Apple will once more tap debt markets to help pay for its dividend and freshly-expanded buyback program. (CC live blogs: I, II)

Tim Cook partly attributes FQ2's soft iPad sales to inventory changes; slowing tablet market growth might also be playing a role. iPad ASP was at $465, up from $440 in FQ1 and and $439 in FQ4 (suggests a mix shift towards the iPad Air).

Healthy emerging markets demand contributed to iPhone strength - BRIC sales hit a record, thanks in part to China Mobile. iPhone ASP came in at $596 vs. $637 in FQ1 and $577 in FQ4; Maestri suggests a mix shift towards the 4S contributed to the Q/Q drop.

Cook states Apple has bought 24 companies in the last 18 months - some are known to the public, but not all - and is "on the prowl" for deals. "We look for companies that have great people and great technology and that fit culturally and we don’t have a rule that says we can’t spend a lot or whatever."

Also: 1) Angela Ahrendts will begin working as Apple's retail chief next week. 2) 20M Apple TVs have now been cumulatively sold. 3) Roughly half of all iPhone buyers and 2/3 of iPad buyers were new buyers of the respective products. 4) There are now nearly 800M iTunes accounts. Will credit cards linked to them be leveraged for a payments service?

AAPL +7.7% AH. FQ2 results, split announcement, details.

From other sites
Comments (23)
  • youngdub774
    , contributor
    Comments (152) | Send Message
    Like at what point do you just take the L and pay taxes
    23 Apr 2014, 06:31 PM Reply Like
  • Justfixit
    , contributor
    Comments (16) | Send Message
    I keep the shares qualified and pay ordinary income taxes much later when I need income.
    23 Apr 2014, 06:42 PM Reply Like
  • Andreas Hopf
    , contributor
    Comments (20102) | Send Message
    "Cook open to big acquisitions"


    Buy Samsung and shut it down ; )
    23 Apr 2014, 06:49 PM Reply Like
    , contributor
    Comments (215) | Send Message
    No way - you don't buy a COPYCAT CRAP
    23 Apr 2014, 08:22 PM Reply Like
  • Balimoney
    , contributor
    Comments (4) | Send Message
    Time to buy TomTom...
    24 Apr 2014, 06:07 AM Reply Like
  • 2puttwo
    , contributor
    Comments (660) | Send Message
    What a day! Just put the Champagne on ice. Steve has a big smile on his face, way up there. So does Jonathan Ive. I think they still are a great team which hasn't been priced by the market. When will the market learn that it's Joni and Steve's relationship that is important, not Steve and Tim's. It's the former, that puts the tick into Apple's clock. Never thought I could live through this much intrigue in one day. I'm getting to old for this.
    23 Apr 2014, 06:50 PM Reply Like
  • rocback
    , contributor
    Comments (1100) | Send Message
    Huge beat in the most important stat…iPhone sales!
    23 Apr 2014, 07:04 PM Reply Like
  • King Rat
    , contributor
    Comments (1902) | Send Message
    Great quarter for Apple. However debt raises and buybacks are myopic. Stock splitting is silly.


    There are times when buying back stock, raising debt, and splitting stock are good for the company. Yet when you have the cash flow to complete M&A then debt raising serves no purpose other than to lower the WACC.


    Buying back stock is great when you are at historically high levels of net cash to market cap. Raising debt to buy back stock lowers that ratio. When your cash is going into acquisitions, which Apple is doing a great job of now, leave it that way.


    I am no fan of Warren Buffett but he does have a lot of great ideas and "when to buy back stock" would apply to AAPL just as well as BRK.


    Buying back stock at current levels is popular with invasive "long term traders" such as Icahn, who are happy to dry a company's lifeblood for a quick turnaround, but it is not the action of a company that plans to hang around for 100 more years.


    Great Apple, you are going in debt to buy back stock. Shares outstanding are reduced so Icahn and Co. can raise their ownership level for free. They'll gut the company of every last penny before cashing out if they can.


    Request for Tim Cook: Spend lunches with your Mac Mini and iWork design teams instead of Carl Icahn and his cronies.
    23 Apr 2014, 07:16 PM Reply Like
  • AutoRegressive
    , contributor
    Comments (263) | Send Message
    I think lowering WACC is pretty important to shareholders.....
    23 Apr 2014, 08:07 PM Reply Like
  • milehr
    , contributor
    Comments (698) | Send Message
    Buying back shares makes every sense for a company that generates as much cash as Apple, and we have advocated the stock split for quite a while. Both measures will make the stock less vulnerable to WS' attacks, thereby protecting the company's image.
    23 Apr 2014, 08:15 PM Reply Like
  • Skeptic84
    , contributor
    Comments (1416) | Send Message
    king rat,


    When your company is seriously undervalued, what better use for cash can there be than buying your own company? How do you better utilize foreign cash than to borrow against it rather than pay taxes to repatriate?


    "Shares outstanding are reduced so Icahn and Co. can raise their ownership level for free. They'll gut the company of every last penny before cashing out if they can."


    That's just silly. Icahn is too small an investor to take control of AAPL, he will hold just a couple per cent even after the buybacks.
    23 Apr 2014, 08:35 PM Reply Like
  • westbroox
    , contributor
    Comments (91) | Send Message
    Split is not silly, opens up doors to price weighted indexes such as DOW. It will also kill the weekly options gamble that pins the stock on Fridays, retail investors will be able to buy shares instead of options.


    Buyback at 10-14 PE levels is a very good investment, remember they know more than you or I on what in their pipeline. Every share they buy back means that they will save on future dividends for those retired shares forever.
    23 Apr 2014, 08:48 PM Reply Like
  • hobart16
    , contributor
    Comments (676) | Send Message
    Exactly right on the weekly options impact. More manageable now with each lot being 100 shares at 1/7th the price. Volume will be 70 million shares per day at current levels, but I suspect there will be an even bigger daily float of shares now and the buy back may be easier picking off 10 million shares here and there. At $30 billion additional buy back that is 375 million shares at tonight's price. All good moves. Plus they promised annual dividend increases in the conference call. No one is picking up on that statement.
    23 Apr 2014, 09:32 PM Reply Like
  • theantiantihero
    , contributor
    Comments (124) | Send Message
    Agreed. Plus the cost of capital is still dirt cheap. Great time to be borrowing before interest rates rise.
    23 Apr 2014, 09:56 PM Reply Like
    , contributor
    Comments (90) | Send Message
    Mr. Rat,


    If the present value of future dividends is more than the share price, it's an excellent use of cash.




    24 Apr 2014, 03:38 AM Reply Like
  • BruinWrtier78
    , contributor
    Comments (95) | Send Message
    Roughly half of all iPhone buyers and 2/3 of iPad buyers were new customers.


    This is a mind boggling number. Assuming these people had phones and tablets previously, does this mean Apple is taking away market share from Samsung?
    23 Apr 2014, 07:41 PM Reply Like
  • MrMatt
    , contributor
    Comments (1395) | Send Message
    I think that assumption is likely wrong.


    I think most tablets would be to first time buyers.
    Samsung and Apple both have pretty decent customer retention.
    23 Apr 2014, 08:04 PM Reply Like
  • kimboslice
    , contributor
    Comments (1817) | Send Message
    I think Cook is feeling his oats and wants to show Wall St. which end of the dog the tail is on, Wall Street guys are the tail.


    Imagine how profitable Apple would be if the world economy wasn't so lousy?


    Wendy O Williams.
    23 Apr 2014, 07:51 PM Reply Like
  • Kimer62
    , contributor
    Comments (269) | Send Message
    You have to give it to Michael Blair! Pretty classy to show up tonight in the comments and congratulate the LONGS! I'm impressed and enjoy reading your thoughts even though we have been on opposite sides of this trade! Please cover your shorts!
    23 Apr 2014, 08:36 PM Reply Like
  • duhaus
    , contributor
    Comments (320) | Send Message
    "Roughly half of all iPhone buyers and 2/3 of iPad buyers were new customers." I'm with BruinWrtier78 that this is possibly as significant as any of the other numbers. Whether a large percentage is Samsung users who have come to their senses or not (which would be doubly good) I have no idea. What I do know for a fact is that Apple product users are extremely loyal for good reasons and a large percentage can be relied upon to keep buying Apple. The numbers themselves would be extremely impressive all on their own but knowing that ~ 50% are new users means that Apple is handily adding to that base of repeat loyal customers. That's huge.
    23 Apr 2014, 09:42 PM Reply Like
  • YogaNatureLvr
    , contributor
    Comments (133) | Send Message
    You are absolutely right. Apple tends to be extremely sticky. Most of these new users will be repeat customers for years to come.
    24 Apr 2014, 04:10 AM Reply Like
  • Warren Buffett007
    , contributor
    Comments (1132) | Send Message
    The reality is the reality but the Wall Street wants every time to manipulate stocks for his own interest!.
    But playing with a big big big company like Apple that have cult status ,you can burn the fingers!.
    24 Apr 2014, 03:19 AM Reply Like
  • lanecotwo
    , contributor
    Comments (13) | Send Message
    Did I miss he comments of the Apple doom & gloom purveyors?
    24 Apr 2014, 03:21 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs