Apple has announced to the world what it intends to do with at least some of its enormous pile of money. Those hoping for some grand philanthropic gesture, such as free iPads for school kids, will be disappointed, as will those expecting Apple to make a juicy acquisition, like snapping up a major media corporation.
However, if you were a shrewd investor and bought Apple shares back when they were worth much less than now, then you are in luck, up to a point. Apple has almost $100 billion ($98bn to be slightly more exact) in cash assets (£62bn, give or take a few pounds) and its stock market value is around $500bn, making it the planet’s most highly valued company.
From the fourth quarter of 2012, Apple plans to spend more than $10 billion a year on a share repurchase programme, rising to a total of $45 billion over the next three years. It also intends to pay a quarterly dividend of $2.65 per share in its fiscal fourth quarter, which begins on 1 July this year. That amount is only worth a small fraction of the shares’ value and even this plan is subject to approval by Apple’s board of directors.
Since 1995 and under Steve Jobs’ recent stewardship, Apple had not paid any dividends. During the late 1990s Apple came close to bankruptcy. In true rags to riches form, its commercial success over the last few years is generating far more cash than it actually needs to run the company.
Announcing the new financial arrangements, Apple’s new CEO, Tim Cook, said: “We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure. You’ll see more of all of these in the future.”
He added: “Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business. So we are going to initiate a dividend and share repurchase program.”
Apple will still have the money and the opportunity to do something really interesting in the long term, so we’ll have to sit tight until we find out what that is going to be.