Apple CEO Tim Cook unveiled plans Monday to share billions of dollars in
profits with shareholders. Jessica Vascellaro stops by digits to weigh
in on the company's future, and whether it's famed founder Steve Jobs
would have approved of the plan. Photo: Getty Images.
Apple Inc.'s decision to pay shareholders a quarterly dividend marks
more than a change in the company's philosophy about its cash—it also
underlines a subtler shift in how Chief Executive Tim Cook is communicating
Steve Jobs, Apple insisted on building up its cash and rarely solicited
input from large shareholders. But following Mr. Cook's appointment as CEO
last August and the death of Mr. Jobs in October, the approach changed.
At around $600 per share,
Apple Inc. clearly sees its stock as something of a bargain, as
opposed to, say, six months ago when the stock was $400/share.
Jonathan Cheng reports on Markets Hub. (Photo: Reuters/Brendan
Around January, Apple took the
rare step of asking some large shareholders their opinions about what to do
with its ballooning cash and other liquid assets, said people familiar with
the matter. As of the end of December, Apple's cash and liquid assets
totaled $97.6 billion.
Management grew more
forthcoming publicly on the cash topic, too. In a rare appearance at an
investor conference in February, Mr. Cook acknowledged the Apple board was
actively discussing what to do with the cash, since the company had more
than it needed to run its business.
That led to
Monday's conference call, in which the Cupertino, Calif., company announced
it would pay its first dividend since December 1995 and launch a $10 billion
share repurchase program. Apple Chief Financial Officer
Peter Oppenheimer said the company chose the hybrid approach after
"listening to the input we were getting from shareholders."
All of this is a turnabout in
Apple's approach with Wall Street and investors on cash. For years, Apple
executives said little about its growing hoard beyond the scripted
statements about using the cash to secure component supplies and stay
flexible. Mr. Jobs, who spent little time with shareholders, rarely
discussed it at all.
Apple CEO Tim Cook
"You always felt like it was
never on the agenda," said Jeremy Gleeson, a fund manager at AXA Investment
Managers, whose global technology fund counts Apple as its largest holding.
He said he welcomed Monday's news as providing more visibility.
Mr. Cook, 51 years old, has
largely been regarded as more communicative than his predecessor, Mr. Jobs.
Some employees have noted the change, citing Mr. Cook's move to hold a
company-wide town hall meeting after a recent earnings report and his public
comments combating criticism of working conditions in its China factories.
Amid heightened scrutiny from the media and activists, Mr. Cook has gone on
the offensive, defending the company's efforts to the media and investors.
An Apple spokesman declined to
The cash topic has long been
sensitive at Apple. Mr. Jobs, who saw Apple almost run out of cash after he
returned to the company in 1996, frequently told colleagues he was against
returning cash to shareholders. He was convinced to do a buyback in the wake
of the Sept. 11, 2001, terrorist attacks as the stock market fell, according
to a person familiar with the matter. After that, several executives thought
the company should continue to do buybacks because the stock price seemed
very cheap, this person said.
Apple hired bankers to study
the impact of a buyback, according to this person, who said Mr. Jobs
rejected the idea before it went anywhere. He felt the company could use the
money to grow the business by more than the bump to earnings a buyback would
provide, this person said.
Berkshire Hathaway Inc.chief Warren Buffett said in a recent CNBC interview that Mr. Jobs
had called him a few years ago for advice on what to do with Apple's cash.
Mr. Buffett said he had advised him to do a buyback if he felt the stock was
Whether the increased openness
with shareholders will extend to other issues besides cash remains unclear.
Investors said the company hasn't been any more forthcoming on closely held
details like products.
In response to a question
about the company's future product line-up on Monday's conference call,
which the questioner hedged by noting Apple doesn't like to announce new
products, Mr. Cook quipped: "We actually do love to announce new products.
We just don't do it in conference calls."
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