Apple announced this morning a major dividend program that is set to transfer profits to shareholders at a significant rate. From the looks of it starting at roughly $10 Billion per year. Though that is small relative to expected Apple profits, even I would admit that this is a huge initial commitment.
Obviously, I have been accusing Apple executives of hoarding cash in an attempt to protect their own interests and the long run survivability of the company rather than maximizing the return on equity of shareholders.
To add insult to injury, share price was down in the immediate wake of the announcement, which though anticipated by a few analysts cannot be regarded as anything other than a discrete jump in market expectations.
There is just no way at this point I can see a narrative in which my story was correct and Apple and the market responds in this manner together.
I will have an update as information becomes available but right now this looks like nothing less than Epic Defeat for my thesis.
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Monday ~ March 19th, 2012 at 9:22 am
Ritwik
Why does this contradict your story. It’s just that yours was a story of Steve Jobs, not Apple.
Monday ~ March 19th, 2012 at 9:29 am
Chris
Shares up 2% in pre-market trading…
Monday ~ March 19th, 2012 at 10:10 am
onionmahoney
Ritwik, I thought the same thing, and then I thought, “I don’t really understand about half of what he says, so I hope he explains the particular nuance that makes that picture appropos.”
Monday ~ March 19th, 2012 at 10:17 am
William Gadea
Aw, c’mon Karl. The stock has risen nearly 50% in the last three months on very little news… but there was a rumor about a dividend. Buy on the rumor, sell on the news — isn’t that the old adage?
Having said that, I did disagree with much of what you implied when you wrote it. But your central observation that the cash was not priced into the stock was correct, and probably is still correct even at this price level.
Monday ~ March 19th, 2012 at 12:53 pm
Lord
Apple: We’re out of ideas.
Tuesday ~ March 20th, 2012 at 9:32 pm
Rick Russell
Exactly. If you’re a consumer electronics company and you’re sitting on tens of billions and *you can’t think of a profitable way to use that cash*, that’s a terrible signal.
Apple doesn’t take in coal and produce electricity. They take in *desires* and produce *ideas*, which they sell in electronic form. Either people have stopped desiring new capabilities, or Apple is out of ideas.
Monday ~ March 19th, 2012 at 1:51 pm
Soho
Eh, given how small the dividend is relative to their profits, your thesis seems fine. The story seems to be more that without Jobs management can’t resist pressure to pay the dividend anymore.
Monday ~ March 19th, 2012 at 6:44 pm
Jeff
On a more important note, how did that picture ever get taken? / how much exactly can photoshop do?
Monday ~ March 19th, 2012 at 10:47 pm
About that Apple Dividend/Buyback | The Dollar Game
[...] was selfishly hoarding the cash at the expense of shareholders (a thesis which Smith admirably admits was proven wrong today–also, awesome graphic!). Still, I also didn’t see the point of [...]
Tuesday ~ March 20th, 2012 at 7:01 am
Navin Kumar
The other commenters insist that the dividend is too small to count as Apple’s redemption. They may well be right. It’s a bit subjective – long run sustainability is the interests of shareholders as well.
But you acknowledge that you got it wrong when it appears that you got it wrong. Mad respect, sir.