Subscribe / Unsubscribe Enewsletters | Login | Register

Pencil Banner

Apple cash plan buys CEO Cook time

Poornima Gupta and Ben Berkowitz (Reuters via AFR) | April 25, 2013
Tim Cook wants investors to "think different" about Apple: less as a hyper-growth startup-like company and more as a mature but robust technology corporation with the world's biggest dividend.

Apple cash plan buys CEO Cook time
To some extent, Apple CEO Tim Cook's expanded capital return program helped mask the company's first quarterly profit decline in a decade, though analysts say the more important issue now is what Apple has in store on the gadget front. Photo: Jim Wilson

Tim Cook wants investors to "think different" about Apple: less as a hyper-growth startup-like company and more as a mature but robust technology corporation with the world's biggest dividend.

If Wall Street follows Apple's famous advertising slogan of old, it may relieve some of the pressure on Apple's chief executive, quiet investors' grumbling about its recent share price slide, and buy the company time to do what it says it does best: come up with and market new products.

On Tuesday, Apple said it would return $US100 billion to shareholders by the end of 2015, in part by raising its dividend 15 per cent and in part by increasing its share buyback program six-fold to $US60 billion.

To some extent, the expanded capital return program helped mask its first quarterly profit decline in a decade, though analysts say the more important issue now is what Apple has in store on the gadget front.

Apple shares were up 0.2 per cent to $US406.96 in afternoon trading on Wednesday, reversing direction after falling about 1 per cent in early trading. The stock has seen a 43 per cent slide since mid-September.

With Apple planning to borrow money to reward shareholders - one way to circumvent repatriating its vast overseas cash for that purpose - it could go from having zero debt to a company that rivals major global banks such as Citigroup in issuing bonds.

The company received an AA+ rating from Standard & Poor's, missing the top rating due to earnings growth uncertainty.

Following the earnings, at least 17 brokerages lowered their price targets on the stock, including JPMorgan, which cut its target by 25 per cent.

Apple's earnings growth trajectory has come to earth in the last year. After posting average annual earnings per share growth of 62 per cent over the past five years, its profit is now forecast to grow at just 4.5 per cent a year for the next decade. For this year, earnings per share are expected to fall 4.4 per cent, according to Thomson Reuters StarMine data.

ADMITTING A CHANGE

Cook is trying to reset heightened expectations around a company once universally feted for its ability to captivate both consumers and Wall Street.

In the years following the introduction of the iPhone in 2007 and the iPad in 2010, the company established a pattern of consistently blowing past even the most bullish Wall Street earnings expectations, much to everyone's delight.

 

1  2  3  Next Page 

Sign up for CIO Asia eNewsletters.