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Post by Odd-Lot Richard on Feb 9, 2013 16:27:34 GMT -8
It looks like I was right about what Einhorn intends with his proposal: see point three in his last set of responses. www.businessinsider.com/einhorn-on-apple-2013-2The preferreds would sit above common in the capital structure, sort of like issuing a bond on money that's already there. Because preferred holders would be guaranteed money even during a catastrophic event, they would have less to worry about and would be free to value their shares fairly. Because they would only care about the cash that Apple has on hand, they would be less sensitive to earnings surprises. Or am I reading the situation wrongly?
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JDSoCal
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Aspiring oligarch
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Post by JDSoCal on Feb 9, 2013 16:49:50 GMT -8
What is apple doing with its cash this year? Via Horace @asymco: News from Japan: Apple will provide $9B capital investment in 2013 to - Toshiba Yokkaichi Memory - Japan Display LCD - Sharp LCD Pay the cash to build the factory with the sole purpose of producing the supply that Apple needs. The best kind of supply chain management, and a nice twist on "vertical integration". Bonus points, of course, for choosing friendlier suppliers. Ironically, there may also be some antitrust avoidance benefits of vertical integration as well as control and intellectual property protection, should Apple be actual part-owners of the supply chain. I'm no antitrust expert, but it might be easier legally to prevent competitors from dealing with one's suppliers when you are the supplier, vs. a non-compete agreement.
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Post by mbeauch on Feb 9, 2013 16:50:39 GMT -8
I posted this in the Friday thread, I was looking for someone to audit.
Good memory Mace, Yep, going back to an even 900 outstanding has always been my plan. This would provide Apple options going forward with no change in in the existing allotment. This would only require 25-30 billion and would be the end of this down cycle. The EPS would also get a nice bump, not dramatic, but a nice bump. Almost $3 EPS for the year and lower supply.
Mace, as you can see, this can come out of cash and would still not keep up with the cash growth. That is why the dividend need to go to $15/year. Just realized there would be an impact to the actual cost of the dividend if the share count was dropped to 900 million. Oh my, must rethink.
It cost Apple $10 billion a year right now to pay out its dividend. (10.60 x 947)
If Apple lowers the shares to 900 million the dividend can go up substantially and the cost be relatively small. Say Apple bumps to $15 per year, the actual cost to pay out is only $13.5 billion. OMG, this is a eureka moment. (for me) I knew the obvious benefits, the hidden dividend cost benefit is huge. The buy back would allow Apple to raise the yearly payment to $17/sh at a cost of only $15ish billion and provide a 3.6% yield. Holy cow Batman. Let this sink in because it still does not significantly slow Apple's cash growth.
I am now at the highest mountain, TIM buy the damn shares............
Someone please check my math to make sure I have not bumped my head and landed in Thurmanville. Sorry Gregg, could not resist. You want sentiment, that is sentiment in spades, no wonder WS is all over this.
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Mav
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Post by Mav on Feb 9, 2013 17:09:38 GMT -8
If shareholders ascribe minimal value to Apple's cash now, but Apple gives a reason to value cash more highly?
Hard to deny that shareholders beginning to value Apple's cash more appropriately doesn't impact sentiment or price in some way.
Now of course earnings and guidance must be solid going forward. But no one can deny that the 2012 dividend didn't give AAPL a boost, though it was "unsustainable".
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Post by leonb on Feb 9, 2013 17:10:31 GMT -8
It looks like I was right about what Einhorn intends with his proposal: see point three in his last set of responses. www.businessinsider.com/einhorn-on-apple-2013-2The preferreds would sit above common in the capital structure, sort of like issuing a bond on money that's already there. Because preferred holders would be guaranteed money even during a catastrophic event, they would have less to worry about and would be free to value their shares fairly. Because they would only care about the cash that Apple has on hand, they would be less sensitive to earnings surprises. Or am I reading the situation wrongly? Another way of looking at it is this: the shareholders are issuing preferred stock directly themselves on their claim to some of the company's cash - should they choose to sell their carved out pref, they (not the company) raise the cash, and they (not the company) give up their claim to the cash. A separation is achieved between risk seekers and risk averse income seekers. Everyone can get the slice they want, so total appetite increases.
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Post by mbeauch on Feb 9, 2013 18:12:18 GMT -8
What is apple doing with its cash this year? Via Horace @asymco: News from Japan: Apple will provide $9B capital investment in 2013 to - Toshiba Yokkaichi Memory - Japan Display LCD - Sharp LCD Pay the cash to build the factory with the sole purpose of producing the supply that Apple needs. The best kind of supply chain management, and a nice twist on "vertical integration". Bonus points, of course, for choosing friendlier suppliers. This would be paid for in pre tax dollars, correct?
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Mav
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Post by Mav on Feb 9, 2013 18:41:46 GMT -8
I guess that depends on what you mean, since all of Apple's cash is technically after-tax dollars. ;D
I'd assume Apple uses treasury cash for these ginormous capital investments.
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Post by mstefa on Feb 9, 2013 19:13:45 GMT -8
Gregg - setting aside the debate on sentiment for the time being, what do you think they should be doing with the cash? Are you saying leave it alone and let it keep growing? Without knowing what management's options are for the use of the cash I haven't a clue. My preference is to have Apple accrue as much as is possible until the cost of the next big thing is known. Even then I think Apple should accrue twice the cost of the next thing, plus twice the safety net it is believed they need to weather the next down turn. A very smart man (was one of my directors) said "all plans, no matter how well researched, cost twice as much and take twice as long, to implement". I don't know what Apple's plans are for that cash, so I'm not going to presume to tell management what to do with it. Is it my business (even as a shareholder) to know what management's plans are? Yes and no. We hire Directors to oversee management's performance. Directors filter shareholder needs with the needs of the company. If we aren't satisfied we can change the board. It just takes a majority of shareholders to do so. I'll wager any amount that the Board is not changed at the next Shareholder meeting. That will put all the expanded buyback/dividend proponents in the minority of Shareholders on this issue. If the plan requires 200 billion in cash, they may as well announce as nobody can compete with that anyways.
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Post by qualitywte on Feb 9, 2013 20:04:51 GMT -8
What is apple doing with its cash this year? Via Horace @asymco: News from Japan: Apple will provide $9B capital investment in 2013 to - Toshiba Yokkaichi Memory - Japan Display LCD - Sharp LCD That's 9B, and looks like they are pointing to the TV as their future.
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Mav
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Post by Mav on Feb 9, 2013 20:32:46 GMT -8
Maybe, maybe not.
Japan Display and Sharp are already key display partners for Apple.
As for Toshiba, it's likely for flash memory supply.
Assuming the $9B data point is for real, there's still a lot of work to be done in order to get down to the educated guess level.
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Post by sponge on Feb 9, 2013 20:35:37 GMT -8
Maybe, maybe not. Japan Display and Sharp are already key display partners for Apple. As for Toshiba, it's likely for flash memory supply. Assuming the $9B data point is for real, there's still a lot of work to be done in order to get down to the educated guess level. I agree. This investment won't see significant return for at least 18 months. An Apple TV is coming but I still think 2014 would be the earliest. Most likely this money is being used to transition from Samsung.
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Post by sponge on Feb 9, 2013 20:44:18 GMT -8
Without knowing what management's options are for the use of the cash I haven't a clue. My preference is to have Apple accrue as much as is possible until the cost of the next big thing is known. Even then I think Apple should accrue twice the cost of the next thing, plus twice the safety net it is believed they need to weather the next down turn. A very smart man (was one of my directors) said "all plans, no matter how well researched, cost twice as much and take twice as long, to implement". I don't know what Apple's plans are for that cash, so I'm not going to presume to tell management what to do with it. Is it my business (even as a shareholder) to know what management's plans are? Yes and no. We hire Directors to oversee management's performance. Directors filter shareholder needs with the needs of the company. If we aren't satisfied we can change the board. It just takes a majority of shareholders to do so. I'll wager any amount that the Board is not changed at the next Shareholder meeting. That will put all the expanded buyback/dividend proponents in the minority of Shareholders on this issue. If the plan requires 200 billion in cash, they may as well announce as nobody can compete with that anyways. I don't see them telling the world how much they want to save or what they plan on using it for. They will pacify some WS investors and increase both dividend and buyback. That is a given. personally I think they need about 300 billion of the mobile payment via iPhones and iTunes credit cards. So they need at least 3 more years of cash accumulation. This way they have enough for dividends, buybacks, prepayment of tooling and parts, rainy day, and this initiative.
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Post by sponge on Feb 9, 2013 20:51:28 GMT -8
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Deleted
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Post by Deleted on Feb 9, 2013 21:34:49 GMT -8
I'll wager any amount that the Board is not changed at the next Shareholder meeting. That will put all the expanded buyback/dividend proponents in the minority of Shareholders on this issue. What is your evidence to support this statement? Who cares what my evidence is? Are you willing to take the wager?
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Deleted
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Post by Deleted on Feb 9, 2013 23:35:17 GMT -8
What am I looking at here sponge - is this a new position, or change of position? Or something else?
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Deleted
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Post by Deleted on Feb 9, 2013 23:39:47 GMT -8
Maybe, maybe not. Japan Display and Sharp are already key display partners for Apple. As for Toshiba, it's likely for flash memory supply. Assuming the $9B data point is for real, there's still a lot of work to be done in order to get down to the educated guess level. Well I guess where getting some sort of new display tech within the next 12 months in apple products - I'm guessing this would be for the ultra thin iPad 5 and a retina iPad mini, but maybe its also for an advanced TV display - really no way to tell I guess. I thought flash memory was rather a commodity product, so an investment by apple for exclusive supply suggests something....new? Maybe drastically higher capacity chips? Or maybe even letting toshiba diversify into SoC production for apple?
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Post by bick on Feb 10, 2013 0:03:45 GMT -8
What am I looking at here sponge - is this a new position, or change of position? Or something else? I'm not sure how to read this either. Regardless, looks very impressive to me. Apparently, BlackRock "controls" over 5% of all outstanding AAPL common shares. Said another way, BlackRock controls nearly 50M common shares with a value of almost $24 Billion. Combine BlackRock with 2 more shareholders of equal size and you have Michael Dell size 15% company ownership. Buyout?
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benoir
fire starter
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Post by benoir on Feb 10, 2013 3:48:19 GMT -8
I must admit I read the first post with dread, thinking crap, here comes another food fight, then the next two posts thinking wow, I'm seriously impressed. The heck with that, I wanted to see spaghetti on the walls. ;D But, mb, iPad said there'd be no pie if we got sketti on the walls... . I like Pie
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Post by mbeauch on Feb 10, 2013 6:56:22 GMT -8
But, mb, iPad said there'd be no pie if we got sketti on the walls... . I like Pie Oh the disappointment when I clicked on the link. I was hoping for better.
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Post by kloot on Feb 10, 2013 7:13:58 GMT -8
Buybacks shrink share count. Whether it is good to use capital towards a buyback is dependent on 2 factors. 1. The price of the shares versus the value 2. The opportunity cost of the capital. If Apple can buy back share for 500 that is worth 750. Thats is value accretive. If Dell is buybacking share worth 15 for $25 then it is not. Share buybacks alone do not make a shit business good or vice versus. However, if Mr. Market wants to underprice Apples value and Apple is confident on it future prospects. Then, buybacks are value accretive. Remember Apple is the very definition of INSIDER. TC/PO/BOD knows what models can be launched and what their long term strategy is. They have asymmetry of information in this case can and should be used to Apple Shareholder advantage. Apple is on the record saying that they had excess capital since 1 last year with Apple less than 100$/sh. They now have 145 and growing about 40-45 $/yr. Returns on cash is ~1%. Returns on purchasing shares is 10% FCF yield. Apple has excess cash and can not allocate it properly. Therefore, it should return it to shareholders. 45B in 3 years is complete BS. If Apples stick to this plan it will have over $250 $/sh in cash at the end of the period. It is a misconception that a stock buyback says anything about the underlying product and business. Look at Visa, Mastercard, IBM to name a few. I have not heard investors complaining about the growth of Visa or Mastercard. Both are close to all time highs trading at high teen multiples. In sum, Buybacks are not the holy grail. They are tool that should be deployed the betterment of long term holders. Apple still needs to dominate it competition. A steady increase of dividends to attract dividend growth/value investors should be considered too. Why the strawman is set up as Apple has to choose is beyond me. Apple please use ALL the tools in your toolbelt. And consider other tools too. JD, IBM is a clear candidate where stock buybacks well as clear forward medium term guidance have enhanced returns. So has Visa and MA +all my thumbs pointing in the upward direction
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Post by roni on Feb 10, 2013 7:19:57 GMT -8
What is your evidence to support this statement? Who cares what my evidence is? Are you willing to take the wager? Apparently you don't I am not here to do internet gambling, or to talk about wagers. I am here to read about and discuss Apple and AAPL.
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Post by rob_london on Feb 10, 2013 9:02:01 GMT -8
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SomeJuan
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Taking a nap…
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Post by SomeJuan on Feb 10, 2013 9:53:03 GMT -8
Sponge et al,
On Sep 30, 2012, Blackrock held 3.9 billion of AAPL commons, or 8.3 million shares. At that date, they were the 13th largest institutional holder of AAPL. As of February 4th 2013, Blackrock is now the single largest shareholder of AAPL, eclipsing the long time king of AAPL ownership, FMR, Fidelity! They now own 49 million shares of AAPL worth 24 billion US Dollars! This has occurred in a window of just over four months!
We now know who has been the recipient of all the weak kneed sellers, it just begs the question of WHY!
Blackrock (BLK), has a market cap of just short of 41 Billion. Take a look at their balance sheet! Their total stockholder equity is 25 Billion dollars, or the exact same amount as their currect holdings in AAPL. They are leveraged up the wahoo in AAPL like nobodys business.
I smell takeover taint in the air, or i drank some really bad koolaid recently. This is nothing short of amazing info...
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Post by alxyz on Feb 10, 2013 9:56:51 GMT -8
This is very exciting with more potential than the iTV.
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Post by lovemyipad on Feb 10, 2013 9:59:20 GMT -8
We now know who has been the recipient of all the weak kneed sellers, it just begs the question of WHY! +1
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SomeJuan
Member
Taking a nap…
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Post by SomeJuan on Feb 10, 2013 9:59:43 GMT -8
I think i am going to the shareholder meeting to see the fireworks up close and personal!
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SomeJuan
Member
Taking a nap…
Posts: 321
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Post by SomeJuan on Feb 10, 2013 10:10:59 GMT -8
No company or individual has owned more than 3.35 % of AAPL in current history.
WTF?
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Post by phoebear611 on Feb 10, 2013 10:28:54 GMT -8
I think i am going to the shareholder meeting to see the fireworks up close and personal! Any chance you can keep us informed if you go to the meeting? Would be much appreciated.
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SomeJuan
Member
Taking a nap…
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Post by SomeJuan on Feb 10, 2013 10:38:18 GMT -8
Phoebes,
Will do... I have to do some rescheduling, but i think i can pull it off.
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Post by mbeauch on Feb 10, 2013 10:48:08 GMT -8
Sponge et al, On Sep 30, 2012, Blackrock held 3.9 billion of AAPL commons, or 8.3 million shares. At that date, they were the 13th largest institutional holder of AAPL. As of February 4th 2013, Blackrock is now the single largest shareholder of AAPL, eclipsing the long time king of AAPL ownership, FMR, Fidelity! They now own 49 million shares of AAPL worth 24 billion US Dollars! This has occurred in a window of just over four months! We now know who has been the recipient of all the weak kneed sellers, it just begs the question of WHY! Blackrock (BLK), has a market cap of just short of 41 Billion. Take a look at their balance sheet! Their total stockholder equity is 25 Billion dollars, or the exact same amount as their currect holdings in AAPL. They are leveraged up the wahoo in AAPL like nobodys business. I smell takeover taint in the air, or i drank some really bad koolaid recently. This is nothing short of amazing info... Put the Kool-Aid down. As of September 30, 2012, BlackRock has $3.67 trillion in assets under management.[3] Street Authority reported that, "If the company were a country, then its assets under management would put it at the fourth largest in terms of gross domestic product, higher than Germany or France."[4][5] This does explain a lot. Blackrock is "THE" big boy on the block and now it explains who has been behind all the negative media and HTF's gone crazy. There have been some large block transactions over the past couple of months. This also explains why so many brokerages have been on the losing end of this down turn. Here is the thing, Blackrock did not build this position to sell the shares back to Apple in a buy back. What this should also do is open up everyone's eyes. Acquired 40 million shares in 4 months in a down market. How does it happen, scare the shit out of the masses to steal their shares. Now I get that they did not want to pay a premium for the shares, but this is ridiculous. Angry does not even come close to describe how I feel.
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