Apple recently released financial results for the first quarter of 2012 and, once again, the company set records in revenue growth by increasing it by 111 percent from this time last year. Revenue totaled $46.33 billion with a net quarterly profit of $13.06 billion. The company has been sitting on nearly $100 billion for years without doing anything with it, until now. Apple shareholders are looking at a dividend and share-repurchasing program to the tune of $45 billion over the next three years.
Warren Buffet spoke with CNBC a few weeks ago about former CEO Steve Jobs’ decision to keep the $97 billion, telling Squawk Box that he advised Jobs to buyback stock. We speculated on what the company should do with its nest egg, noting that, currently, a buyback would do more to hurt Apple then help it. Apparently, we were wrong.
Apple will not repatriate the $64 billion in foreign cash due to strict tax laws in the U.S. that would hurt the company due to a tax rate of 35 percent. However, the company is willing to part with more than $45 billion in its hybrid approach over a three-year span.
This program will provide Apple with the opportunity to continue to take advantage of investment opportunities while providing current income for its long-term shareholders and increasing its investor base.
This is the first time in 17 years that the company has paid out dividends to its shareholders. In September 2011, AAPL stock hit a milestone by surpassing Exxon Mobil as the most valuable company in the world with a per-share cost of $411.63. The stock opened on NASDAQ this morning at $585.57 per share.
Below are some excerpts from the announcement concerning cash base from Apple’s CEO, Tim Cook:
We’re off to an amazing start with the iPad, selling 55 million from the launch of the iPad in 2010 until the release of the new iPad.”
We believe the tablet market will eventually surpass the pc market in size, its just a question of when.
All of this innovation and success has let to a generation of substantial amounts of cash, both domestically and abroad. We have used some of our cash to make great investments in our business to increase research and development, acquisitions, new retail store openings, strategic payments in capital expenditures and building our infrastructure. You will see more of all of these in the future.
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.
We have thought very deeply and very carefully about our cash balance. We will continue to invest in the business and we will maintain our disciplined and focused approach in the future. Innovation is the most important objective of Apple and we will not lose sight of that.
Subject to a Board Declaration we will begin paying a quarterly dividend of $2.65 per share, beginning in the September quarter. A quarterly dividend will provide current income for our shareholders. We also believe it will broaden Apple’s investor base by attracting new investors who don’t currently own Apple stock.
Additionally, in the December quarter we plan to commit the share repurchase program. The Board has authorized the repurchase of $10 billion of stock over the next three fiscal years with the primary objective of neutralizing dilution from future grants through Apple’s employee equity program.
We will continue to do what we believe is in the best interest of Apple and our long-term shareholders.