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Apple to decide fate of its US$98b cash mountain

Raindrops are seen in front of an Apple logo outside an Apple store in Shanghai February 22, 2012. — Reuters picRaindrops are seen in front of an Apple logo outside an Apple store in Shanghai February 22, 2012. — Reuters pic

SAN FRANCISCO, March 19 — Apple Inc, the world’s most valuable company, is poised today to confront one of the biggest questions in corporate America: what it plans to do with its US$98 billion (RM299.31 billion) cash hoard.

Just days after its stock touched US$600 per share, Apple issued a short press advisory saying it would hold a conference call today to discuss the outcome of discussions about its cash balances. The move comes as investors have clamoured for the company to return some of the money to shareholders.

The maker of the iPhone, iPad and iPod has US$98 billion in cash and securities, equal to about US$104 a share according to ISI Group analyst Brian Marshall.

Wall Street has increasingly bet that Apple will this year return cash to shareholders, taking their cue from Chief Executive Tim Cook’s comments about “active discussions” at the top levels about the matter.

Cook recently said he had been “thinking very deeply” about investors’ demands that Apple return some of the cash to shareholders via a dividend.

“Frankly speaking, it’s more than we need to run the company,” Cook said at the annual shareholders meeting in February.

Analysts have said the return of cash to shareholders could take the form of a one-time dividend or even an annual payout, potentially opening the stock up to a new class of investors who seek a dividend yield. Alternatively, the return could be carried out through a share buyback.

“A dividend makes sense,” said Shaw Wu, analyst with Sterne Agee. The decision “is probably going to be pretty binary. It’s going to be either yes or no. Many are hoping the answer is going to be yes.

“It’s more likely they are considering it. I am not sure they are going to necessarily say it’s to be effective immediately.”

Wu said the value to shareholders of a stock buyback would be more questionable: “The issue with (a) buyback is that the payback for investors is not as tangible. With a dividend, you get a check in the mail.”

Wu doubted there would be a stock split, saying it would be more difficult for Apple to beat consensus earnings forecasts.

Mounting anticipation over a buyback, along with hopes that the newest iPad will keep sales momentum strong, helped propel the stock to a record high this month above US$600 a share.

At Friday’s closing price of US$585.57, Apple has a market value of about US$546 billion.

ISI’s Marshall said a dividend would drive additional stock purchases from top-20 dividend mutual funds and other investors as they make Apple a top holding. Apple could pay an annual dividend of as much as US$14.65 per share, he added.

The Apple call, to be held at 9am EDT (1300 GMT) on Monday, will not provide an update on the current quarter nor will it touch upon any topics other than cash, the company said in a statement on Sunday. Apple declined to comment further. — Reuters pic

 

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