Apple has announced a conference call on Monday morning to reveal the outcome of their internal discussions regarding a rather beefy $100 Billion cash balance that's 'gathering dust' by their tool shed.
So, it's 'speed round' to guess what they are going to announce because Apple chose to announce this at 6 AM Pacific (9 AM Eastern) on Monday. (A tad hastily, for Apple, don't ya think?)
Conventional wisdom says that Apple is going to announce a dividend because they have more money than they reasonably need, and as such, will return some of that cash to investors.
But as I said HERE and HERE, Apple doesn't follow the logic of conventional wisdom, and won't start to do so now.
Why not? Apple has been the top-performing stock for a decade plus, and show no signs of slowing down. They trade at a relatively low P/E, and heretofore, have avoided all of the typical optics that public companies tweak to lure new investors. If they wanted a higher stock price, there are other things that they could do.
Besides, cash allows them to do whatever they want, whenever they want, and history has taught them that rainy days do come.
As such, the only scenarios that make strategic sense to me are:
- Do nothing: No change in cash strategy;
- Capital expenditure that increases the long-term health of the business;
- Major acquisition that changes the composition of the business;
- Customer dividend that moves more Apple gear plus creates a secondary catalyst for customer loyalty.
You can pretty safely rule out scenarios #2 and #3, as Apple wouldn't announce something so strategic with virtually no advance media runway so early in the morning.
Scenario #1 makes a lot of sense, but then why did they go out of their way to broach the subject in the last earnings call?
It's not like Apple has felt the need to assuage investors regarding what they're going to do with their cash in the past.
Hence, my best guess is that Apple is going to offer a dividend, but NOT one that is the traditional cash variety.
Rather, they'll pursue one that is a win for lovers of "all things Apple."
Specifically, I am betting on a dividend that is only redeemable at Apple Stores (online or retail) in the form of gear, apps, music, movies and/or books.
UPDATE: In the first sign (of many?) that this is now Tim Cook's Apple, and not a continuation of the global philosophy that Steve Jobs set forth, Apple has announced a dividend AND a stock-buyback. The market obviously loves this (the stock is up $14), but I consider this move a bit of a bearish indicator. Why? When a company that has repeatedly avoided going out of their way to feed the trough of investors, who are notoriously short-sighted, turns tail so fully, it is worrying. Simply put, it represents another mouth that the company is now committed to feeding, and one whose interests aren't fully aligned with Apple's. As such, it changes the context "a bit" about how the company sees its constituency, and the compass that it follows. Heck, why didn't they go for the trifecta, and announce a stock-split as well? Not a fan of this decision for those reasons.
Related:
- It’s Time to ‘Think Different’ because Conventional Wisdom is Dead: Thoughts on Apple’s Q1 Earnings Call
- Apple's Segmentation Strategy (and the Folly of Conventional Wisdom)
