Liberty Posted October 21, 2013 Share Posted October 21, 2013 The bolded part is also a direct refutation of the idea that"Buybacks are better than dividends at any price". Hardly true, because a management's job is to increase value of only continuing shareholders, and not the ones who are selling out. If the business is good and has a long-term future, buybacks do increase the value for continuing shareholders by giving them a bigger piece of the pie. Look at how happy Buffett is about IBM or WaPo buybacks, or any buyback under IV (his hero is Singleton). It's not like buybacks are forcing anyone to sell. If the daily volume was ±zero, the money would probably be returned via dividends. But since there are many shareholders who will put their shares for sale at prices below IV, it's fine for the company to buy and cancel. Which is why I hope that tomorrow after the announcements the stock will drop a lot, allow more buybacks at lower prices :) Link to comment Share on other sites More sharing options...
Guest valueInv Posted October 21, 2013 Share Posted October 21, 2013 The bolded part is also a direct refutation of the idea that"Buybacks are better than dividends at any price". Hardly true, because a management's job is to increase value of only continuing shareholders, and not the ones who are selling out. If the business is good and has a long-term future, buybacks do increase the value for continuing shareholders by giving them a bigger piece of the pie. Look at how happy Buffett is about IBM or WaPo buybacks, or any buyback under IV (his hero is Singleton). It's not like buybacks are forcing anyone to sell. If the daily volume was ±zero, the money would probably be returned via dividends. But since there are many shareholders who will put their shares for sale at prices below IV, it's fine for the company to buy and cancel. Which is why I hope that tomorrow after the announcements the stock will drop a lot, allow more buybacks at lower prices :) At this rage, the cheap buy back window is closing soon. :( Link to comment Share on other sites More sharing options...
Palantir Posted October 21, 2013 Share Posted October 21, 2013 If the business is good and has a long-term future, buybacks do increase the value for continuing shareholders by giving them a bigger piece of the pie. Look at how happy Buffett is about IBM or WaPo buybacks, or any buyback under IV (his hero is Singleton). I don't disagree with buy backs and do support return of capital with this firm. However I think apple needs to be seen as a firm that needs to be grown organically over the long term while enriching shareholders rather than simply as a vehicle to extract cash out of- the way Icahn sees it. Cook should be focusing energy on product rather than spending time arguing with Icahn about buy backs IMO. Link to comment Share on other sites More sharing options...
Liberty Posted October 21, 2013 Share Posted October 21, 2013 I don't disagree with buy backs and do support return of capital with this firm. However I think apple needs to be seen as a firm that needs to be grown organically over the long term while enriching shareholders rather than simply as a vehicle to extract cash out of- the way Icahn sees it. Cook should be focusing energy on product rather than spending time arguing with Icahn about buy backs IMO. I don't think Cook has spent too much time with Icahn, and capital allocation should be a top priority for a CEO anyway, so it's not like it's totally wasted time. Buffett recommended to Jobs that he should do buybacks years ago, when the stock was sub-100 IIRC, and if he had, Apple would be in even better shape today. IMO whatever Icahn (iCahn now?) says should be looked at on merit, like what Einhorn and Buffett said. Dismissing it blindly because Icahn said it is just as bad as adopting it blindly because he said it. Whether they end up doing it or not, I doubt it changes the company's long-term focus one iota. They'll look at it through that lens. All this is just input from known good capital allocators, so it can't hurt to at least listen, especially for a company that has a lot of cash to allocate, with more coming in all the time, and few obvious ways to spend it organically. It's not because you're the best at making consumer products that you are the best at capital allocation (we have to be careful about the halo effect). Now, don't take all this to mean that I think they should do what Icahn proposes. I don't know, I don't have Tim Cook's inside view, but I'm glad they're thinking hard about capital allocation, especially when the stock has been relatively cheap. Link to comment Share on other sites More sharing options...
Guest valueInv Posted October 21, 2013 Share Posted October 21, 2013 Say what? http://venturebeat.com/2013/10/21/shocker-iphone-5c-sales-starting-to-catch-up-to-iphone-5s-report/ Link to comment Share on other sites More sharing options...
Viking Posted October 21, 2013 Share Posted October 21, 2013 One of the challenges when coming up with a valuation for Apple is what to do with the $140 billion in cash on the balance sheet. The number is so large it is hard to understand how Apple can possible use it in a shareholder friendly way. Much of it is also 'trapped' offshore which adds more complexity. Another challenge for Apple is the cash pile is growing so fast; free cash flow the next 12 months should be in the $40 billion range. Quality of management is one of the most important factors when investing in a company. Do you trust them? Over time do they walk the talk? When Apple announced in April that they would be increasing the size of their stock buyback to $60 billion I was impressed. When they announced in August that they had accelerated their repurchases I was even more impressed (I think a total of $18 billion was repurchased in the June quarter alone). We will get more details on repurchases next week; my hope is they have continued to be aggressive. They may reduce the total share count by 6-7% in calendar 2013. If they are able to continue to be this aggressive for the next couple of years they will reduce the total share count in a very meaningful way. This in turn will make it easier to value the cash on Apple's balance sheet. Apple is a massive company. However, it still has many opportunities to grow its top and bottom line: smartphones, tablets, TV, wearables, payments, i-tunes etc. As the share count comes down (5-6% per year)and as the top line continues to grow (single digits), earnings per share will once again start to grow nicely. Moving forward, hopefully we will continue to see good things from management at Apple. Buffett bought IBM due in part to their management of capital (via large share repurchases over a decade). To me, Apple looks like it may be following in IBM's capital management footsteps. The big difference is Apple has much more opportunity to grow its top line and total profits than IBM. Time will tell if this is how it plays out. Link to comment Share on other sites More sharing options...
DCG Posted October 21, 2013 Share Posted October 21, 2013 I'd still love to see them buy Netflix. Also, as I've said before, they should buy a few top app developers (won't cost them a whole lot). If apps like Shazam are made part of iOS, it would be a big advantage (I also worry about Google buying some of these companies and taking their apps off iOS). Shazam would be a great part of iOS, as they could integrate it seamlessly with iTunes. Link to comment Share on other sites More sharing options...
Liberty Posted October 21, 2013 Share Posted October 21, 2013 I'd still love to see them buy Netflix. That's an interesting idea. The first few things that come to mind are: Netflix has thin margins and an uncertain future. If cable and content companies get their act together and begin unbundling content and improving random access streaming, as is widely expected to happen over the next few years, its value proposition won't be quite as unique. And if they start making more money, the content owners will squeeze it out of them when contracts renew. They can gain more leverage by scaling up some more, but their best hope is to keep creating enough original content to differentiate themselves and be worth subscribing to even if others offer a similar service (like HBO when it made that transition to original content). So if Apple buys Netflix, it's doubtful they'd make much money (not at Apple scale, anyway), and it's doubtful they'd want to get into content creation in a big way as that's not really their business. But if they don't buy Netflix, nothing bad really happens. Netflix will never prevent Apple devices from playing its streams. It would be crazy for a subscription service to prevent the top end of the market to subscribe. So Apple will have access to Netflix even if they don't own it. And by not owning a content producer/distributor, Apple can keep partnering with everybody without feeling like a competitor (unlike how Microsoft went into hardware and started competing with its partners). Also, as I've said before, they should buy a few top app developers (won't cost them a whole lot). If apps like Shazam are made part of iOS, it would be a big advantage (I also worry about Google buying some of these companies and taking their apps off iOS). Shazam would be a great part of iOS, as they could integrate it seamlessly with iTunes. Indeed, a lot of the small acquisitions they make seem to be acqui-hires. They want talented people who fit in the culture, and if they already have good products that can be integrated (ie. Siri), all the better. Shazam would be nice, though if someone ever removed it from iOS, another company would jump in the hole and fill that need. I don't think Shazam is the only one able to do what they do, it's just that right now they fill the niche so well that few competitors will even attempt it. But if they leave that space on iOS, I'm sure it wouldn't stay empty for long. But getting more talented people is definitely a good use of cash, and Apple buys many small companies and recruits many people. We hear about it when they are bigger companies and better known people, but I'm sure there are also tons of small deals that never get reported because they don't have to. Sadly, there's not an unlimited supply of talented people who fit Apple's culture. Link to comment Share on other sites More sharing options...
DCG Posted October 21, 2013 Share Posted October 21, 2013 So if Apple buys Netflix, it's doubtful they'd make much money (not at Apple scale, anyway), and it's doubtful they'd want to get into content creation in a big way as that's not really their business. But what if in a couple years you kill off they dvd business, and make Netflix streaming exclusively available on Apple TV and iOS devices? I look at it as more of a way to further sell hardware and tie people into the Apple ecosystem. Netflix is barely profitable currently, so it's wouldn't directly add earnings from subscribers. Link to comment Share on other sites More sharing options...
Liberty Posted October 21, 2013 Share Posted October 21, 2013 So if Apple buys Netflix, it's doubtful they'd make much money (not at Apple scale, anyway), and it's doubtful they'd want to get into content creation in a big way as that's not really their business. But what if in a couple years you kill off they dvd business, and make Netflix streaming exclusively available on Apple TV and iOS devices? I look at it as more of a way to further sell hardware and tie people into the Apple ecosystem. Netflix is barely profitable currently, so it's wouldn't directly add earnings from subscribers. I don't see it. It would piss a lot of people off, make the experience worse for almost everyone who isn't 100% Apple (which is a lot of people, watching netflix on theit Xbox or windows laptop or whatever), and open the door for competitors who are multi-platforms. It's not really the Apple way, at least not anymore. They don't even make iTunes Apple-only... And they'd have to pay like 20+ billion for the privilege of probably seriously crippling Netflix because it would lose a lot of subscribers and its service would be less useful than it was, and get tangled into a lot of complications as a content producer, making it harder to have access to content from other content producers. Apple devices already have access to Netflix, and they wouldn't sell that much better if it was exclusive to them. Netflix's cool, but it's not that big a draw. Link to comment Share on other sites More sharing options...
Guest valueInv Posted October 21, 2013 Share Posted October 21, 2013 So if Apple buys Netflix, it's doubtful they'd make much money (not at Apple scale, anyway), and it's doubtful they'd want to get into content creation in a big way as that's not really their business. But what if in a couple years you kill off they dvd business, and make Netflix streaming exclusively available on Apple TV and iOS devices? I look at it as more of a way to further sell hardware and tie people into the Apple ecosystem. Netflix is barely profitable currently, so it's wouldn't directly add earnings from subscribers. IIRC, Netflix's content licenses are not transferrable in the event of an acquisition (same problem with Hulu). Besides, Netflix's business model is the exact opposite of Apple's. Netflix gives you long tail and old content for cheap. Apple wants to sell premium, latest and greatest content. Netflix is also transforming itself into a content creator. Something I doubt Apple is interested in. Link to comment Share on other sites More sharing options...
Viking Posted October 21, 2013 Share Posted October 21, 2013 Becoming a content provider (by buying Netflix) would make Apple a direct competitor to the other large content providers out there (Disney, ABC, NBC, Fox etc). Microsoft bought Skype and chose to become a big competitor to AT&T, Verizon etc. Smartphone manufacturers need the support of the distribution network. With this one aquisition MSFT effectively has crippled its smartphone business. Link to comment Share on other sites More sharing options...
Guest valueInv Posted October 22, 2013 Share Posted October 22, 2013 Becoming a content provider (by buying Netflix) would make Apple a direct competitor to the other large content providers out there (Disney, ABC, NBC, Fox etc). Microsoft bought Skype and chose to become a big competitor to AT&T, Verizon etc. Smartphone manufacturers need the support of the distribution network. With this one aquisition MSFT effectively has crippled its smartphone business. The single most important thing that differentiates Apple from most companies is focus. You look at other companies - they're trying to be all things to all companies. They try to enter every market they can. In the end they lose the market that made them successful in the first place. Apple has shown great restraint despite having more money than anyone else to buy their way into new markets. In return, they earned the label as the worst capital allocator for it. ;D Link to comment Share on other sites More sharing options...
Guest valueInv Posted October 22, 2013 Share Posted October 22, 2013 On the theory posted here that China Mobile may have leverage over Apple in negotiations: http://online.wsj.com/news/articles/SB10001424052702304402104579148973503876140 Link to comment Share on other sites More sharing options...
rkbabang Posted October 22, 2013 Share Posted October 22, 2013 Becoming a content provider (by buying Netflix) would make Apple a direct competitor to the other large content providers out there (Disney, ABC, NBC, Fox etc). Microsoft bought Skype and chose to become a big competitor to AT&T, Verizon etc. Smartphone manufacturers need the support of the distribution network. With this one aquisition MSFT effectively has crippled its smartphone business. The single most important thing that differentiates Apple from most companies is focus. You look at other companies - they're trying to be all things to all companies. They try to enter every market they can. In the end they lose the market that made them successful in the first place. Apple has shown great restraint despite having more money than anyone else to buy their way into new markets. In return, they earned the label as the worst capital allocator for it. ;D All excellent points. For me the answer to the question is found in the margins. Apple would never acquire Netflix not only because of its current profit margins, but because there is no real hope of ever increasing them dramatically. I can see Amazon.com acquiring Netflix, (I'm actually surprised they never did), but never Apple. Link to comment Share on other sites More sharing options...
DCG Posted October 22, 2013 Share Posted October 22, 2013 Good points regarding Netflix. Link to comment Share on other sites More sharing options...
Liberty Posted October 22, 2013 Share Posted October 22, 2013 If you didn't know, they are streaming today's event live: http://www.apple.com/apple-events/october-2013/ Link to comment Share on other sites More sharing options...
Palantir Posted October 22, 2013 Share Posted October 22, 2013 Is Tim Cook an older version of Sheldon Cooper? Link to comment Share on other sites More sharing options...
DCG Posted October 22, 2013 Share Posted October 22, 2013 Sweet..Maverick is available for free starting today. 9.7" iPad with a smaller bezel, thinner & lighter, renamed iPad air. Retina screen on the mini, but the price moved up to $399. $299 for the original iPad mini. Link to comment Share on other sites More sharing options...
Palantir Posted October 22, 2013 Share Posted October 22, 2013 Powerful processor for the iPad Mini...somewhat surprising really. I like the older iPad Mini bumped down to 300, a decent price IMO for Apple Land. What's bizarre is that they're still selling the iPad 2 for 400....wtf? #profitmargins Link to comment Share on other sites More sharing options...
rkbabang Posted October 22, 2013 Share Posted October 22, 2013 Powerful processor for the iPad Mini...somewhat surprising really. I like the older iPad Mini bumped down to 300, a decent price IMO for Apple Land. What's bizarre is that they're still selling the iPad 2 for 400....wtf? #profitmargins I thought that was odd too. Now I'm thinking if an iPad 2 is $400 new, what can I get for my used iPad 4 on craigslist so I can trade up to the new one? $375-$400 I'd think. Link to comment Share on other sites More sharing options...
Liberty Posted October 22, 2013 Share Posted October 22, 2013 I'm quite pleased with the announcements. The only thing that I would've liked to see that wasn't there was touch ID for the iPad, but I guess they're in no hurry, and it's not as important to have on an iPad as on the iPhone (which you take more in public places and unlock more often in a day). Also, I think making so much of their software free is quite smart. I hope the stock will tank like after so many announcements so that Apple can buy back more cheaply for a while. Link to comment Share on other sites More sharing options...
Palantir Posted October 22, 2013 Share Posted October 22, 2013 I'm quite pleased with the announcements. The only thing that I would've liked to see that wasn't there was touch ID for the iPad Finally we have a leak that got it wrong. Link to comment Share on other sites More sharing options...
rkbabang Posted October 22, 2013 Share Posted October 22, 2013 I'm quite pleased with the announcements. The only thing that I would've liked to see that wasn't there was touch ID for the iPad Finally we have a leak that got it wrong. There was no 13" iPad either. Not that I believed that one. Link to comment Share on other sites More sharing options...
Palantir Posted October 22, 2013 Share Posted October 22, 2013 ^True, but there were photos of the iPad with the scanner, and I believe gray iPad photos too... Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now