Kraven Posted February 7, 2013 Share Posted February 7, 2013 When will suing will replace baseball as the national sport? Already did - 1994. Link to comment Share on other sites More sharing options...
Viking Posted February 7, 2013 Share Posted February 7, 2013 This discussion highlights a key challenge today in valuing many tech companies... what is the proper way to value their large net cash position held on their balance sheet? The norm is for companies to waste it either on expensive aquisitions (HP being the poster child) or on share buybacks (buying shares at high prices). The fact that Apple has not wasted the cash (or does not feel any urgency to 'put it to work') is a big positive to me; instituting a dividend last year was a good first step. Dell, the past few years, is a great example. They generated an enormous amount of free cash flow. They spent this free cash flow buying back stock (at much higher prices than $13.60) and on large aquisitions. Based on where the stock is trading today (low) these two uses of free cash flow were not good decisions (for shareholders today). Regarding Apple, my read is they are only in the early innings in executing their business plan and it is by no means certain what the future holds. If earnings per share have peaked (I don't think they have) then buying shares back at current prices would be a foolish thing to do. Should they continue to grow earnings then, yes, the questions will get louder; regardless, they should have close to $190 billion in cash by the end of the year. The time to do a special dividend was the end of last year; so this is unlikely. My guess is they will increase the dividend (soon) and let the cash pile up this year. And we will all continue to struggle with how to value it properly in our calculations. Link to comment Share on other sites More sharing options...
bobp Posted February 7, 2013 Share Posted February 7, 2013 I hate to defend Einhorn, but he obviously lobbied apple for his preferred idea, and in return they go and put in a provision to make that impossible, and they bundle it with proposals shareholders will vote for. Maybe I'm missing something, but they could have just said no. They must have found Einhorn really obnoxious to stick it in his face like that. I don't see it mentioned here but Bill Miller is on Consuela Mack this weekend. Some pre show video is online. He makes a pretty good case for Apple returning cash. Link to comment Share on other sites More sharing options...
Palantir Posted February 7, 2013 Share Posted February 7, 2013 They must have found Einhorn really obnoxious to stick it in his face like that. ;D Link to comment Share on other sites More sharing options...
LowIQinvestor Posted February 7, 2013 Share Posted February 7, 2013 Looks like they ( Apple Board) may be open to the idea after all. Glad I own GLRE Link to comment Share on other sites More sharing options...
Guest wellmont Posted February 7, 2013 Share Posted February 7, 2013 Looks like they ( Apple Board) may be open to the idea after all. Glad I own GLRE they said they would look at it. they are leaving proposal #2 on the proxy. I believe in April they will raise the dividend and increase the buyback. einhorn would like more but if it takes sending a letter to bod and spending 10 minutes on cnbc to get them to move, he'll take that result. Link to comment Share on other sites More sharing options...
Viking Posted February 7, 2013 Share Posted February 7, 2013 Apple management gets it and we will soon know what their plan is. Perhaps they aren't just a bunch of dummies after all... if they actually get it on the 'return cash to shareholders' theme perhaps they also are managing the business in a quality way. I look forward to future announcements; expectations are so low right now they will not need to do much to impress investors. Here are a few lines from Apple's news release: By early last year, Apple's cash balance had built to a point beyond what we needed to run our business and maintain flexibility to take advantage of strategic opportunities, so we announced a plan to return $45 billion to shareholders over three years. As of next week we will have executed $10 billion of that plan. We find ourselves in the fortunate position of continuing to generate large amounts of cash, including $23 billion in cash flow from operations in the last quarter alone. Apple's management team and Board of Directors have been in active discussions about returning additional cash to shareholders. As part of our review, we will thoroughly evaluate Greenlight Capital's current proposal to issue some form of preferred stock. We welcome Greenlight's views and the views of all of our shareholders. Link to comment Share on other sites More sharing options...
Guest valueInv Posted February 8, 2013 Share Posted February 8, 2013 Remember I said that Apple should use its cash to provide financing for its low end phones. Take a look: http://techcrunch.com/2013/02/08/apples-iphone-sales-grow-by-as-much-as-400-in-3-months-in-india-but-theres-a-huge-gap-to-close/ Link to comment Share on other sites More sharing options...
jeffmori7 Posted February 10, 2013 Share Posted February 10, 2013 Damodaran to Einhorn : http://aswathdamodaran.blogspot.ca/2013/02/financial-alchemy-david-einhorns-value.html Link to comment Share on other sites More sharing options...
Guest wellmont Posted February 10, 2013 Share Posted February 10, 2013 Remember I said that Apple should use its cash to provide financing for its low end phones. Take a look: http://techcrunch.com/2013/02/08/apples-iphone-sales-grow-by-as-much-as-400-in-3-months-in-india-but-theres-a-huge-gap-to-close/ I guess when your share is hovering around zero, it's not hard to make big gains when a new product is introduced, from an almost non existent base of phones. but apple, if they intend to make inroads at all in the fastest growing wireless markets, really really needs to copy Samsung and release a cheaper phone for emerging markets. http://www.tech-thoughts.net/2012/12/smartphone-market-share-trends-by-country.html#.URfNxagQbF8 Link to comment Share on other sites More sharing options...
Guest valueInv Posted February 10, 2013 Share Posted February 10, 2013 Remember I said that Apple should use its cash to provide financing for its low end phones. Take a look: http://techcrunch.com/2013/02/08/apples-iphone-sales-grow-by-as-much-as-400-in-3-months-in-india-but-theres-a-huge-gap-to-close/ I guess when your share is hovering around zero, it's not hard to make big gains when a new product is introduced, from an almost non existent base of phones. but apple, if they intend to make inroads at all in the fastest growing wireless markets, really really needs to copy Samsung and release a cheaper phone for emerging markets. http://www.tech-thoughts.net/2012/12/smartphone-market-share-trends-by-country.html#.URfNxagQbF8 Keep watching.. Link to comment Share on other sites More sharing options...
constructive Posted February 10, 2013 Share Posted February 10, 2013 The obsessive focus on market share (instead of profits) is getting a little old. Link to comment Share on other sites More sharing options...
Guest valueInv Posted February 10, 2013 Share Posted February 10, 2013 The obsessive focus on market share (instead of profits) is getting a little old. not when margins are coming down. as they are. :) Wellmont, what was Apple's share of profits in the mobile device market last quarter? Link to comment Share on other sites More sharing options...
Guest wellmont Posted February 10, 2013 Share Posted February 10, 2013 The obsessive focus on market share (instead of profits) is getting a little old. not when margins are coming down. as they are. :) Wellmont, what was Apple's share of profits in the mobile device market last quarter? markets look ahead. estimates for the future are being revised way down. margins are coming down. share of profits is kind of irrelevant to shareholders in my book. what matters is Shareholder share of profits, and those are coming down. apple is not in the fast growing part of the wireless device market. combine that with suspect capital allocation and you have a great company selling at a single digit p/e raio ex cash. Link to comment Share on other sites More sharing options...
constructive Posted February 10, 2013 Share Posted February 10, 2013 share of profits is kind of irrelevant to shareholders in my book. I agree with you on that. what matters is Shareholder share of profits, and those are coming down. What does this metric mean - you think EPS will decline the next few years? There's not much evidence for that in my opinion. apple is not in the fast growing part of the wireless device market. Just because they aren't growing quite as fast as Android doesn't mean they aren't fast growing. Anyways, profitability is more critical to the value investment thesis than growth or market share. You can't pay dividends with growth or market share, you pay them with cash earnings. combine that with suspect capital allocation and you have a great company selling at a single digit p/e ratio ex cash. Apple's capital allocation (small dividend, small buyback policy, hoarding low interest cash), while not optimal, is still firmly above average. Most companies in their position would have blown their cash on terrible acquisitions or internal projects (think Microsoft, HP, Dell, etc.). If you agree it's a great company, it's a bit astonishing you think the valuation is justified... Link to comment Share on other sites More sharing options...
Guest wellmont Posted February 10, 2013 Share Posted February 10, 2013 I don't think the valuation is justified. I think it's a self inflicted wound, however. I believe if they had different capital allocation policies over the years, the stock would be around $600 now. There is a long list of money managers who highly critical of the way apple has been allocating it's surplus capital. Bill Miller just said in late January that it's the worst in corporate america. larry haverty said someone should sue them. einhorn did. I believe Oracle has been the best capital allocator. Ibm has been great. Cisco is improving. msft and intel poor. michael dell is the smartest investor but worst partner. ps: I should have said estimates are coming down. eps is not declining yet. you are correct. Link to comment Share on other sites More sharing options...
Guest wellmont Posted February 10, 2013 Share Posted February 10, 2013 maybe there is hope... http://news.cnet.com/8301-13579_3-57568584-37/tim-cook-reportedly-opposed-patent-suits-against-samsung/ Link to comment Share on other sites More sharing options...
constructive Posted February 10, 2013 Share Posted February 10, 2013 I don't think the valuation is justified. I think it's a self inflicted wound, however. I believe if they had different capital allocation policies over the years, the stock would be around $600 now. There is a long list of money managers who highly critical of the way apple has been allocating it's surplus capital. Bill Miller just said in late January that it's the worst in corporate america. larry haverty said someone should sue them. einhorn did. I believe Oracle has been the best capital allocator. Ibm has been great. Cisco is improving. msft and intel poor. michael dell is the smartest investor but worst partner. ps: I should have said estimates are coming down. eps is not declining yet. you are correct. OK, I agree with most of that. Except I think Oracle and Cisco might be a bit overrated and Intel a bit underrated. Miller was clearly just being hyperbolic. Link to comment Share on other sites More sharing options...
Guest valueInv Posted February 10, 2013 Share Posted February 10, 2013 The obsessive focus on market share (instead of profits) is getting a little old. not when margins are coming down. as they are. :) Wellmont, what was Apple's share of profits in the mobile device market last quarter? markets look ahead. estimates for the future are being revised way down. margins are coming down. share of profits is kind of irrelevant to shareholders in my book. what matters is Shareholder share of profits, and those are coming down. apple is not in the fast growing part of the wireless device market. combine that with suspect capital allocation and you have a great company selling at a single digit p/e raio ex cash. Why don't you answer the question and then I'll address You comments. ;) Link to comment Share on other sites More sharing options...
Guest wellmont Posted February 10, 2013 Share Posted February 10, 2013 I did address the question. I said it wasn't very relevant to the shareholder. it's a macro question. being a shareholder is a micro problem. I will go further. what if apple owned 100% of the smart phone profits? now lets say next year they will still own 100% of the smart phone profits but those profits will decline by 20%. still good for shareholders? to me it's misdirection. if anything, owning the lion's share of the profits tells me they are in a dangerous business, and not necessarily a very stable business. more interesting to me is why is apple trading at single digit p/e ratios? why have estimates come down dramatically over the last 90 days? Link to comment Share on other sites More sharing options...
Guest valueInv Posted February 10, 2013 Share Posted February 10, 2013 I did address the question. I said it wasn't very relevant to the shareholder. it's a macro question. being a shareholder is a micro problem. I will go further. what if apple owned 100% of the smart phone profits? now lets say next year they will still own 100% of the smart phone profits but those profits will decline by 20%. still good for shareholders? to me it's misdirection. if anything, owning the lion's share of the profits tells me they are in a dangerous business, and not necessarily a very stable business. more interesting to me is why is apple trading at single digit p/e ratios? why have estimates come down dramatically over the last 90 days? I never asked if it was relevant to shareholders. I simply asked what was Apple's share of industry profits last quarter. Let me give you a hint - its a percentage number. Link to comment Share on other sites More sharing options...
Guest wellmont Posted February 10, 2013 Share Posted February 10, 2013 I don't think it's relevant data point. if it's relevant to your analysis that's fine. it's not to me for the reasons I explained. Link to comment Share on other sites More sharing options...
Guest valueInv Posted February 10, 2013 Share Posted February 10, 2013 I don't think it's relevant data point. if it's relevant to your analysis that's fine. it's not to me for the reasons I explained. Do you know the number? Link to comment Share on other sites More sharing options...
Palantir Posted February 10, 2013 Share Posted February 10, 2013 I love how you guys have so much personal attachment/abhorrence for this company the way people have towards sports teams. Not just you, the arguments between Apple and Android fanboys remind me of Tea Party v Liberals slugfests. Link to comment Share on other sites More sharing options...
Guest valueInv Posted February 10, 2013 Share Posted February 10, 2013 I love how you guys have so much personal attachment/abhorrence for this company the way people have towards sports teams. Not just you, the arguments between Apple and Android fanboys remind me of Tea Party v Liberals slugfests. It's not the company, it's the confidence that seems to accompany ignorance that I find abhorrent. Link to comment Share on other sites More sharing options...
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