Analysis by Above Avalon‘s Neil Cybart suggests that Apple is unlikely to accelerate the pace of its stock buyback program as it is already spending almost all of its available US cash stockpile on share dividends and buybacks.
Out of $155B of cash, only $18B is available in the U.S., with the rest sitting in international subsidiaries unable to be sent back unless repatriation tax is paid […] Apple is essentially taking most, if not all, of its free cash flow from U.S. operations and piling it into share buyback.
Cybart does some number-crunching to suggest that Apple is likely to buy back around $30B worth of stock next year, though acknowledges that new product lines like the Apple Watch make it difficult to forecast future profits with any certainty.
Apple has come under consistent pressure from billionaire shareholder Carl Icahn to increase the pace of its stock buyback program, recently suggesting that an accelerated buyback could see the company achieve a trillion dollar valuation. It was recently estimated that Apple’s cash reserves would have reached $210B without the dividend and stock buyback program started two years ago.
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Interesting… As a non financial person, two questions come to my mind:
– Is Apple bowing to investors or is it the best use for that money anyways?
– What about that more than 100B held outside of North America… whats their plans with that bundle?
To sit on it most likely, to bring it into the US they would potentially have to pay 30% of it to the US gov in the form of profit tax.
should read up to 30%…
They have also been investing it.
Just not in the US, since to bring the money into the US would cost them close a third of the money.
Look at where Apple has been opening R&D and manufacturing centers lately. They have almost all been overseas.
“Apple is essentially taking most, if not all, of its free cash flow from U.S. operations and piling it into share buyback.” — Profit is not “free cash flow.” Amazon banks huge free cash flow, but no profit. Apple’s banked cash is sitting, not flowing. I would question Cybart’s credentials, except I cannot find that quote in the source article. This appears to be a quote from a secondhand, uncited source.
http://investordiscussionboard.com/boards/aapl/aapl-spending-almost-all-its-us-cash-reserves-dividends-and-stock-buybacks
The quote is from his email newsletter.
So, uncited then. In that case, I believe the misinterpretation is yours. Cash reserves is not free cash flow. The chart shows Apple certainly has tapped the reserve to buyback shares and pay dividends, but that is in addition to and separate from the cash flow being mostly or wholly diverted to them.
It’s a direct quote.
Isn’t Apple borrowing money for its share buyback program?
http://www.idownloadblog.com/2013/04/26/why-apple-is-borrowing-money-to-pay-for-60b-stock-buyback/