Apple Inc. (NASDAQ:AAPL) conference call this morning showed off the company’s two new strategic endeavors to increase value and get rid of the company’s huge cash stocks which were almost a burden in themselves. The two proposals, the first the introduction of a quarterly dividend of $2.65 per share and the second a $10 billion buy back of stock to take place in early 2013. One or the other of these moves was widely anticipated, (at least in the small amount of time Cook&Co. gave us to anticipate anything), though few saw the possibility of both moves being undertaken. You can pull that sort of thing off with $100 billion. The real question is what does this say about Apple, and what can we ascertain from this move about the company’s future plans.
The first and most important idea that can be taken from the announcement is Apple’s growing comfort with its position as the world’s most valuable company and the world leader in consumer electronics by a long way. The last time the company actually paid a dividend was in the fourth quarter of 1995. At that time it was for $0.12 per share. $2.65 is a nice mark up even if it has taken seventeen years. The company has refused to pay a dividend even as it recovered from its 1990s decline and became the most important company in tech. This decision shows that the company is now comfortable in itself to commit to dividends totaling just over $10 billion per year. The company has finally come out of its reclusive shell and seems confident in its ability to excel, a fact now shown with financial backing rather than showmanship. There hasn’t been much doubt since the release of the iPhone about the company’s stability but now Apple has finally put their money where their mouth is. As Cook said during the conference call “We don’t see ceilings to our opportunities”.
The decision to pay a dividend can be seen as a reversal of Steve Jobs position outlined in 2010 at a shareholder’s meeting that dividends do not add to the value of a share. Jobs was questioned at that meeting about the possibility of using the company’s cash reserves to pay a quarterly dividend. The cash available to the company at the time was a mere $40 billion. This reversal of a Jobs belief is interesting for the company whose future even now seems at least philosophically reliant on the former CEO’s vision. This may simply be a financial decision the board has undertaken to increase the value of the shares, but it still delineates Apple’s relationship with its past. This may be the first transgression over the principle’s set down by Jobs and may show a changing attitude to the company’s co-founder. Even in a small way a change in this attitude could say a lot about the company’s future.
Apple’s announcement this morning could tell much about the company’s relationships with the market and its shareholders for the considerable future. Even if you don’t agree with what I’ve taken from the dividends decision you must see the importance of today’s decision. Expect to see speculation on the topic abound across the internet today and the print media tomorrow.