After a stormy financial week for the corporation, Apple Inc. (NASDAQ:AAPL) evidently isn’t overly concerned about its long-term future, based on the its recent actions. After the corporation’s share price took a kicking over lukewarm sales results, the company announced today that it has purchased $14 billion of its own shares in the weeks since its financial results were poorly received by the markets.
CEO explains share purchase
The CEO of Apple Inc. (NASDAQ:AAPL) Tim Cook made the announcement to the media personally, expressing his surprise that the Apple stock had been devalued to the degree that it was. Cook considered Apple’s strategy with the share purchase to be both aggressive and opportunistic and patently he believes that the company’s share price will go much, much higher in the future.
Mangrove Partners had its worst month for shorts ever
Nathaniel August's Mangrove Partners was down 0.5% in May and 6.8% in April, bringing its quarter-to-date return for the second quarter to -7.2% and its year-to-date return for the first five months of the year to -35%. At the end of May, the fund's gross exposure was 194%, while its net exposure was 7%. Q2 Read More
Apple Inc. (NASDAQ:AAPL) has now bought back over $40 billion of its shares over the last twelve months, which Cook claimed was a world record for any company over a yearly period. He attached as much rhetoric as possible to this decision, stating that it showed a clear intention within the company to “bet on Apple”.
According to Cook, the buying won’t stop there either. The $40 billion of shares which have been purchased so far are merely part of a broader strategy. Apple intend to repurchase $60 billion of its own shares in total, having recently bought $12 billion through an accelerated repurchase program, with a further $2 billion being acquired on the open market. Full details of this program will apparently be revealed to the markets in March and April.
Icahn urges $50 billion purchase
While the city may not have been terribly impressed with Apple Inc. (NASDAQ:AAPL)’s performance in the last financial quarter, not everyone is so lukewarm on its prospects. The billionaire Carl Icahn has invested heavily in Apple stock, currently owning around $4 billion in Apple shares, and is currently lobbying shareholders to vote on his proposal that the corporation should purchase a further $50 billion worth of its shares by the end of September.
There is no doubt that Apple Inc. (NASDAQ:AAPL) is in a position to do this. The corporation is sitting on arguably the biggest cash pile of any company on the planet, with $160 billion in reserve. Furthermore, it was the second most profitable corporation on the planet last year, according to Forbes, and has the highest market value of any listed company in the world. As Icahn understandably reasons, purchasing even tens of billions more of its own stock poses little risk for such an awesomely successful company.
However, history tells us that Apple Inc. (NASDAQ:AAPL) may be a little reticent about following Mr. Icahn’s strategy. Traditionally, the company hasn’t made huge acquisitions of its own stock, nor of other companies. Although Apple has acquired 21 different companies over the last 15 months, they have never spent more than $1 billion on a single deal. I guess that’s how you build up a bank balance of $160 billion.
New market penetration critical for Apple
Meanwhile, as Apple Inc. (NASDAQ:AAPL) contemplates its future stock market strategy, similar plans are going on behind the scenes with regard to its product strategy for 2014. If the market perception over the last few weeks may have indicated that the company’s best days are in the past, Apple’s plans indicate that the company certainly feels otherwise.
However, one way that the company has not progressed as would be ideal would be in definitively breaking into a new product category. This seemed routine for the corporation just a few years ago; when it was released in 2010, the iPad defined the tablet market. But Apple hasn’t really broken new ground since, and the coming calendar year will be a period during which the company attempts to convince the market that it still has the capacity to innovate.
But what will this new category be? Mr. Cook isn’t giving a great deal away at the moment, refusing to even confirm the existence of the long rumored iWatch, which must surely come out at some point. He did confirm though that Apple Inc. (NASDAQ:AAPL) will move into new categories, and that the company is currently working on “some really great stuff”. It’s just “not ready to talk about it” yet.
Another area which Apple Inc. (NASDAQ:AAPL) must surely be interested in expanding into is televisions. The company already has its Apple TV series, and in an era where smart TV is becoming ever more important, with its popular iTunes service having been developed, Apple is well placed to deliver something spectacular in this market place. It would also seem to make sense given that Samsung, their major rival in the smartphone market, is the world’s biggest producer of televisions.
When you’re the most iconic brand in the world, one of the biggest companies in the world, and manufacture pretty much the coolest products in the world, one might think that you’ll inevitably hit the ground with a bump at some point, as it seems like you have nowhere to go but down. While the markets think this eventuality might be coming for Apple in the near future, it is evident that the company is beavering away to ensure that this perception is a false one.