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AAPL Stock: 119 ( + 1.4 )

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Apple should announce succession plan, stock buyback?

updated 07:50 pm EST, Sun January 25, 2009

Apple stock buyback

Apple should announce a management succession plan and use some of its cash reserve to retire 20 percent of the company's outstanding shares, according to Chad Brand, founder and president of Peridot Capital Management. Brand claims that the company has plenty of competent managers and its operations would continue to be successful even without jobs. He believes, however, that the board should nonetheless announce a potential executive hierarchy in the event that Jobs leaves his position as CEO.

"The board knows this is a crucial issue (the stock plummets each time the health issue appears troubling), but simply ignores it for some reason," Brand said. "The idea that he is the entire brains behind the company and its products, and not the other 35,000 employees is pretty silly. Jobs is certainly a very good CEO, but the idea that Apple lacks the talent to innovate without him seems far fetched to me."

Brand also suggests that the Cupertino-based company should use part of its cash hoard to initiate a stock buyback program, which could still leave $12 billion in the bank while retiring 20 percent of the outstanding shares. "A large buyback would be significantly accretive to earnings per share and could get the stock rolling again after the latest Jobs-related hiccups," he said.

Despite the frustrations voiced by shareholders and analysts, Apple is one of the few companies that was able to weather the recent-quarter economic turmoil without announcing dismal financial results. The company achieved a record revenue of $10.17 billion, along with a net profit of $1.61 billion, while still maintaining a gross margin of 34.7 percent.

Other tech industry giants did not finish 2008 unscathed, including AMD, Intel and Samsung each reporting a net loss for the quarter, while Sony, Microsoft and Nokia also fell below expectations. Intel and Microsoft each plan to displace at least 5,000 employees and AMD will cut salaries across the entire workforce, in addition to 1,000 layoffs.




by MacNN Staff

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Comments

  1. testudo

    Joined: Dec 1969

    -6

    second the buyback!

    Since Apple doesn't offer dividends, they should do something with their money to help its stockholders get a return on their investment.

    Because we know a quick fix like this will do wonders for the company!

  1. QualleyIV

    Joined: Dec 1969

    +3

    Not so fast...

    From the perspective that the stock is cheap historically speaking, it's not a bad suggestion, but a stock buyback doesn't seem like a great idea when the stock is already relatively expensive on a per-share basis. It seems to me that paying dividends would be better plan if they're not going to invest their pile of cash, especially since dividends would likely have a similar upward effect on the share price.

    Nevertheless, I don't see it happening. Apple has always been very conservative with it's cash reserves. For example, I remember back when the stock was down in the $12 - $14 range and they actually had in excess of that per share in cash (I actually bought at that time... wish I was still holding those shares).

    A better idea would be to leverage some of that money. Or, maybe they're just saving up so they can eventually buy Microsoft...

  1. Peter Bonte

    Joined: Dec 1969

    +2

    buyback

    he's being sarcastic (i hope), a buyback will only help short term investors cash in on there stock and leave. Doesn't benefit Apple at all, if they're not buying stock when Apple made record profit then they won't buy if Apple does a buyback.

    Much better to buy into another company now they are cheap and need the cash.

  1. nhmlco

    Joined: Dec 1969

    +1

    Invest it elsewhere

    Forget the buyback, which will only benefit the financial types. There's a lot of technology and companies and people available on the cheap these days. Apple needs to decide on the next thing and move in while costs are low.

  1. SierraDragon

    Joined: Dec 1969

    +1

    Another silly analyst

    Yet another talking head that does not "get" Apple as a company. Apple's forte is as a tech innovator at the top of its game. Even though a stock buyback would likely "make money," suggesting that Apple should play stockbroker does not play to Apple's strength.

    Large cash reserves help them be prepared to buy out firms with useful new technology; attract talent; reassure investors and business partners; weather a very serious recession/depression; and most importantly be capable of bringing innovative new products to market without cash flow constraints that limit creativity.

  1. iphonerulez

    Joined: Dec 1969

    +4

    Investor uneasiness...

    is caused by the news media and analysts insisting that Steve Jobs makes all the decisions on his own. He, himself never said that nor did any of the other executive members. Steve Jobs probably said he will be back in five months or so and if things work out for his health, maybe he will. Yet even now, the word is that he won't be back and that is based on speculation, not fact. If investors really believe that Steve Jobs is irreplaceable, then what is the point of a clear succession plan. These investors will still be uneasy with anyone except Steve Jobs. When Apple stock was at $200 a share, nobody was complaining, now that it's down people believe there is something wrong with the way Apple is running the company. Nothing has changed except the economy in the past year. Every company's stock has collapsed regardless of dividends or buybacks. I believe Apple should just continue doing what it has been and I just hope for the economy to turn around so Apple's stock will again rise.

  1. sribe

    Joined: Dec 1969

    +2

    stupidest idea ever

    Yeah, Apple should definitely provide a public guide to "executives to whom our competitors should offer 7-figure signing bonuses". Brilliant idea there.

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