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AAPL Stock: 94.72 ( + 0.78 )

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Steve Jobs defends Apple's cash reserves, stock management

updated 09:40 pm EST, Thu February 25, 2010

Shareholders should not expect dividends, buyback

Steve Jobs, speaking at the Apple's annual shareholder meeting, defended the company's $40 billion cash reserve and management of AAPL stock. The CEO pointed out that Apple is run conservatively regarding its finances, and "very fortunate" that acquisitions can be funded by writing a check and not worrying about borrowing money.

"Cash gives us tremendous security and flexibility," Jobs said. "When you take risks, it's like jumping up in the air, and it's nice to know the ground will be there when you land."

The CEO dismissed several suggestions regarding what the company could be doing with its cash, while jokingly responding to one shareholder that he would throw a "toga party" with the money before investing in the car maker Tesla. Jobs believes a dividend program or stock buyback would have little effect, if any, on the current stock price.

While many shareholders express a desire to rake in dividends on their AAPL holdings, others are satisfied by the stock's performance on the market. Shares have followed a fairly steady incline, growing from a 52-week low of $82 to reach a current price around $200.




by MacNN Staff

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Comments

  1. Constable Odo

    Joined: Dec 1969

    +5

    I'm sure dividends would have no great

    effect on share price in this crappy economy. Apple is holding $200 and considering how Google and Amazon are sinking, Apple is doing pretty darn well. I'd hoped for Apple to be around $220 or so by now, but I'll settle for being glued to $200.

    I like Steve's attitude. Willing to take risks with solid funding. Writing a check instead of getting a loan. It's just that some people say that Apple is too cash heavy and there's no advantage after you have a certain amount, say $20 billion. I'm thinking that Apple wants to eventually purchase something really big that might almost use up $40 billion or so.

  1. rtbarry

    Joined: Dec 1969

    0

    what the h***...

    costs $40billion? microsoft in 5 years?

  1. Will C

    Joined: Dec 1969

    +4

    Good

    I have a couple of Macs and generally like the OS and its machines - I don't think everything Apple does is good, however I like the fact that they have these reserves. It makes me believe they are in a safe stable position - a bit of a rarity these days for many businesses.
    It also makes me think that they could actually be in the business because of the technology, and the money and profits are merely a necessity, unlike too many companies who are in it for the money, and what they do is an annoying necessity.

  1. beb

    Joined: Dec 1969

    +2

    40+ Billion

    Yeah, That amount has got to have everybody everywhere wondering... Seems like a lot to have just sitting around. Then again, my guess is that the interest alone...

  1. testudo

    Joined: Dec 1969

    +1

    Re: I'm sure dividends

    I'm sure dividends would have no great effect on share price in this crappy economy.

    Of course they'd have no effect. People invest in a company to make money. They do not invest in a company just to say "Look at me, I have stock in xxxxx!". That's why it is called an 'investment' and not a 'gift' or 'donation'.

    With a stock, there are two ways to make money. One is from the price of the stock rising, the other is through dividends. For companies that are not in major growth markets (Pepsi or Coca-Cola, for two examples), their stock value is not going to rise in large percentages, regardless of the money it makes (even though there are people who, when looking at a company making 500 million a year, would go, "sure, they make that much, but they need to GROW!). For technology companies (like Apple, MS, Google, etc), the theory is that you're betting on the growth of the company, which drives up the value of the stock and, thus, the stock price.

    MS has turned into GM. Their growth potential has flatlined (there's only so far a company can go, you know). So they had to start handing out dividends to appease the investors (for what reason would you hold on to a stock that stayed the same value year after year?)

    Apple has yet to hit that point. As such, there's no reason to give out dividends.


    In fact, one could argue it would drive the value of the stock down, as the current price takes into account the $40b in reserves. If they hand out dividends, the reserves go down, thus the price would go down. The only thing it gives the investor is some quick cash without having to sell stock.

  1. testudo

    Joined: Dec 1969

    -1

    Re:Good

    It also makes me think that they could actually be in the business because of the technology, and the money and profits are merely a necessity, unlike too many companies who are in it for the money, and what they do is an annoying necessity.

    Which might have been true in the 70s, but the second they went public, they became in it for the money. Apple had cool technology in the 90s (Newtons, eMate, for example), but they were losing money and CEOs cut left and right. And if Apple's stock falls and sales plummet, no matter how 'cool' the technology is.

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