AAPL: A Possible Highly Transformative Plan for Strategy and Cash
My recent discussion about my participation and attendance respectively at the Morgan Stanley TMT Investors Conference and the Apple Shareholders meeting were based on actual discussions with Large Institutional investors at TMT, and a side bar chat, with a AAPL senior executives at the end of the annual shareholders meeting, the same week.
I will try, albeit imperfectly, to be disciplined in separating actual observations from analysis and conjecture derived from those observations. Having said that here is my take. Apple is simultaneously focusing on evolutionary and transformative product innovation, both organically and through M&A. Management is painfully aware that during the past 12 months the stock has changed from a predictably positive growth stock, to a predictably negative growth stock, largely resistant to the performance of the broader market. In the next 30-45 day, I expect them to increase the dividend, buy back shares, or take some other steps that will boost near term value. This will be less than desired by many investors. The question is why. Approximately $ 100 Billion of their $ 137 Billion in “ cash “ is overseas or otherwise committed. The punitive taxation in the U.S. is a major deterrent to repatriation, nothing new here. Some large hedge funds have publically speculated that a depression mentality of, conserve cash for a future catastrophe, is the underlying reason. Others opine that competition, and expansion into lower margin markets and products may be the motivation to conserve cash. I believe that neither is accurate. My assessment is that they are contemplating a $ 100 Billion plus transformative acquisition or series of acquisitions that will add value to the Apple ecosphere and compliment, and be announced concurrent with introduction of their evolving video media strategy, that some are simplistically calling Apple TV. This will all play out later this year. I believe that Disney, market capitalization $ 100 Billion, is a central focus of their inspirational planning. Disney’s CEO Bob Iger is already on the Apple Board, is near retirement, and could assume the role of Non-Executive Chairman/Lead Director in a merged company, with Tim Cook the CEO. Contemplate the value of combining Disney’s rich media, with Apple’s ecosystem.
Apple does not need to repatriate the 100 billion overseas.....They can simply do exactly like IBM did......Buy back stock with overseas cash....No Tax.....Buy back shares.....Apple can buy back 30 billion worth right now...and still have 70 billion overseas....and 45 billion USA side.
Apple then can simply pay a $20 divy or $5 Quarter out of FCF........no big deal for Apple
Apple is already in bed with Disney......there is no need to buy Disney.......Iger going to retire? really? I don't see that happening just yet.
Apple needs to get some totally new product revenue growth going....and add China Mobile......
I agree Ottoman. I would much rather see them find new ways to extract revenue from the 500 miilion and growing Itune accounts. I don't think you need to spend 100 billion in cash to dilute the hell out of yourself to accomplish that. It would also go against what Apple has been doing since the beginning. Simply buy certain tech talent and technology with small aguisitions.