Apple Announces Plans to Initiate Dividend and Share Repurchase Program

March 19, 2012
$10 billion buyback will not restrict research, development or acquisitions, company says.

Apple (IW 14/500) announced on March 19 that it will spend part of its massive cash hoard to pay its first dividend since 1995 to shareholders and buy back $10 billion in shares.

But the company stressed the plan, which will tap into a cash stockpile of $98 billion, will not restrict its ability to invest in research, develop new products, or pursue valuable acquisitions.

"We don't see ceilings to our opportunities," despite the new payouts to shareholders, chief executive Steve Cook told analysts in a conference call.

"Innovation is the most important objective at Apple and we will not lose sight of that. These decisions will not close any doors for us."

Apple said it would pay a quarterly dividend of $2.65 per share from its cash balance generated from sales of its hugely successful gadgets like the iPad and iPhone.

The dividend payment would start with the company's 2012 fiscal fourth quarter, which begins on July 1, Apple said in a statement.

The $10 billion share buyback will begin in fiscal 2013, which begins on September 30.

Apple said it expected the repurchase program to be carried out over three years in an effort to neutralize the impact of dilution from future employee equity grants and employee stock purchase programs.

Chief financial officer Peter Oppenheimer described the company as generating enough cash quarterly to easily accommodate the dividend -- amounting to $10 billion a year -- and the stock buyback without deeply impacting Apple's resources.

In the company's 2011 fiscal year, Apple generated $31 billion in surplus cash. In the first quarter of 2012, it added another $24 billion.

"That's plenty of cash to run the business," said Oppenheimer.

"We want to maintain the flexibility to take advantage of investment opportunities that present themselves."

In total, including its employee stock options, Apple will spend $45 billion over the next three years on these programs, Oppenheimer said.

Apple shares jumped 1.4 percent to $593.70 in early trade. The shares have run up nearly 47 percent since the beginning of the year.

Cook painted a strong picture for the company, especially in sales of its iPhone smart phones and iPad tablet computers -- the newest model of which was launched last Friday, with fans lining up from Sydney to San Francisco to snap them up.

Cook said the iPhone still had a huge market in front of it.

In the company's first quarter of this fiscal year -- ended December 31 -- they sold 37 million iPhones, less that 9 percent of all handsets sold during the quarter.

The handset market will continue to grow, to about two billion units in 2015, and increasingly will favor smartphones, Cook said.

"It's our belief that eventually nearly all handsets will be smartphones. So the potential for iPhones is enormous."

Meanwhile he predicted tablet computers will soon overtake personal computers, and said the iPad is well-positioned in that market.

The iPad has had "an amazing start," selling 55 million since it was launched in early 2010.

"We had a record weekend and we're thrilled with it," he said of the new iPad launch.

Copyright 2012, Agence France-Presse

See Also:
"Apple Looks to Tighten Tablet Market Grip with New iPad"
"Whitman Says Apple Could Overtake HP as World's Top PC Maker in 2012"
"Apple Corporate Reputation Shines: Harris Poll"

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