Apple Seizes Stock Decline To Buy Back $14B In Shares
redOrbit Staff & Wire Reports – Your Universe Online
On the heels of first-quarter financial results described as disappointing to investors, Apple has repurchased $14 billion of its own shares over the past two weeks as the iPad and iPhone maker looks to accelerate a stock repurchase program, various media outlets reported last Friday.
According to AP Business Writer Michelle Chapman, officials from the Cupertino, California-based tech giant confirmed that they had taken advantage of an eight percent decrease in its after-hours stock value to re-acquire $12 billion worth of shares through an accelerated repurchase program and an additional $2 billion in stock on the open market.
Apple CEO Tim Cook told reporters that he was surprised that the company’s stock fell after its projected first-quarter revenue failed to meet investor expectations last month. The decline came despite the company’s sales reaching a record $57.6 billion, thanks primarily to strong iPad and iPhone demand, wrote Matthew Sparkes of The Telegraph.
Cook explained that the transactions (which bring the total value of stock repurchased by Apple in the past year to more than $40 billion) were designed to be “aggressive” and “opportunistic,” noted CNET’s Dara Kerr said. He added, “It means that we are betting on Apple. It means that we are really confident on what we are doing and what we plan to do. We’re not just saying that. We’re showing that with our actions.”
Kerr added that the company has approximately $160 billion in the bank, and some of its most active investors have been calling on the firm to return some of those funds to the shareholders. One of those investors, Carl Icahm, owns roughly $4 billion in Apple stock and has asked the company to commit to at least $50 billion in share repurchases in the next year – a proposal that will be voted on by shareholders on February 28.
“Apple has previously said that it intends to spend $60 billion on repurchasing its own shares. This reduces the number of shares in circulation, providing a boost to remaining investors as their shares rise in value,” Sparkes said. “As well as the recently announced purchases, the company spent $7.7 billion in the last quarter of 2013 issuing dividends to investors and buying back shares. That takes the total program so far to $43 billion.”
While the company is pleased with the stock buyback, JP Morgan analyst Mark Moskowitz told CNET that there are other issues plaguing the company – issues that the buyback does little to address. Moskowitz said that Apple would be better served investing the money in researching and developing new products and services.
“We do not think this buyback activity overcomes the slowdown in the all-important iPhone business,” he said in an investors note released Friday. “The last two iPhone launches have not resulted in multi-quarter sales growth spurts as previously seen. We think this lack of follow-through indicates end users are slowing their refresh rates, and recent technology advancements have not been enough to change that.”