Sunday, 25 March 2012

Apple decides that a $100bn cash balance is a minimum

Apple's grand plan to use its huge cash balance: Not to touch it!

Currently, Apple has $98bn cash; that's around $105 per share (941.6m diluted shares at Q1).

During its call on March 19th, Apple announced that around $45bn will be spent over the next 3 years (Apple Press Release and call transcript).

However, as the company generates so much cash (like $16bn in the quarter from Sept to Dec alone), the balance will actually continue to grow; probably to around $200bn (considering 50bn cash flow a year... which is actually very conservative) by the end of the program.

In details of the plan, there will be

  • a $2.65 quarterly dividend, from Q4 2012, ie. the quarter from July to September, that's $2.5bn per quarter, and a 1.8% yield on current $600 stock price.
  • a 3-year $10bn shares repurchase program, to start in fiscal year 2013, ie. from October 1, 2012. The main goal of this program is to neutralise dilution from employee. At today's stock price of $600, that's around 16.6m shares, 1.7% of the company's shares.

A reason mentioned for not distributing more is that $64bn of the cash is outside of the US (and significant part of the future generated cash will be outside of the US too), hence significant tax impact should it be brought back for distribution.