Tue, Mar 20, 2012 - Page 10 News List

Apple decides fate of US$97bn cash heap

AWASH IN MONEY:The world’s most valuable company has more than enough money to fund any future investments, so it could be time to return a dividend to shareholders


Apple Inc announced yesterday it would spend part of its cash hoard to pay its first dividend to shareholders since 1995 and buy back US$10 billion in shares.

Apple said it would pay a quarterly dividend of US$2.65 per share from its huge cash balance, estimated to be at least US$97 billion, from sales of its hugely successful gadgets like the iPad and iPhone.

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

The US$10 billion share buyback will begin in the next fiscal year, which begins on Sept. 30.

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

“We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure. You’ll see more of all of these in the future,” Tim Cook, Apple’s chief executive, said in the statement.

“Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business,” he said.

Wall Street had increasingly bet that Apple would this year return cash to shareholders, taking a cue from Cook’s comments about “active discussions” at the top levels about the matter.

Cook recently said he had been “thinking very deeply” about investors’ demands that Apple return some of the cash to shareholders via a dividend.

Apple last paid a dividend in 1995, Thomson Reuters data shows. In 1996, Apple posted a net loss of US$816 million.

Meanwhile, Apple appears to be making less of a profit from each new iPad than it did when it launched the previous model a year ago, according to a research firm’s analysis.

IHS iSuppli took apart a new iPad on Friday, the day the device went on sale in the US and nine other countries, and found that the components are more expensive than those of the iPad 2.

The third iPad comes in several versions starting at US$499, the same price as the iPad 2 at launch.

ISuppli said a new iPad with 32 gigabytes of RAM and a cellular modem, which costs US$729 in stores, costs US$364.35 to manufacture. That’s 9 percent more than the US$335 it cost to make the corresponding iPad 2 a year ago, when it came out. The corresponding version of the first iPad cost about US$276 to make in 2010, according to iSuppli’s estimate.

The higher-resolution display and the larger battery needed to support it are the main reasons the new iPad is more expensive than the iPad 2. It has four times as many pixels as the iPad 2’s screen. ISuppli estimates the display costs Apple US$87, plus US$40 for the touch-sensitive layer.

The new iPad battery has 70 percent more capacity, but the new display consumes all that additional power, so the battery life is the same as for the old model. Also contributing to the cost increase is the new cellular modem in some models. It can use faster “4G LTE” networks in the US and Canada.

Samsung Electronics Co remains the largest single supplier of iPad components. It made the display in the unit iSuppli examined and it supplies all iPad processors.

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