Apple announces US$100bn warchest plan – $2.65 dividend and a $10bn share buyback

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Apple has announced what it will do with its almost US$100 billion ‘war chest’. that it will initiate a dividend at the start of July with a substantial US$2.65 per share – something that will make Microsoft investors a bit envious. In addition, it will announce a share buyback scheme.

Yes, this is all financial-related stuff.

In the press release, CEO Tim Cook said, “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.”

“Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business. So we are going to initiate a dividend and share repurchase program.”

On the share buyback, the board has authorised a $10 billion buyback scheme over three years starting in FY2013 (or in at the end of September 2012).

In all, Apple is expected to spend $45 billion on these programs – $10 billion alone in the first year in dividend payouts. In addition, CFO Peter Oppenheimer said that Cook’s own unvested RSUs (restricted stock units – stock units that are given if certain conditions are met) will not be part of the dividend payout, as per his request.

The company previously paid dividends between 1987 and 1995, before it stopped. The next year, in 1996, Steve Jobs returned to the company and as everyone knows, when he returned, the company was tanking. Now, Apple is highly profitable – and with a US$100 billion ‘war chest’ and at least US$13 billion made in this quarter alone, it has serious cash it can burn.

And obviously, the dividend is a big sign that says Apple is looking pretty happy for its future in a post-Steve Jobs era. Despite holding less than 6 percent of the global PC market, he sees the big growth markets are in the iPhone and iPad – the two businesses that Apple largely dominates. The iPod line still is the number one MP3 player, but because it is no longer competitive (and mostly everyone has some form of an iPod) profits are slowly dropping.

While Tim Cook refused to answer to a question about future products or even give subtle hints, he did note that their “pipeline is full of stuff”.

Also in the teleconference, Apple has not ruled out a stock split in the future. “That is something we have looked at while looking at this cash question… there’s very little support that it helps the stock,” Tim Cook said.

“At this point, not how we see it,” he added.

(Should also point out that the question was asked by one Gene Munster, the guy known for some outlandish Apple rumours)

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