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Apple buying back many shares of AAPL
Last April, Apple announced plans to increase its share repurchasing program from US$10 billion to $60 billion. Apple at the time noted that this represented the "largest single share repurchase authorization in history." While the full buyback program is slated to be finished by the end of 2015, Apple has already began buying back shares. Philip Elmer-DeWitt of Fortune reports: By my calculation, the company spent $16 billion last quarter ($4 billion in cash, $12 billion through the so-called accelerated share repurchase program) to purchase 36 million of its own shares at an average price of just over $444. Coupled with Apple's dividend payments, which now stand at $3.05 a share, Apple over the course of three years will be spending $100 billion as part of its initiative to return money to shareholders and buy back its own shares.
Numerous Apple executives sell millions of dollars' worth of shares
Last Friday we reported on a new SEC filing from Apple which relayed that Apple's Board of Directors tweaked Tim Cook's compensation package by adding a performance metric to his stock options. In addition, there were a number of other SEC filings from Apple which disclosed that a number of top executives sold millions of dollars' worth of Apple shares that had recently vested. Here's the breakdown: Apple CEO Tim Cook sold 41,391 shares for $17,115,178.50 Jeffrey Williams sold 38,181 shares for $15,787,843.50 Bob Mansfield sold 14,465 shares for $5,981,277.50 CFO Peter Oppenheimer sold 37,828 shares for $15,641,878 Phil Schiller sold 37,878 shares for $16,287,540 Bruce Sewell sold 37,828 shares for $15,641,878 Apple investors, however, shouldn't be worried that Apple's executive team is losing faith in the company. Keep in mind that the shares above were originally part of an allotment granted back in November 2011 with two vesting dates. The first one was on June 21, 2013 and the second is set for March 21, 2016. In other words, it's business as usual.
Apple's April 'mugging'
Philip Elmer-DeWitt over at Apple 2.0 had an interesting post today talking about why Apple's share price took such a beating in April. Elmer-DeWitt pointed out a column by Canadian money manager and financial columnist Mal Spooner in which he describes a burst of short-selling between April 2012 and April 2013. Short-selling is the brokerage practice of selling stock that you don't own, betting that the price of the stock will drop. The short-selling of AAPL that started last April was described by Spooner as being like swarming, where an "innocent bystander is attacked by several culprits at once." At the time Spooner wrote his column in early April, things were quite bad for Apple. Short interest in Apple had climbed from 8 million shares in April of 2012 to 20 million in April 2013. During the last two weeks of April 2013, short interest doubled again to 41.6 million shares -- and that's when Apple's share price fell to $385.10 (it's currently hovering around $444 - $450). Spooner's comment in early April points out how unethical the practice of shorting a valuable stock really is: "I've never claimed to be all that smart, but I just can't figure out how aggressively attacking a company's share price, selling stock that the seller doesn't even own, for the sole purpose of transferring the savings of innocent investors into one's own coffers... is a noble thing. Isn't it kind of like a bunch of thugs beating someone up and stealing his/her cellphone declaring it was the loner's own fault for being vulnerable?" The bears are still shorting AAPL, but the short interest has fallen to 26 million shares in just two weeks. For Apple, hopefully that's a sign that shares may recover some of their value in the future and that the muggings are over for the time being.
Livestream of Tim Cook and Peter Oppenheimer at today's congressional hearing
Catch up on all of Apple's tax controversy here as both CEO Tim Cook and CFO Peter Oppenheimer gear up to testify in front of Congress to address Apple's billions in foreign-stored cash.
Apple's $17 billion bond deal allows it to avoid $9.2 billion tax hit
Yesterday I reported on the clever economics behind Apple's US$17 billion bond deal, specifically pointing out that the interest Apple will owe on each share it repurchases will be less than the dividend it would have otherwise been responsible for. Going a bit further, Businessweek did some calculations surrounding Apple's $17 billion bond deal and deduced that the company is avoiding a $9.2 billion tax hit by borrowing the money as opposed to using its own cash pile. Specifically, if Apple wanted to raise $17 billion by using its foreign stash of cash, it would have had to repatriate upwards of $26.15 billion. With a 35 percent corporate tax rate, Apple would have owed about $9.15 billion in taxes to Uncle Sam. Instead, Businessweek notes that Apple's annual interest payments on its issued bonds will only come out to about $308 million. And again, those payments are tax deductible. All in all, Apple's structured bond deal appears to be the result of some extremely shrewd financial planning.
Daily Update for May 1, 2013
It's the TUAW Daily Update, your source for Apple news in a convenient audio format. You'll get all the top Apple stories of the day in three to five minutes for a quick review of what's happening in the Apple world. You can listen to today's Apple stories by clicking the inline player (requires Flash) or the non-Flash link below. To subscribe to the podcast for daily listening through iTunes, click here. No Flash? Click here to listen. Subscribe via RSS
Apple reports Q2 2013 earnings
It's the earnings report everybody has been waiting for. Apple just announced earnings for the second quarter of its 2013 fiscal year, and the news is actually quite good. Apple's own guidance for Q2 2013 expected revenues in the range of $41-43 billion, with gross margins in the range of 37.5 to 38.5 percent. Wall Street analysts were in the same general range, with institutional investors looking at an average earnings number of $41.82 billion and independent analysts a bit more bullish at $43.75 billion. Results for the same quarter last year were $39.19 billion in revenue, earnings per share of $12.30 and a gross margin of 47.4 percent. Actual results for the quarter were as follows: Revenue: $43.6 billion (beat expectations and institutional investors) Earnings Per Share: $10.09 Gross Margin: 37.5 percent (met expectations, did not meet street expectations) Tim Cook was quoted as saying, "Our teams are hard at work on some amazing new hardware, software and services, and we are very excited about the products in our pipeline." Apple is providing the following guidance for its fiscal 2013 third quarter: revenue between $33.5 billion and $35.5 billion gross margin between 36 percent and 37 percent operating expenses between $3.85 billion and $3.95 billion other income/(expense) of $300 million tax rate of 26 percent Join us at 4:50 PM ET today for a liveblog of the earnings call.
A history of Apple's share price
Anybody who has been watching Apple's share prices since September 2012 would think that the company is in the midst of a huge crisis. Shares of AAPL have dropped from a high of over US$700 a share to around $400 now, and the financial press is sure that the company is doomed. Abdel Ibrahim, co-founder of The Tech Block and a technical analysis trader for about 10 years, points out that based on a look at historical data, large upswings in AAPL share price followed by swift downturns are actually quite normal for the company. Ibrahim based his analysis on what is called Fibonacci retracements, a method of technical analysis that uses "the idea that markets will retrace a predictable portion of a move, after which they will continue to move in the original direction." In other words, the share price will rise significantly, then fall back to a lower level before starting to rise again. Ibrahim notes: "Most technical traders use the 50 percent and 61.8 percent Fibonacci levels to predict where a market may find support or resistance. For example, if a stock went from $10 to $20, and then started to significantly pull back, many technical traders would expect that stock to have a lot of support somewhere in between $14 - $15 (roughly 50 percent to 61.8 percent of the $10 move). In my personal analysis (emphasis is Ibrahim's) I have found this to be true nearly 70 percent of the time." Ibrahim then follows with AAPL chart examples demonstrating this recurring trend. It happened between late 1997 and late 1999, in 2005 into 2006, then late 2006 through early 2008. Since that time, AAPL has been following the same trend and is currently on the downward path it has followed so many times before. As Ibrahim notes, the charts he's created aren't meant to stir investors to buy AAPL. Instead: "It's to tell you to ignore the bullshit headlines that seem to be flooding the internet and newspapers. They come from analysts. Analysts with agendas to either inflate the price of a stock they own or deflate the price of a stock they want. ... Apple, in my eyes, is still a very good company. Time will tell if I'm right or wrong." If you'd like to hear what some of those analysts with agendas are asking Apple executives, be sure to join us at 4:50 PM ET today for our liveblog of the company's Q2 2013 earnings call. [Via The Loop]
Join us for a TUAW liveblog of the Apple Q2 2013 earnings call
This afternoon, Apple CEO Tim Cook and CFO Peter Oppenheimer will host Apple's Q2 2013 earnings call to discuss the company's financial fortunes for the quarter ending March 31, 2013. As always, TUAW is hosting a liveblog of the event, during which we'll be providing commentary on the actual results, questions from the financial community, and how the results are likely to affect Apple's share price. The call is scheduled at 5 PM ET today and our liveblog will begin at 4:50 PM ET. If you're an IRC user, we'll have a chat room set up on server irc.freenode.net, chat room #tuaw so you can converse with the TUAW team and others. You can listen to a live audio stream of the event here.
Apple India sees iPhone boost to bottom line
TUAW has recently reported several times about Apple's efforts to tap the huge market for iPhones in India. Now the Times of India is reporting that Apple's net profit for the India business unit has skyrocketed 431 percent year over year. As the newspaper explains, these figures do not take into account Apple's recent agressive marketing strategies, and that it may be that the company became aware of the vast potential for sales in India during two strong years in 2011-12. Now the company is "chasing volumes and looking at the numbers game," according to Manasi Yadav of IDC. Market research firm Canalys notes that iPhone shipments to India have risen threefold in just six months. At the beginning of that period back in September 2012, Apple began advertising the iPhone extensively on the Indian subcontinent and appointed two retail distributors. Just a few weeks ago, the company started a buy-back scheme that resulted in a 300 percent increase in sales in just one week. Canalys analyst Jessica Kwee was quoted as saying that "Apple India should generate US$1 billion sales between April 2013 and March 2014," a number that should cheer the hearts of Apple executives wondering why the company's share price has plummeted to $400 today.
Daily Update for April 11, 2013
It's the TUAW Daily Update, your source for Apple news in a convenient audio format. You'll get all the top Apple stories of the day in three to five minutes for a quick review of what's happening in the Apple world. You can listen to today's Apple stories by clicking the inline player (requires Flash) or the non-Flash link below. To subscribe to the podcast for daily listening through iTunes, click here. No Flash? Click here to listen. Subscribe via RSS
Apple to release Q2 2013 earnings results on April 23
Apple updated its investor relations page on Monday to reveal that the company will post its earnings results for Q2 2013 on Tuesday, April 23. Per usual, an earnings conference call will follow at 5 PM ET. Typically, this is where CEO Tim Cook and CFO Peter Oppenheimer go over Apple's earnings in further detail and answer an assortment of questions from analysts. Naturally, all eyes will be on Apple and its perceived ability to maintain the tremendous growth it has enjoyed over the past few years. For historical context, let's take a quick look at Apple's Q2 results from the past two years. During Apple's second fiscal quarter of 2012, the company posted revenue of $39.2 billion and a quarterly net profit of $11.6 billion, resulting in EPS of $12.30. During Apple's second fiscal quarter of 2011, the company posted revenue of $24.7 billion and a quarterly net profit of $6 billion, resulting in an EPS of $6.40. So quarter over quarter, Apple's Q2 profits increased by nearly 94 percent from 2011 to 2012. While no one on Wall Street anticipates Apple's Q2 2013 growth to be anywhere near 94 percent, it'll be interesting to see how drastically the addition of the iPad mini to Apple's fleet of products will affect its bottom line compared to last quarter.
iTunes is more than earning its keep
As writer John Paczkowski notes in an AllThingsD article today, iTunes was originally "conceived as a low-margin 'break-even' operation intended to drive hardware sales" -- in particular sales of iPods. Now that the iTunes Store is used to sell more than just songs and videos, it's turning into a "significant profit center for the company". Paczkowski was commenting on numbers from Asymco analyst Horace Dediu, who notes that now that Apple has folded its in-house software group into iTunes, Apple software is having "significant implications for iTunes margins." The software, including items like iWork, iLife, Final Cut Pro, Aperture and more, has much higher profit margins than traditional iTunes items like music, books, video, and apps. Dediu deduced that Apple sold about US$3.6 billion worth of its software products in 2012, and that profit margins for software is usually about 50 percent. If that's the case for Apple -- and Dediu is usually correct in his assumptions -- then iTunes is generating operating margins of about 15 percent on gross revenue. That's about $2 billion in profit for 2012, or as Paczkowski so eloquently put it, one "hell of a way to break even."
Apple Store boosts revenues for entire shopping district
There's an old saying that "A rising tide lifts all boats," but nowhere has the truth of that saying been demonstrated more than in Berkeley, Calif., where the opening of the Fourth Street Apple Store in 2011 quadrupled sales tax revenues for the district in which the store is located. That quadrupling is just in the sales tax category in which the Apple Store is placed -- "furniture and appliances" -- but the impact of the opening is apparent even when all of the various categories are shown together. As pointed out on ifoAppleStore.com, it appears that the Apple Store was placed into that category specifically to disguise its contribution to overall tax revenues. The website did a quick calculation based on the revenue trend and determines that the store will probably have about US$38.4 million in sales for the first quarter of 2013, more than twice the per-store average for all Apple Stores. A PDF copy of the City of Berkeley economic report is available for viewing here.
A look at Apple's international retail strategy
Asymco analyst Horace Dediu does a very good job of dissecting the Apple financial data released publicly to discover trends and tidbits of information. Today Dediu looked into Apple's international retail strategy and pulled out some tasty nuggets about Apple Stores. Apple's rate of store openings is surprisingly slow, but Dediu goes on to point out that sales outside of Apple's retail channel are a much higher portion of the total than they were in 2007. The percentage of sales from Apple Stores has actually dropped from 17 percent in 2007 to 12 percent in 2012. Dediu points out that while, currently, most Apple Stores are in the Americas, the company's strategy is to open more stores in other markets. Whereas almost 80 percent of store openings in 2007 were in the US, that number shrunk to about 15 percent in 2012. Dediu notes that, "It would seem reasonable therefore to expect that the priority for most, if not all, future openings should be outside the US to address the current sales/retail presence imbalance and to accomodate the bulk of future growth."
NPD: Apple accounted for 1/5th of all US consumer tech revenue last year
The 2012 superlatives for Apple just keep rolling in. NPD Group released a report today showing an overall decline in US sales of consumer technology for the year, but that Apple's share of sales (based on revenue) rose from 17.3 percent in 2011 to 19.9 percent in 2012. Apple's sales share was over 10 percent higher than number two brand Samsung at 9.3 percent. HP, Sony and Dell -- taken together -- had less of a share (15.6 percent) of US consumer technology sales than Apple alone. NPD's data also show several ominous trends for all companies in the consumer technology sector. Revenues from sales of notebook computers were down 9 percent from 2011, while desktops showed a 11 percent drop year over year. Smartphone revenues grew at a slightly slower rate -- 25 percent -- in 2012 than in 2011 (28 percent), and growth in the tablet market slowed dramatically as well. 2011 was a banner year for growth of the tablet market, with a growth in revenue of 135 percent. Last year's numbers showed a drop to "only" a 42 percent growth rate. Whether that trend will affect Apple's earnings in 2013 is unknown, making growth in offshore markets like China and India all that much more important to the company. [via AppleInsider]
Ranking Apple analysts
Philip Elmer-DeWitt at Apple 2.0 keeps track of the how well Wall Street analysts -- and amateur Apple watchers -- predict the fortunes of the company. An overzealous estimate of earnings that isn't met by a correspondingly big figure by Apple always seems to result in a hit on share price, so Elmer-DeWitt has been ranking the analysts by accuracy. In the not-so-distant past, the amateur stock watchers were doing a much better job than the professionals, but that's changed. Now the professionals have taken eight of the top 10 positions on Elmer-DeWitt's list. He points out that this doesn't necessarily mean anything, since professionals also filled nine of the bottom 10 in his "Top 40." Based on the last nine quarters, the most accurate analyst on The Street appears to be Colin Gillis of BCG Partners. Some other familiar names from the Apple earnings calls don't fare as well. Gene "Apple TV" Munster of Piper Jaffray is about halfway down the list in the No. 19 spot, while perennial earnings call questioner Katy Huberty of Morgan Stanley barely made the Top 40 by coming in at No. 39. During the second quarter earnings call sometime in April, we'll be sure to give participants in our live blog Elmer-DeWitt's ranking information for each analyst who asks a question so you know how much credence to give their opinions.
Apple blasts shareholder lawsuit in court response
Just a few days after Apple CEO Tim Cook referred to a shareholder lawsuit spearheaded by Greenlight Capital fund manager David Einhorn as a "silly sideshow," the company filed its formal response to the lawsuit. As one would expect, the response is rather harsh. As noted in MacNN's analysis of the response, Apple found that Einhorn's plan was "self-serving," with even Einhorn himself referring to the proposal as a "roadblock." In previous coverage of this lawsuit, we noted that it was brought on by a desire by shareholders to have Apple distribute more of its sizable cash hoard through dividends. Einhorn had made a proposal asking for the issuance of "perpetual" preferred shares of AAPL that would pay a larger dividend than common stock. Apple has a proposal coming up for vote at its general meeting on February 27 to prevent any distribution of preferred shares without the approval of shareholders, and Einhorn's not happy with that. In Apple's response, the company notes that Einhorn's plan -- which calls for the preferred shares to be called "Greenlight Opportunistic Use of Preferreds" or GO-UPs -- has little benefit to anyone except Greenlight Capital. To paraphrase the title of a book by Einhorn, he appears to be trying to "fool some of the people all of the time" with his proposal. Apple CFO Peter Oppenheimer declared to the court that Einhorn referred to his lawsuit as a "roadblock" in a conversation between the two, and the company calls for the lawsuit to be dismissed for any one of four reasons listed in the response. First hearings on the lawsuit are scheduled for February 19, and Greenlight must file its response to Apple's claims by this Friday.
Apple pays dividend to shareholders this Valentine's Day
Apple shareholders get an extra special Valentine's Day gift from Apple this week in the form of a dividend from the company, says a report in AppleInsider. This will be the third dividend paid to shareholders and will amount to US$2.65 per share. Shareholders will receive the payment on February 15. Apple announced its dividend program last year and said it would distribute $45 billion to its shareholders over the next three years. This breaks down to $2.5 billion per quarter. Though Apple is paying out cash, the company is raking in cash at a faster rate. In its last quarter, Apple added $16 billion to its cash reserve, which now sits at a healthy $137.1 billion.
