Apple's iDivi signals maturity

What is Apple doing with its cash pile? Here's the first shot analysis.

I cannot recall any company that has come back in the way Apple has from its near death experience in 1997. Such is life in the reality distortion field created by Steve Jobs &Co.

Earlier today the company announced the intention of a quarterly $2.65 per share dividend coupled to a $10 billion share buy back program. But before anyone runs away with the idea this is good stockholder news, it is important to read the timing of these events. From the blurbs (my emphasis added)

...the Company plans to initiate a quarterly dividend of $2.65 per share sometime in the fourth quarter of its fiscal 2012, which begins on July 1, 2012.

Additionally, the Company’s Board of Directors has authorized a $10 billion share repurchase program commencing in the Company’s fiscal 2013, which begins on September 30, 2012. The repurchase program is expected to be executed over three years, with the primary objective of neutralizing the impact of dilution from future employee equity grants and employee stock purchase programs.

At first blush, this looks like a conservative rather than bold gesture but in line with some analysis. From the WSJ:

Bernstein Research said a meaningful dividend of 2.5% to 3% would have no impact to Apple's earnings or cash flow.

From Forbes:

Contrary to dividends, buybacks can be scaled back easily if Apple needs to save cash for its own investments or acquisitions. Dividend cuts are lived like personal tragedies for income investors. Barely anybody notices decisions to cut or cancel buybacks.

In reality, Apple is handing back $45 billion of its estimated $100 billion cash pile. It also allows Apple to repatriate cash at a relatively low tax rate in advance of government plans to hike taxes for companies that earn substantial profit from overseas.

Among the announcements, Apple's plans to rev up its enterprise sales efforts caught my eye. In recent times, Apple has scored significant deals with SAP, GE Healthcare and United, racking up sales in excess of 34,000 units of iPad to those buyers alone as the iconic tablet becomes the Blackberry of the future in business environments. This must be a worry for smartphone and PC vendors alike. Last quarter, both Dell and HP took baths on their PC sales while Apple continued to rack up record sales of its iPad 2. On the conference call, the company said it had a 'record weekend' for sales of its new iPad. Heck - I bought one as did Jason Perlow who has gone positively fanboyesque over the latest object of our collective desires.

The bigger question though is what Apple does with the remainder of its cash pile. Traditionally, Apple has shunned mega acquisitions. That only leaves one thing it can (and should) do: use its cash pile to invest in its supply chain. Apple is now so big that mastering its already well oiled supply chain machine serves it well in meeting anticipated demand going into the future.

All in all? A prudent and conservative use of cash that signals a company growing up at Internet speed.

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