"The next quarterly update will surely show the net cash has risen still further. Even by conservative estimates the surplus is probably nearing $30 per share. This is not all money Apple needs to run its business. Most of it is sitting in low-yielding investments like short-term corporate bonds. It's earning next to nothing. "
And that, Arends says, is "dragging down" returns for Apple investors—but don't get the impression that his concern is that they're all widows and orphans hoping that Apple dividends will keep roofs over their heads and gruel on the table. Quite the contrary—Arends expresses naked contempt for the many Apple shareholders who are also Apple zealots, and therefore unlikely—or in his estimation, unable—to think clearly about anything having to do with Apple and Steve Jobs:
"Last summer, writes Arends, "I observed that Apple stockholders were unlikely to get the same kind of 55% annual returns over the next five years that they had gotten over the previous five.
"Some Apple partisans, apparently unable to read or do basic math without an "app" to help them, took this as a prediction that Apple stock was going to fall. This illustrates Arends' First Law of Technology: As phones get smarter, people seem to be getting more stupid—and the stupidest people own the smartest phones."
Now, I'm all for wide-open debate but that seems a touch defensive, wouldn't you say? Lord knows, the Apple faithful can be a vociferous bunch and to them, the only thing worse than not having more than 5,000 songs on your iPhone is saying something critical about Steve Jobs or the company he has run so brilliantly for the past decade. Doesn't matter how accurate, insightful, or potentially valuable that observation might be: if it's not a hosanna, they're gonna bring the heat.
Think about that in terms of brand-building and your own company: how vigorously would your best customers defend you? Or do you give them reason to think that you're just another in a long line of suppliers, with the only difference being that your turn has come to be at the front of the line for a fleeting moment? Behind the silliness of some of the stuff above lies a very powerful message: Jobs and Apple have created products and services that transcend categories, transcend seller/buyer roles, and transcend—as Arends points out—the norms of rational self-interest shareholders almost always express.
Nevertheless, Arends has a strong point to make, and he hammers it home again:
"Why is Apple hoarding its cash? A company spokesman explains: "We have maintained our cash and strong balance sheet to preserve the flexibility to make strategic investments and/or acquisitions," writes Arends. "Steve Jobs really doesn't need an acquisitions warchest of around $30 billion, and it is alarming to think he wants one. He should start handing back this money to stockholders through dividends. Regular, quarterly dividends are better than a one-off special payout because they impose financial discipline on the management. But the core principle is the same in either case. The money belongs to stockholders: Give."
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Bob Evans is senior VP and director of
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