Apple Placates Investors with Hot Air

by Matt Klassen on March 4, 2013

Although still flying high atop the tech world, Apple has hit some serious turbulence with its investor group, particularly from the legal action brought against the company by vocal investor David Einhorn. Recently Einhorn protested Apple’s stockholder strategy, complaining that the company is obligated to pay dividends to shareholders given the company’s quarterly earnings and its huge stockpile of cash.

While previously calling the lawsuit ‘silly,’ last week company CEO Tim Cook held an investor’s meeting to set the record straight, offering the company’s shareholders a look into where the company is going and what it plans to do with its ever growing mound of money.

But unfortunately for investors, and anyone else interested in the future of Apple, the meeting really failed to deliver, instead turning out to be nothing more than 60 minutes of listening to Cook placate the crowd, with only a few realizing in retrospect that he  really didn’t say anything at all…at least not anything helpful or informative.

Without Einhorn in attendance, many investors gathered on Wednesday to talk about Apple’s increasingly large stack of cash and what it plans to do with it. While agreeing it’s a topic worthy of discussion, what’s surprising is that Cook said very little about what the company intends to spend its money on, only saying that the company was looking at options.

Although some think Apple will start reinvesting the money in key acquisitions and product improvements, with the company’s growth starting to plateau company shareholders want in on the good times before they’re over; they want Apple to share the wealth. Apple certainly needs to do something, noted Covestor Investment Model Manager Eric Steiman said in a recent interview, emphasizing that, “They have too much cash, and are making too much on a quarterly basis to not repay their shareholders.”

For its part, Apple has a few options, including paying one-time stockholder dividends, creating some sort of share buy-back option, or event splitting the company stock in hopes of increasing its value overall. Further, stockholders are often willing to let the company keep the cash if it’s demonstrated a willingness to use the money in the best interests of the stockholders, but given the fact that Apple has already demonstrated a Scrooge-like miserliness towards spending, shareholders are starting to demand action.

The issue of slowing growth was also front and centre on Wednesday, to which Cook attempted to assuage growing concern. Not only did he hint at new products coming down the pipe, he was clear that the company was not stalling its research and development in the name of stockpiling money.

Of course with all the talking, the comforting, and the promising, Cook gave little concrete insight into his company’s plans about either the money or the future, choosing to placate the generally friendly investor crowd by blowing a lot of hot air and beating firmly around the bush. That said, for once it looks like Cook was finally able to channel the charisma of his predecessor, as despite the fact the entire meeting was a non-event investors came away satisfied, convinced that Apple is still innovating and that the company’s next break through product is right around the corner.

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Written by: Matt Klassen. Follow by: RSS, Twitter, Facebook, or YouTube.

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