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Apple announces biggest share buy-back in corporate history

Jonathan Shapiro (via AFR) | April 24, 2013
Despite mounting concerns over its ability to continue to dazzle the world with its products, Apple on Tuesday posted solid quarterly revenue of $US43.6 billion and quarterly net profit of $US9.5 billion, or $US10.09 per diluted share. That beat analyst estimates, who had predicted profits of $US9.98 a share.

Apple announces biggest share buy-back in corporate history

Apple’s fiscal second-quarter revenue beat Wall Street's expectations as iPhone and iPad sales surpassed investors' lowered expectations, but quarterly profit dropped for the first time in 10 years. Photo: AP

Despite mounting concerns over its ability to continue to dazzle the world with its products, Apple on Tuesday posted solid quarterly revenue of $US43.6 billion and quarterly net profit of $US9.5 billion, or $US10.09 per diluted share. That beat analyst estimates, who had predicted profits of $US9.98 a share.

But while the number came in at the upper range of Apple's own guidance, profit was down from a year earlier for the first time in nearly a decade.

To sweeten the deal for shareholders, Apple boosted its dividend by 15 per cent and announced a massive $US55 billion share-buyback - the largest in corporate history - as it faced pressure from activist investors to share more of its cash reserves with shareholders. The move lifted Apple shares in after-hours trading.

The company announced the capital management plans in an after-hours regulatory filing that accompanied earnings release that disappointed expectations as Apple's revenue declined for the first time in a decade.

Apple said it would return a total of $US100 billion to shareholders by the end of 2015, "a $US55 billion increase to the program announced last year and translates to an average rate of $US30 billion per year from the time of the first dividend payment in August 2012 through December 2015".

"As part of this program, the Board has increased its share repurchase authorization to $US60 billion from the $US10 billion level announced last year," the filing said.

The 15 per cent boost to Apple's dividend will increase its annual payment to shareholders to $US11 billion, making the company one of the largest dividend payers in the world.

"We continue to generate cash in excess of our needs to operate the business, invest in our future, and maintain flexibility to take advantage of strategic opportunities," said Peter Oppenheimer, Apple's CFO.

Apple's massive cash hoard was the focus of intense shareholder activism led by New York based hedge fund manager David Einhorn who threatened to sue the company over its handling of its capital management plan.

Einhorn proposed the issue of "iPrefs" - yield generating securities that would allow investors to access Apple's cash, a plan that was not endorsed by one of Apple's largest shareholders CalPERS .

The decision to buy back shares follows revelations that star investor Warren Buffett gave advice to the late founder of Apple Steve Jobs that he should have bought back his shares with excess cash

 

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