When Apple reported its most recent financial results, the tech giant disclosed it was sitting on $100 billion — leading many observers to wonder what the company might do with its cash hoard. On Monday, Apple provided an answer, saying it plans to spend $10 billion to buy back its own shares over three years. The plan, which also includes issuing a dividend of $2.65 per share, will ultimately cost $45 billion, and could boost Apple’s already-high-flying stock price.
The plan represents a marked shift under CEO Tim Cook, who took over the company’s leadership following the death of founder Steve Jobs last year. Jobs had famously resisted stock buybacks and dividends. Indeed, the newly announced dividend would be Apple’s first since 1995 — one year before Jobs returned to the company he founded.
On a conference call Monday morning, Apple executives said the move will allow the company to avoid paying incomes taxes to repatriate some $64 billion, which it is currently holding outside the United States. Even with the new program, Apple is expected to generate billions of dollars of new cash from the red-hot sales of its iPhone, iPad and Mac computer sales. Last quarter, after reporting $13.1 billion in profit on sales of $46.3 billion, the company said it was holding $97.6 billion in cash.
Cook said the company planned to initiate a quarterly dividend of $2.65 per share sometime in the quarter that begins on July 1, 2012. He said the board has also authorized a three-year $10 billion share repurchase program in its 2013 fiscal year, which begins on September 30, 2012.
Apple shares surged as much as 2% in early trading on Monday.
Apple is just one of many companies holding large cash reserves offshore, and the issue of repatriating those assets has become a hot topic recently. Apple, Google, Microsoft, Pfizer, and General Electric are among 70 U.S. firms that hold an estimated $1.2 trillion overseas, according to a recent survey by Bloomberg. Apple CFO Peter Oppenheimer said current law effectively prohibits from the company from bringing that cash back into the U.S. where it could be invested back into its business — a view he said the company had made clear to Congress.
Apple said it would spend about $10 billion on the dividend over the next three years. In total, the plan will cost the company $45 billion over that time period. Along with avoiding the corporate tax associated with repatriating the overseas cash pile, Cook said the goal of the plan is to provide existing shareholders with continuing income, as well as broaden the company’s shareholder base to attract new investors.
“We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure,” Cook said in a statement. “Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business.”
Asked on the call to shed light on first-weekend sales of the company’s new iPad, which went on sale last Friday, Cook declined, saying: “We had a record weekend, and we’re thrilled with it, but this call isn’t to discuss the current business.”