Bloomberg News

Apple Dividend or Buyback ‘More Likely,’ Morgan Stanley Says

September 13, 2011

(Updates shares in ninth paragraph.)

Sept. 13 (Bloomberg) -- Apple Inc., the world’s most valuable company, is “more likely than ever” to return money to shareholders in the form of a stock buyback or dividend, according to Morgan Stanley.

Apple is able to finance a $25 billion share repurchase program or a 2.4 percent dividend using its available cash, said Katy Huberty, an analyst for Morgan Stanley in New York. Apple has $76 billion in cash and investment holdings, equivalent to about $81 a share, which could be used to fund the effort.

“We believe Apple is more likely than ever to return cash to shareholders,” Huberty said in a note to clients.

Technology companies that pay a dividend or buy back shares rather than using the money for acquisitions generally outperform their peers on the stock market, Huberty said. Steve Jobs, then chief executive officer, said last October that the company was saving its money for “strategic opportunities.” He stepped down as CEO last month to become chairman. The company is now run by Tim Cook, former chief operating officer.

A multibillion acquisition is still a possibility, Huberty said. While a large deal would be risky, it could be worthwhile if it brings new subscription-based revenue for streaming content to its devices, she said.

Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co. in New York, has called on Apple to return money to shareholders. In a letter to Jobs and Apple’s board last year, he called the company’s hoarding of cash “excessive.”

‘Powder Dry’

Last October, when Cupertino, California-based Apple had $51 billion in cash and long-term investments, Jobs said it was keeping its “powder dry” in case an opportunity comes along.

“We’ve demonstrated a really strong track record of being very disciplined with the use of our cash,” Jobs said on Oct. 18 during a conference call with financial analysts. “We don’t let it burn a hole in our pocket.”

Apple rose $4.68, or 1.2 percent, to $384.62 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have climbed 19 percent this year.

Between Jobs returning to the company in 1997 and his retirement as CEO last month, the stock climbed 9,000 percent. The 56-year-old, who has battled a rare form of cancer, had been on medical leave since January.

--Editors: Nick Turner, Stephen West

To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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