Matt Richman on the common refrain that Apple needs to spend its cash on stock buybacks and shareholder dividends:
No. As Horace Dediu pointed out, when technology companies institute stock buybacks, they don’t create a lot of shareholder value, if any at all. Microsoft has spent a little more than $97 billion on buybacks since 2004 and its share price has gone up less than 10%. Over the last 10 years, it has spent over $170 billion on both buybacks and dividends while MSFT has gone down 19.92%. At the same time, networking giant Cisco has returned $50.7 billion to shareholders since the beginning of 2004 while its share price has dropped 35.58%. Additionally, RIM’s stock price has plummeted 21.16% since it announced a share buyback program less than 30 days ago, on June 16th. Though other factors certainly could have played a part in the depreciation of the share prices of the aforementioned companies, using cash for stock buybacks and dividends clearly isn’t the best way to increase shareholder value.