Matt Richman on Apple’s Cash Hoard

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.

Wednesday, 20 July 2011