Tuesday, December 04, 2007 11:26:37 AM
Interesting that no one's ever talked about the cost of Apple having failed to do something productive with its cash. If, at any time during the past 3 years, Apple had ever needed a big hunk of change for any sort of one-time investment or acquisition, it would have had no problem doing that either by issuing shares via a secondary or via issuing debt, either corporate convertibles or straight borrow.
Had Apple elected to plough even 1/2 its free cash flow and cash stash into a share buyback, that would have reduced share count by something on the order of 80-100 million shares. Instead of looking at $5.00/shr in FY'08 eps, AAPL shareholders would be looking at $5.50 to $5.75/shr.
Return on that cash asset would have been on the order of 100% per annum, rather than the 3% they've gotten.
Ironically, had Apple believed its stock was as valuable, and its business prospects as great as virtually every investor on this board for the past three years or so, it would have engaged a share buyback as the highest and best use of its capital.
In fact ... taking it to the extreme, had Apple elected to, in 2003, Apple could have socked away $1 billion for a rainy day, and engaged a share buyback with the rest that would have reduced the share count by 75%. Had Apple done that, an if AAPL were trading at the same p/e it is today, the share price would be somewhere in the neighborhood of ... $800/shr.
I have to wonder if all those who defended Apple's corporate choice to hoard cash over those years, have any idea how much it cost them. I wonder what they'd be doing today with the extra $500-$600/shr they'd have in their accounts?
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