Same reason why Apple eventually drop the idea of selling a physical large screen TV. Just dreams of may be Jony and Schiller. Pretty sure not of TC. TC prefers healthcare and fitness.
If tech journalists sometime seem overly alarmed about the smalest flub by Apple, it’s not because they’re being overly dramatic for the sake of page views. (Well, sometimes.) It’s usually because they know how much we depend on Apple in so many little ways. Given the history of civilization and corporations, we tend to react to every little Apple trouble with seasoned worry.
According to Gruber, Apple is actually selling the 2017 Apple TV 4K at cost, suggesting the device costs Apple $180 to make. As for the HomePod, Gruber said he believes Apple sells it at a loss.
Gruber said that he also suspects the AirPods are priced close to cost as well, though he’s not sure and can’t prove it. And, of course, over time, things become less expensive to manufacture as component costs come down. Something that cost $180 in 2017 might not cost the same in 2019, as an example.
Overall, Gruber says that Apple isn’t pricing its products too high, it’s developing products that are too good.
“If you think it’s a problem that these products are so expensive compared to their competition, that too few people buy them, it’s not because Apple is charging too much, it’s because Apple engineered and designed too good of a product,” said Gruber.
Apple is selling hardware close to cost? Razor-blade model? Make money from services? Earlier INTC/DELL style, lose money initially but make money as price of components/ cost of manufacturing decline?
My take: Apple can afford to sell a few wearables and accessories at a loss because they sell in such (relatively) small numbers. But “too good of a product” doesn’t sound good. It sounds like an invitation to be disrupted.
Is what worries me a lot too. Without SJ, products seem to be over-designed and over-engineered. Ended up took a long time to release and cost too much. I have expected R&D expenses to go up after the death of SJ, hope the recent fast rising R&D expenses is not due to over-design/engineering.
Rising price with declining volume usually lead to subsequent price decline.
Expect price to peak at $170-$175 follows by a sharp decline to $155 (calling manch).
The iPhone maker curbed its share buybacks considerably in the final three months of 2018. Only 38 million shares were purchased during the period, according to Apple’s quarterly filing. That follows a binge in which Apple bought back a little over 342 million shares during the first nine months of the year—nearly four times as much as a year earlier.
Have always been against share buyback. Buy more at high price, buy less at low price, completely against DCA philosophy. The only valid share buyback is to compensate RSU dilution. I can understand the initial share buyback to reduce share count to compensate the huge share dilution (early years of SJ return) but I think we have passed the point to do any more share buyback.
Would you prefer they pay dividends with the cash? There’s been a lot of studies on buybacks. Companies usually pay too much for the buyback. It’s the same as M&A activity. There are a lot of big promises, but they rarely deliver the returns promised.
AAPL payout ratio is 22.7%, i.e., they share 22.70% of every quarterly profit as dividend and rest they accumulate for company growth/company cash. Since they make huge amount of profits, apple dividends does not eat any of the accumulated cash position. Most the accumulated profit is used to buyback shares which increases share price.
They could do a special dividend instead of the buyback. It rewards the long-term holders who keep holding. The buy back to increase the price only rewards people that sell for the capital gains.
Long term holders or financial institutions prefer buyback than dividends as buybacks will not be taxed, while dividends are taxed immediately.
If a company, like apple buys back all its shares, it become private company, i.e. entire 22.7% profit margin goes to themselves.
This is what Warren Buffet do many times, he purchased Sees Candies at 25 Million cash, but it returns every year $100 Million. Such companies are stronger when economy goes south as they are financially independent state.
Since AAPL is such a cash flow stream company, he invested in it.
His BRK is one of the lowest P/E with heavy cash in flow.
I actually wouldn’t mind having more dividends because I can use that to offset margin interest so there’d be no tax I’d need to pay.
Share buyback increased your concentration in the company forced upon by the leadership.
Dividends (double taxed, so what?) let you decide what to do with the cash, ofc you can choose to invest in AAPLs, or buy more rentals or buy index funds.
Goal of share buyback should only be to compensate for RSUs/ ESPPs dilution, nothing more, company should not make stock investment decision! Is obvious that the hidden goal of share buyback is to push up eps which push up share price which benefit… yes, those who have tons of RSUs… who have those? Correct, the leadership.
Any1 who vote for share buyback to increase share price plan to sell shortly, by definition, not long term investors. Leadership want to sell shortly (they are given tons of RSUs every year so they sell whenever RSUs vest), vote for share buyback. Institutions want to sell shortly, vote for share buyback. @wuqijun wants to hold for a long time, like decades, didn’t want share buyback.
You and hanera prefers dividends as your purchase price was $10 and $3 respectively, but that is not the case for institutional investors. They want growth of their stock value, and vote for buy backs.
If they want to buy Netflix they wouldn’t be rolling out their own streaming service.
Mostly, you and WQJ, talk aapl buybacks from your point of view.
But, you are minority considering big institutions and hedge funds, they want to show the clients big growth( than dividends) to be attractive. They vote for buybacks, moving company cash position to investment position without adding double taxation.
Buybacks not only used for espp and rsu, they will use it for take over/merger. They use it in any forms transactions to substitute cash.
Buybacks and dividends just show the lack of ideas on Apple’s part. Apple will always be a heavy user of silicon no matter what it does. Why not use the cash to buy micron or better yet TSMC? If it didn’t waste money on dividend Apple can buy a couple Intel’s with cash to spare.
Silicon is the New Oil
My preference is SJ’s practice and philosophy. Leave as cash, and buy core technologies. Also to fund the dream of selling products at 10% above white box (that is SJ’s dream). I actually don’t like share buyback and dividends.
Steve Jobs took the long bet to buy chip making startups and now it’s the absolute core strength of Apple. I don’t think TC would have made the same bet. How many semiconductors startups has Apple bought since Jobs passed away? I can’t think of any.
Silicon is the New Oil
He knew it was a key to future differentiation. Everyone using Intel always limits PC differentiation. Yeah, there’s AMD, but how tiny is their market share?
Silicon is the New Oil
near the counter-trend target of $176.57. Will AAPL break above it thereby robbing @manch’s chance of ever buying at dreamy price of $100! ?
Can we learn the lesson that revised guidance is a BTFD lifetime buying opportunity and not a time to sell! Apparently the blogger and commentator who took the opportunity to bash AAPL had went into hiding.
Traders are betting on Apple Video Streaming Service! Beware of sell the news!
Apple’s service revenue growth is still highly correlated to iPhone sales. The biggest is the App Store tax and second is probably apple care. So to grow service without increasing iPhone sales they have to find ways to get more money from existing users. If you’ve used apple’s service software like maps or Siri you should be worried. They’re POS.