This article was published on February 7, 2013

Apple indicates in public statement that it may accelerate cash returns to its investors

Apple indicates in public statement that it may accelerate cash returns to its investors
Alex Wilhelm
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Alex Wilhelm

Alex Wilhelm is a San Francisco-based writer. You can find Alex on Twitter, and on Facebook. You can reach Alex via email at [email protected] Alex Wilhelm is a San Francisco-based writer. You can find Alex on Twitter, and on Facebook. You can reach Alex via email at [email protected]

Today Apple released a statement regarding its cash position. Apple, with more than $100 billion in the bank, is one of the richest companies in history. The firm, exceptionally profitable, has continued to grow its cash surplus, despite new methods of distributing cash to investors through a dividend.

Apple today stated that it has gone through with a total of $10 billion of its $45 billion plan to return cash to its investors. The company stated that it may in fact increase, or accelerate the cash it returns to current stock owners.

What follows is Apple’s statement:

By early last year, Apple’s cash balance had built to a point beyond what we needed to run our business and maintain flexibility to take advantage of strategic opportunities, so we announced a plan to return $45 billion to shareholders over three years. As of next week we will have executed $10 billion of that plan.

We find ourselves in the fortunate position of continuing to generate large amounts of cash, including $23 billion in cash flow from operations in the last quarter alone.

Apple’s management team and Board of Directors have been in active discussions about returning additional cash to shareholders. As part of our review, we will thoroughly evaluate Greenlight Capital’s current proposal to issue some form of preferred stock. We welcome Greenlight’s views and the views of all of our shareholders.

As a part of our efforts to further enhance corporate governance and serve our shareholders’ best interests, Proposal #2 in our proxy includes some recommended changes to our articles of incorporation. These changes were recommended independently of Greenlight’s proposal and would not preclude Apple from adopting their concept. Contrary to Greenlight’s statements, adoption of Proposal #2 would not prevent the issuance of preferred stock. Currently, Apple’s articles of incorporation provide for the issuance of “blank check” preferred stock by the Board of Directors without shareholder approval. If Proposal #2 is adopted, our shareholders would have the right to approve the issuance of preferred stock. As such, Proposal #2 has the support of many of our shareholders.

We remain committed to having an ongoing dialogue with our shareholders to get perspectives around return of capital and driving shareholder value.

Key to this brief quote is that Apple is willing to discuss preferred stock. This could lead to a power-shift among its shareholders, if the preferred stock had special voting privileges. It’s also interesting to hear Apple publicly state that it is open to outside views on how to run its operations. That doesn’t precisely fit with the vibe that Apple tends to exude. But, then again, no company is in its position of being so wealthy, so cash flow positive, and apparently unable to invest in its own operations at a level that would allow to avoid doling out built up cash.

Apple’s point that it has more cash than it needs to “maintain flexibility” is quite true. It will be interesting to see if Apple is willing repatriate cash – and thus incur high taxes – to fund larger dividends, either regular or one time.

The company’s statement comes the same day hedge fund magnate David Einhorn filed a lawsuit on behalf of his fund Greenlight Capital against the company to prevent it from eliminating preferred shares. According to the New York Times, Einhorn told his fellow stockholders that the “move to amend the company’s charter would unnecessarily limit the technology giant’s ability to create value for shareholders.” It is believed that this lawsuit gives fuel to apparent investor anger over a company whose stock price has had “unearthly” gains.

Apple could find some merit in Einhorn’s proposal, as it was mentioned in its statement, saying that it would thoroughly review Greenlight’s proposal. However, it continues by saying this change was recommended independently and any adoption of “Proposal #2” would not prevent the issuance of preferred stock — a proposal that it says has the support of many shareholders.

Photo credit: Justin Sullivan/Getty Images