I am a big fan of both Apple and Tim Cook. I have been for a while. I said Cook would do a great job as CEO 6 months before Steve Jobs died and defended his record 2 years ago when people were saying he wasn’t “innovative” enough.
However, I do have a big problem with one choice Cook has made over his tenure as CEO of Apple. It’s not the lack of a bigger screen iPhone sooner or his original choice of head of Apple Retail before Angela Ahrendts. It’s his decision to spend $100 billion and counting of Apple cash on a capital return program.
The program was announced in April 2012. It was the first time since 1995 (before Jobs returned to the company) that Apple had paid a dividend. To date, it’s been estimated that Apple has used more than $100 billion of its cash on dividends and stock buybacks. To me, that’s madness.
Prior to Cook’s decision to start spending cash on dividends and buybacks, Apple was content to let it accumulate on its balance sheet. The company had gone through a near death experience in 1997 and obviously wanted to ensure it had a sufficient cash cushion to continue to fund its operations in case the markets ever turned against it.
By 2012, lots of Wall Street analysts had begun complaining that Apple simply had too much cash sitting idle on its balance sheet and it should either invest it through R&D or M&A or return it to shareholders.
There are generally 3 points of view regarding Cook’s decision to start this capital return program:
(1) Carl Icahn and most other observers affiliated with Wall Street think it was smart and, if anything, hasn’t gone far enough. more…