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Intel issues dividend, Apple sits on $97.6bn

A tale of two companies

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Intel has quietly announced that it will pay a quarterly dividend of 21 cents per share on March 1, just as they did last September and December, and in earlier quarters at lower rates.

At the end of last year, Intel had $14.84bn in cash and short-term investments, from which it pays its dividends to shareholders. Apple, on the other hand, announced in its quarterly earnings report on Tuesday that it's sitting on an astonishingly large $97.6bn pile o'cash – and Cupertino has no plans to issue a dividend anytime soon.

Well, none that it has announced, in any case. During a call with analysts and reporters after the Q1 2012 earnings release, CFO Peter Oppenheimer refused to be drawn out on what Apple plans to do with its cash hoard, repeatedly saying only that the company is "actively" examining its options.

He also noted that "We continue to be very disciplined with the cash and are not letting it burn a hole in our pocket." Or, for that matter, in anyone else's pocket – such as Apple's shareholders.

After a few more successful quarters, that pocket could hold enough for Apple to buy Intel, which as of this Wednesday has a market capitalization of about $136bn. Or, for that matter, Apple could buy AMD with only a mere 5 per cent of its cash – that Intel rival is worth around $4.5bn.

But as Oppenehimer reminded listeners during the conference call, Apple isn't one for large, splashy acquisitions. Its recent snapping up of flash-chip baker Anobit for $390m was its biggest acquisition since it bought NeXT – and Steve Jobs – for $404m back in 1997.

So what will Apple do with all that cash? Well, for starters, it plans to fork out about $8bn in capital expenditures in the current fiscal year, a big jump over the $4.6bn it spent in fiscal 2011. But that $8bn is still dwarfed by chipbaker Intel's massive capex outlays of $10.7bn in 2011 and $12.5bn in 2012.

One use for Apple's big ol' cash pile will undoubtedly be the continuance of CEO Tim Cook's time-tested – and successful – policy of locking down key components in long-term deals. And then there's that new "spaceship" they're building in Cupertino – perhaps it will include solid gold bathroom fixures.

Or, for that matter, Apple could do the patriotic thing and move some of those Chinese Foxconn jobs back to the good ol' US of A. Failing that – and don't hold your breath – it could at least give those hardworking Foxconners a hefty raise. And breath-holding is ill-advised for that latter scenario, as well.

Or perhaps Apple will follow the lead of Intel and many, many other companies, and finally issue a dividend to its shareholders. One analyst from Cannacord Genuity predicts that Apple will, indeed issue a dividend this year, and The Street is running a yes/no poll asking "Should Apple pay a dividend?", with "yes" beating "no" by about two to one.

After all, Apple is under new management, so anything could happen – dividends and share buybacks being among the possibiities.

So we suggest that Cook give Intel CEO Paul Otellini a quick call. After paying out $4.1bn in dividends and spending $14.1bn to buy back 642 million shares during 2011, Otellini might be able to give Cook a few pointers on how to better reward shareholders. ®

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Anonymous Coward

They have a lot of money in the bank in part because they don't pay dividends.

If Intel had kept all the dividends in the past 5 years, they would have billions more in the bank.

Apple also has a big chunk of their cash "overseas", they keep lobbying to have a tax holiday so they can bring the money back to the US without paying taxes.

8
0

errr, not quite

You couldn't be more wrong and deluded if you tried and your comment shows how little you understand of the financial markets. Buying a share entitles you to part ownership in the company and a say in how it is run. Morons like you are the very problem with the current system, treating it like an oversized casino. Buying a share shouldn't be a gamble at all. If a company does well you should benefit through a share of their profits and an increase in stock value as more people want a part of the company. If the company does badly you loose by not receiving any income and a drop in share value as less people want to own the company. Without dividends you aren't sharing in the success of the company but in the success of the company's stock. This is how companies become hugely overvalued or undervalued regardless of their true performance. Apple certainly deserves a high stock value as they have done exceptionally well over the last few years, and yet Google stocks were penalised for not returning even more profit that they had forecast simply because speculators gambled that they would do even better.

I fully understand how the current system works, that doesn't mean that I agree with it and that it doesn't desperately needs to change.

you sir are the one who needs to do some major growing up and clue getting.

9
2

Not paying dividends is one of the factors

that causes the boom / bust cycle in the stock market.

srsly, what is the point of owning "shares" in a company if you don't get to share the profit? Speculation, that is the only reason, which means either Apple share price has to go up forever... or its shareholders are suckers and the stock market is a roulette wheel.

7
1

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