What it has decided to do is what it probably should have done a long time ago: buy back Apple stock and pay shareholders a dividend. On Monday, the company announced it would initiate a $2.65-per-share dividend and start buying back $10 billion in company stock. The move represents a significant shift for a company that has long eschewed both options—either because it reportedly needed all that cash to buy component supplies or because it was not the philosophy of the company’s iconic founder, Steve Jobs.
To me, that is one of the most interesting elements of Apple’s decision to offer the dividend and do the buyback. Cook’s decision to give investors what they wanted—one analyst wrote that the company’s cash had reached “mythic proportions” and was frustrating investors to the point where it was “now bordering on exasperation”—reveals a departure in the company’s leadership.
Jobs was apparently long against doing either. The company last paid a dividend in 1995, the year before Apple had a net loss of $816 million, which was soon followed by Jobs’ return to the company. And despite counsel from none other than Warren Buffett, Jobs kept cash on the sidelines. He seemed to like the security of having a big cash horde and, as an innovator, probably wanted to buffer himself against future failures. It probably didn’t help that some people see dividends as a mark of stodginess, and that growing, innovative companies should be putting their cash to work funding bold new products or buying hot startups or rivals.
Sure, a lot has changed recently for Apple besides the company’s CEO. For one, the company’s cash pile has grown tremendously, reaching $97.6 billion at the end of December from $59.7 billion the year before. That’s more than the market capitalizations of all but 52 of the publicly traded companies at that time, according to the Wall Street Journal—meaning that, conceivably, Apple could have bought anything from Hewlett Packard to Goldman Sachs. Much of that cash is increasingly coming from offshore, and as Apple CFO Peter Oppenheimer said repeatedly in Monday morning’s conference call, the company does not want to pay the tax cost to repatriate the cash. Some have also argued that Apple’s share price run-up had in effect “exhausted” its fan base among growth-oriented investors, and needed to offer the dividend to broaden its shareholder base.
Perhaps with all those factors in place, Jobs too would have elected to do the same. We’ll never know. But perhaps it also took new leadership to make the move. Whether it’s fresh eyes, less baggage from history or more willingness to risk what’s been built, new leaders can make tough decisions that others in the past, particularly founders, are often less willing or able to make.
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