Late last night I took the time to listen to Horace Dediu discuss Apple’s growing cash position and their “What should we do with it?” dilemma.
This is a fascinating discussion for the times. I say this because it touched on how important it was for Apple to control their supply chains in the Post-PC era.
Sure, there are other options. They could buy someone but the history of M&A (A often standing for Attrition) is not that good.
They could implement a share buyback and an extraordinary and/or ordinary dividend. These seem viable but during the call Horace discussed studies showing how stock buybacks are typically not that rewarding for shareholders. He specifically mentioned Microsoft and their 2004 actions. If you will recall, Microsoft grew a monster pile of cash and in the summer of ‘04 they announced a $3 per share dividend (costing $32 billion), doubled their annual dividend to $0.32/share and a 4 year, $30 billion stock buyback program. After Microsoft announced these activities the stock traded at $28.32. Aside from a rally in to the mid-$30’s in late 2007 Microsoft’s share price has been range bound.
Here’s a story from the day: Microsoft to Pay Special Cash Dividend
Looking at the results you can hardly question why Apple has not pursued any of these measures.
So what do they do?
I would not be surprised to see Apple get more aggressive in managing their supply chain. There are some major changes coming to chip-making land over the next few years. One of the major transitions is going to be the move to 450mm wafers. The R&D needed to make 450mm wafer fabs is going to be enormous but based on some conversations I’ve had with folks in the trenches and stories you can find on the web the migration to even bigger silicon wafers is starting to happen.
There’s a fascinating discussion taking place on LinkedIn’s Semiconductor Manufacturing Group and it appears that even the EU, yes, the EU, is going to try and push 450mm forward: