Tuesday, March 4, 2008

Apple's Annual Shareholder's Meeting

Apple held its Annual Shareholder's Meeting today at its Town Hall in Building 4 at its Cupertino headquarters. There are several summaries available from the Mercury News, AppleInsider and MarketWatch. Steve Jobs, Tim Cook, Daniel Cooperman and five of Apple's board members including Al Gore, Bill Campbell, Millard Drexler, Arthur Levinson and Eric Schmidt were present from Apple. The shareholder proposal asking for a nonbinding shareholder referendum on executive compensation was passed this year, which Apple's executive team dismissed as a "blunt and insufficient instrument for registering dissatisfaction." There were a variety of different questions asked including the one that always comes up about whether Apple is willing to consider a dividend or a share buyback. The answer was no which I believe has been and continues to be absolutely the right move. Neither of these options make sense for a company like Apple and I believe that management is taking a long-term view on the situation. Apple has over $18 billion in cash and I believe that using that cash to continue to innovate and create better and better products that grow the company's revenue and earnings in years ahead is a way better strategy than using that money to create an artificial, short-term pop in Apple's share price by reducing the float through a share buyback or by paying out a dividend. Both of these options are poor investments for the company and the cash ends up essentially as dead money to the company when paid out like this. Using that cash to innovate and grow the company is a much better investment for Apple which will reward investors in the long-run much more than a share buyback or dividend will. Another (more valuable) question that came up was about Apple's plans for a successor to Steve Jobs. The shareholder asking the question reportedly said that "the media often equates Jobs with Apple" and some analysts have said that as much as 30% of Apple's market cap would disappear if Steve Jobs was for some reason unexpectedly unable to be the CEO or "hit by a bus" as Steve put it. Steve is integral at Apple- he personifies the company, is so much a part of Apple and his incredible vision and understanding of people and the industry are almost invaluable. He has amazing abilities to find the right people for Apple, maintain and grow the brand and constantly innovate and execute on his vision. Steve Jobs said that at Apple they "talk about that a lot" and there is "lots of talent" which I definitely agree with. Steve Jobs also reaffirmed Apple's goal of selling 10M iPhones in 2008, something which seemed to reassure investors.

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