Apple to reveal plans for its $98 billion in cash [update: dividend, share buy-back]

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Update: It’s official — Apple will initiate a dividend and share repurchase program, which will go into effect later this year, the company revealed in a press release. If approved by Apple’s board of directors (which it most certainly will be), the Cupertino company will dole out a quarterly dividend of $2.65 per share, or a yearly dividend of $10.60 a year. In addition, Apple will buy back $10 billion of its shares, starting at the beginning of its first fiscal quarter of 2013, which starts September 30, 2012.

“We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure. You’ll see more of all of these in the future,” said Tim Cook, Apple’s CEO, in a statement. “Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business. So we are going to initiate a dividend and share repurchase program.”

Original text

Apple announced this weekend that it will hold a public conference call Monday morning, at 6AM PDT/9AM EDT, where it will reveal the long-awaited plans for the company’s $98 billion in cash. Apple CEO, Tim Cook, and Apple CFO, Peter Oppenheimer, will host the conference call, which will be made available for a dial-in, live audio stream, and as a continuous rebroadcast beginning Monday, March 19 through Monday, April 2.

Having accrued such a large sum of money — about $98 billion — indicates that Apple has not yet solidified a strategy for the company’s growth, outside of reinvestment into R&D, expanding its manufacturing capabilities and protecting its intellectual property. Currently, with the rate that the company is accruing capital, the sum could reach as much as $150 billion by the year’s end.

Two scenarios may take place: Apple could financially benefit shareholders through dividends, a buyback of its shares, or a stock split; or, the second scenario: the company decides to spend its cash on money-making investments including acquisitions, securities, or profitable projects.

It’s possible that Apple may decide to buy back shares if Apple believed that the stock was undervalued. While Apple had recently broken the $600 per share mark (although it has currently has settled at $585 per share), The Motley Fool points out that “APPL” remains undervalued when comparing its price-earnings ratio with competitors, Amazon, Google and Oracle.

Apple has amassed capital by ignoring the recommendations of its investors, primarily due to Steve Job’s frugality and seemingly justified arrogance. But by not bending for investors, Jobs had been successful in pushing the company forward in the way that he best saw fit. He reinvested Apple’s capital back into the company and its products to bring the company to its current standing.

That said, with the newest CEO, Tim Cook, at the helm, investors must wonder if a dividend is in fact the more desirable announcement. Apple’s structure is changing, as the Guardian explains. Disney’s chief executive, Bob Iger, replaced Job’s position on Apple’s board, and Disney is a known proponent for dividends. Despite Job’s vehement rejection of a tablet that wasn’t ideal for a touch screen, the iPad mini is purportedly in the works and could also be seen as evidence that Job’s legacy may be slowly waning.

Now the question is, are investors are comfortable in the management of their investment by the post-Jobs leadership, or do they want to cash out now?

If you’re interested in listening to the broadcast live, you can stream the audio on devices running Quicktime 6 or later on www.apple.com/quicktime/qtv/call31912.

As an investor, what type of announcement would you prefer? Let us know in the comments below.

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