Technology

Monday 28 July 2014

Apple to return $130bn to shareholders

Apple boosts buyback after profits and revenues jump on an unexpected surge in iPhone sales

Published 24/04/2014|07:00

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FILE - APRIL 23, 2014: Apple Inc. reported a 7 percent increase in quarterly profit with sales totally $45.6 billion and will conduct a seven-for-one stock split. PALO ALTO, CA - SEPTEMBER 20:  The new Apple iPhone 5C is displayed at an Apple Store on September 20, 2013 in Palo Alto, California. Apple launched two new models of iPhone: the iPhone 5S, which is preceded by the iPhone 5, and a cheaper, paired down version, the iPhone 5C. The phones come with a new operating system.  (Photo by Justin Sullivan/Getty Images)
Apple Inc. reported a 7 percent increase in quarterly profit

APPLE is to return $130bn of cash to shareholders by the end of next year, bowing to pressure from activist investor Carl Icahn to deliver one of the biggest investor windfalls in history.

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The technology giant will buy back an extra $30bn of its own shares, on top of the $60bn buyback it had already promised. It also raised its dividend for the second year in a row and pledged to look at future increases on an annual basis.

 

“The size and pace of our [cash return to shareholders] is unprecedented, and we still plan to complete it by December next year,” said Tim Cook, chief executive. “We’re confident in Apple’s future and see tremendous value in Apple’s stock.”

 

He added that the company would regularly review the its cash returns, remaining “thoughtful about the size, mix and pace of the programme”.

 

Apple made the announcements as it delivered a strong set of results that outstripped forecasts. Revenues climbed 4.6pc to $45.6bn in the second quarter, nearly $2bn higher than expected, while profits rose from $9.5bn to $10.2bn.

 

The figures were driven by strong sales of the iPhone, which sold 43.7m units in the last quarter alone – around 5m more than projected. Sales of its iPad tablet device were less impressive, however, slipping to 16.4m units from 19.5m in the same period last year.

 

Mr Cook said it had increased its share buyback after discussions with a broad range of shareholders, but Mr Icahn was quick to claim the victory.

 

The billionaire investor, who is the 23rd largest shareholder in Apple, has spent the past year agitating for the company to return more money to shareholders, and put its massive cash surplus to use while the company is “undervalued”.

 

He tweeted: “Completely agree with Apple’s increased buyback and extremely pleased with the results. Believe we’ll also be happy when we see new products.

 

“We continue to believe Apple remains meaningfully undervalued. Many analysts fail to understand [the] company.”

 

Mr Icahn has had a number of meetings with Mr Cook, and has intimated that the secretive technology giant has a number of products in the pipeline, which investors have not yet factored into their valuation of the business.

 

Apple’s share price jumped nearly 8pc to $565.50 in after-hours trading last night, as investors were buoyed by the prospect of regular cash returns. However, it is still a long way below its peak of September 2012, when it topped $700.

 

The appetite for Apple’s shares was also helped by a seven-for-one stock split, which was confirmed for June. The move will make it much easier for smaller investors to take bets on the future of the California business, without having to make huge outlays.

 

By  Katherine Rushton, Telegraph.co.uk

Telegraph.co.uk

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