There are times when I think big business is just a scheme to get many people to pay for a few people to be rich. I’m no financial genius, but I invest and thanks to the stock market’s rise since early 2009, I’ve done OK.
Yes, I have some Apple stock and the price has done well, too. It should. I pay for Apple’s stock dividends and stock buybacks. And by ‘I’ I mean you and me and everyone else who buy Apple’s products. That’s how the world works but it is not something I like. Why not? The rich get richer.
Think about the situation for a moment. Apple charges more for their products. That means higher gross margins and more profits. The executives that run Apple get stock options and high pay. Apple is so profitable that it can afford to give dividends to shareholders and buy back stock (ostensibly to inflate the stock’s price by reducing available shares). We’re talking many tens of billions of dollars in buybacks and dividends. Yet, Apple still has a cash pile pushing nearly $250-billion (and some debt, due to debt being cheaper for Apple than repatriating overseas profits).
We pay for those dividends by paying higher prices for Apple’s goods. We pay for those stock buybacks. We pay for those huge executive bonuses, stock options, and high salaries. Apple’s employees live well thanks to a faithful and loyal customer base that pays more money for products that can be purchased for less elsewhere.
Apple designs products which have a desirability factor; products that work well together, and come with an ecosystem that provides an extra measure of privacy and security, plus good service and support. All of that costs money. We pay for that. But we also pay for the aforementioned executive lifestyles, and we pay for the company’s lucrative dividends and stock buyback programs.
Oh, and $10-billion a year in R&D, but that’s a different story.
Here’s what I would like to see. Lower prices. Apple can afford it. The company has so much money on hand that it does not know what to do with it. Apple cannot spend money fast enough, so in exchange for that lack of creativity and new product development, I propose this adjustment in how Apple does business.
First, lower the prices. We pay a premium for almost everything the company makes, we love Apple products, but let’s be realistic. Some of us have grown tired of paying for Apple’s luxuries while we scrimp and save and borrow to buy the company’s products.
Second, cut the dividends. Those stockholders haven’t done anything to deserve a dividend. They buy. They sell. When they do, that money doesn’t go to Apple. It goes in their pockets. When an investor buys a stock and sits on it (ostensibly collecting dividends) they set a floor for the stock. That’s all well and good, but I’m paying for that floor.
Finally, do something with the money you have. Expand the Mac line, expand the iPhone line, do the same with the iPad, buy Tesla, but make the money work for Apple instead of being lazy and making money work a little as a bank deposit.
I’m growing a little weary of making Apple’s executives rich while they give away money left and right and sit on a pile of cash.