Apple reveals how it's planning to use the surplus cash

Apple decided to use the $97.6bn cash on its balance-sheet to pay dividend, for the first time since 1995, and buy back some of its shares.

The company confirmed it will pay a quarterly dividend of $2.65 per share starting from July which is a dividend yield of 1.7 per cent on the current share price. Apple will buy back up to $10bn of its own shares starting in the company's next financial year.

There have been a many speculations as to how the money will be used. The cash had been held for a long time mainly because of Apple’s near-bankruptcy in the mid-1990s. Also, Steve Jobs was not a supporter of dividends. Another reason for Mr Cook’s cautious approach to paying dividends may be the Microsoft’s experience. The firm suffered a slower growth as soon as it began to return cash to shareholders in 2003. Some therefore view the decision to start paying dividends as a signal that company’s glory days are over. Parting with money is therefore a big step for the company to take.

On the other hand the dividend rewards shareholders and opens ownership of Apple shares to a wider range of funds, as most ‘value-oriented’ funds are not allowed to buy stocks which don't pay dividends.

Apple’s share prices continue to rise thanks to this decision. With the new iPad sales boosting company’s wealth is growing at enormous rate. Three million iPads were sold in the first three days at $400 gross profit per unit making up for the $10 billion return to shareholders.

As Tim Cook ensured in his statement:  ‘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.’

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Apple worth more than most countries in the world!

Apple, world’s most valuable company, announced its market value closing at $542.44 on Wednesday. There are only six other US businesses that have ever passed the $500bn (£314bn) threshold: Exxon, Microsoft, Cisco Systems, Intel and General Electric. However, none of them are near it now, therefore Apple is currently the only firm priced that highly. Furthermore, there are only twenty countries in the world that reached the $500bn gross domestic product mark.

 The company’s sales and profits are growing at enormous rates as the popularity of its iPads and iPhones increases. It is expected to make a profit of $40bn in 2012 with its iPad3 launching next week. Its shares are already up 32 per cent this year. Apple has also approximately $100bn of cash on its balance sheet. Investors are hoping that the firm may use some of the reserve to pay out a dividend. Tim Cook assured shareholders that the board is thinking ‘very deeply’ about ways to use the cash.

This remarkable turnaround, for a company that used to be worth only $3.19, took place under Steve Jobs, the revival started with computers, then iPods, iPhones and iPads. Despite all patent and trademark disputes future remains optimistic for Apple, fuelled by the supposed launch of a new iPad next Wednesday. The new iPad is expected to secure Apple’s domination on tablet market and ensure further profit increase. 

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Olympus and the impact of the accounting scandal

Olympus predicts a significant net loss, but core business is expected to remain intact.

Olympus made a 33.09bn yen loss for the nine months to the end of December 2011 and it forecast that it would make a 32bn-yen loss for the full year to the end of March 2012. That is in comparison to a 3.87 billion yen net profit last year.

 

The Japanese maker of cameras and medical equipment has admitted to hiding losses of $1.7bn for 20 years and it remains under investigation by law enforcement agencies in Japan, Britain and the United States. The company is now preparing to question its former board members in April, the meeting is expected to be a lively one.

Despite the scandal the firm was allowed to keep its listing on the Tokyo Stock Exchange, however it has been fined 10m yen by the exchange. Furthermore, the scandal has caused Olympus' share price to fall by almost 50% since it became public in October last year.

Olympus has been considering alliance offers to shore up its finances after the accounting scandal severely harmed its assets. However, as Takayama told reporters, Olympus may be able to deal with the crisis independently by accumulating profit, without outside capital.

Yasuo Sakuma, a portfolio manager at Bayview Asset, claims that given the nature of the business, there are limited competitors and the scandal has not had a huge impact on the business. Operating profit in its medical systems business rose 7 per cent to 18.87 billion yen during the October-December quarter.

The scandal has shaken confidence in Japanese corporate governance and it will be very difficult for the company to fully recover.

Also see: Olympus loss-hiding scandal

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Olympus loss-hiding scandal

The Japanese camera maker Olympus sued 19 current and former executives for their alleged role in a £1bn accounting cover-up. It was revealed when Michael Woodford, the former chief executive, got dismissed after expressing his concerns about the company's accounting practices. Mr Woodford had written six letters to directors questioning business methods at Olympus. He had raised a concern over Olympus' payment of $687m in fees to financial advisers during the acquisition of Gyrus - UK medical equipment company. Mr Woodford claims that there is a need to clear the situation completely in order to regain credibility. He is also calling for drastic changes in the board of directors.

The 19 sued executives initially denied their involvement in the cover-up, however they later admitted the company had been hiding losses. The firm has admitted to hiding losses of $1.7bn (£1bn) for twenty years. The lawsuit was filed on 8 January, it seeks up to 3.6bn yen (£30.3m) in damages. The case will mainly focus on current and former board members, including ex-president Tsuyoshi Kikukawa, former vice president Hisashi Mori, auditor Hideo Yamada as well as current president Shuichi Takayama. All of them already have or are planning to step down this month altogether with other board members. The company has announced it will be holding an extraordinary general meeting on 20 April, where Olympus shareholders will get a chance to confront its management about the accounting scandal.

Olympus has lost 50 per cent of its market value since the scandal became public in October. Shares, however were slightly boosted by talk of Olympus’ takeover and a report that this large company is unlikely to be delisted. 

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