Why not? They can spend their money however they want, but Wall Street demands endless share buybacks over everything else.
Do you think there is any downside to just transferring wealth to the (already rich) shareholders over and over and over again? Seems to be their top priority nowadays.
Camera tech seems to be an obvious choice. But, they could go as far out there as doing drug research. Apple is a giant multinational corporation, they could get into any market.
Drug research? Really? There is no part of Apple that is optimized for drug research. Even with the iPhone, they already had an OS that was the basis for it.
As I said, cameras or something similar would be working to their strengths. Hell, build a game console, Microsoft eventually pulled that off and Apple has a huge leg up.
But, the thing is they don’t need to be good at something. Giant companies regularly expend into new areas. Employ the right people, make some investments, and suddenly they are competitive.
I am not saying Apple should diversify like this. However, it is an option.
Game consoles are also not hugely profitable. In fact they are sold at a loss for the most part for the first few years. Microsoft loss billions selling game consoles on the first two or three generations. Even now, the mobile app market is larger and more profitable than the console market for Apple with them taking a 30% cut.
On top of that, Apple already announced the subscription Apple Arcade service and their games will run on iPhones, iPads, AppleTVs and Macs.
Between Microsoft and Sony, they sold a little over 100 million of the current generation consoles during their entire existence (https://www.cinemablend.com/games/2417541/ea-reveals-how-man...) - many of them at a loss. Apple sells 50-70 million iOS devices every quarter.
Heck Apple will probably sell more Watches (at a profit) than that during its first 5 years.
People are already spending more time on mobile devices than consoles.
As far as cameras, the standalone camera market has been declining for years because of the smart phone. There is only so much you can do with cameras in phones because of both physics and the cost has to be low enough to make the entire phone affordable. I’m sure no one at Apple is thinking about releasing the Apple QuickTake 2.
The point of this exercise was to find areas they could have spent that 17 billion on R&D. A few billion losses for a few years for a net long term gain is the point of investing in R&D.
Further, as I have listed areas they could be investing in but are not that you have had zero objections to. I think it's clear they have less focus on R&D than was possible.
Yes and every area you posted is about them getting into declining markets - most of which are declining because of the smart phone.
Microsoft made $10 billion in revenue last year on the XBox - they don’t mention profit (https://www.geekwire.com/2018/microsofts-record-setting-10b-...). Microsoft still probably hasn’t recouped their losses in the Xbox division and the console market isn’t expected to grow.
Apple made about 24 billion on the Mac during the previous four quarters (https://sixcolors.com/post/2019/07/apple-third-quarter-2019-...). You know Apple doesn’t sell a single Mac where they don’t make a healthy profit. The Mac is nowhere near their best performing segment.
Smartphones also largely killed off the watch industry but they where happy to jump into that market. It’s just a question of positive ROI not the ultra long term.
Yes and the Apple Watch is a wearable computer that does a lot more than just tell time. What do you propose they bring to the standalone console, TV, or camera market that will make a declining market make money?
Do you know what apple did in the 80s? Overextend by following foolish ideas like yours, focus is what led to them reaching their success, and focus is what will extend them to the next product that, guys like you will complain about not being innovative.
It's impossible to evaluate the marginal return to Apple on increasing R&D by $1 versus increasing $1 in spending buying back stock in light of a tax windfall. They are both sources a potential value, neither is obviously correct, and the value of each dollar spent is highly non-linear.
Also who do you think the top shareholders of Apple are? Apple making a profit doesn't necessarily hurt the Vanguard ETFs my government-employeed middle class American family members sock retirement saving into...?
What is exactly wrong with share buybacks? Clearly they have more capital than they can deploy effectively right now, so they plan for the future by putting some powder in their gun. Share buybacks serve three main purposes:
1) increase the share price (as you mentioned)
2) signal to investors that the company is bullish on it's future (they wouldn't buyback shares if they thought the shares would be lower in the future)
3) Give the company the option to sell the shares in the future in case the extra capital can be used for a prudent use.
It's really mystifying why people are so against share buybacks while no one talks about dividends. They share a lot of similarity, but buybacks provide more options and greater tax efficiency so they should be preferred over dividends in most cases.
> Do you think there is any downside to just transferring wealth to the (already rich) shareholders over and over and over again? Seems to be their top priority nowadays.
That's not what's really going on (see above). Also, I would hazard to guess that most people who have exposure to the stock market have direct market exposure to Apple. Moreover, about half of households have direct (non-pension) exposure to the stock market. So I don't think your claim about it only benefiting the "already rich" shareholders hold much water. Hell, I would bet that 90% of HN users have direct exposure to equity markets.
AOC presents a good argument against Buy Backs from Big Pharma which incentives CEO's who's compensation is tied to stock price, which as a result she attributes as the cause of rising costs of health insurance:
Although Big Pharma doesn't operate in a natural economy where products are priced at optimal demand / supply for max Revenue. Instead their cost is hidden from the end-user, absorbed by insurance companies and amortized across all plan holders with rising cost of health insurance.
In the long-term Buy Backs shouldn't increase a companies value as it's just trading one Asset for another, i.e. it's cash reserves for shares in their own stock, they'd choose to do this if they've maxed out their R&D budget (very healthy at $14B) and if they believe their share price is undervalued, which at a 17 P/E is significantly lower than all other FANG stocks.
They could try and follow in AMZN's footsteps and try to expand into all areas outside of their core competency, but it's not their style which is to do a few things and do them well. IMO it's due to protecting and not wanting to dilute the high appeal of their Brand and Products.
The result of which they've ended up with an excessive amount of capital and no effective place to invest it, although IMO they should've invested a lot more in content like Netflix a lot sooner than they have with Apple TV+.
> Are we taking AOC seriously on anything related to economics?
AOC has at least studied economics at Boston University and has made it a goal to go after corruption and corporate greed. Just because the source isn't coming from Wall St or Corporate America doesn't make it invalid.
It's not clear how much of the research behind her reasoning and arguments come from her or her team, either way if you have a counter argument that contradicts her points make them, you've added nothing of value with your prejudices in trying to disparage the source.
Parent was asking what's wrong with Buy Backs, to which she's presented a negative side-effect of them that you wouldn't hear from Wall St who stands to benefit from them.
> Another presidential candidate said he would “clear the swamp”. How did that work out?
She's never been a presidential candidate, but what do the words of a pathological liar have to do with anything? That no-one can be trusted and everyone will always do the opposite of what they say they'll do?
If you've followed the House meetings AOC has participated in you would've noticed that she's been committed to exposing corruption and corporate greed that she's brought to light. She's also taken a public pledge to refuse any corporate PAC money that she's highlighted (in another House Meeting) was a common cause of corruption.
So I'll take her word over a serial liar who's been favorable towards companies, lobbyists and foreign nationals that frequents his hotels and earned him more than $80M in revenues.
Regardless this thread has become unnecessarily political. Her point was about the negative consequences of Buy Backs.
Okay. Let’s make it a little less political. When good intentions meet reality where each house of representative member spends more time fundraising than working (https://www.termlimits.com/congress-fundraising-priority/) and since more states are Republican than Democrat - meaning that the Senate doesn’t represent the people in proportion to the population (every state has two Senators regardless of population), what are the chances that a Democratic President will get anything done?
Obama’s administration had almost no personal legal issues, was much more popular than the current administration and still couldn’t get much done after the first two years.
> Okay. Let’s make it a little less political... What are the chances that a Democratic President will get anything done?
This has instead segued into predicting the hypothetical effectiveness of a unknown future Democratic President...
I'm Australian so it's not going to affect me, but from the outside it looks like the U.S. has, with the assistance of a foreign adversary, unknowingly elected a corrupt, cheating, racist, inept pathological lying demagogue as its head of government. If he's elected again after showing his true colors, the rest of the world's going to think the majority of the US population is complicit and in-support of his views. Personally I'd say give a Democratic President a chance at restoring decorum to US politics.
In terms of effectiveness, IMO U.S. major problems with cost of Health Insurance, Gun Laws and frequent Massacres wont be resolved within my lifetime. They might have a chance with Health Insurance as Obama was able to implement ACA and it looks like its one of Sanders and Warren's major campaign promises to implement Medicare for all, but they should be able to make progress on their other campaign promise of reducing Wealth Inequality. Warren is especially motivated on reining in Wall Street [1].
They might have a chance with Health Insurance as Obama was able to implement ACA
Just barely, but it was still a half measure and while better than before, they couldn’t go all in even during the first two years because to keep the Democrats on board who were just as beholden to the insurance lobby as Republicans they had to work with private insurance companies. It is still slowly being eroded by both the President and red states that are trying to get it overturned by the judiciary.
They might have a chance with Health Insurance as Obama was able to implement ACA and it looks like its one of Sanders and Warren's major campaign promises to implement Medicare for all,
And no Republican in the Senate or House will go for it and many Democrats are afraid to stand up to the insurance lobby. Even if the Democrats keep control of the house and gain control of the senate, it’s unlikely they will have the 60 vote filibuster proof majority to pass anything. Even if they do, Republican states will fight it tooth and nails in the courts.
Inequality. Warren is especially motivated on reining in Wall Street [1].
She can be “motivated” all she wants, but both parties are in the pocket of Wall Street. She probably won’t even get Democratic support for it.
Do you think there is any downside to just transferring wealth to the (already rich) shareholders over and over and over again? Seems to be their top priority nowadays.