Why Apple is buying back stock faster than promised

Tim Cook revealed today in an interview with the Wall Street Journal that Apple had purchased $14 billion of its own stock in the last two weeks. This brings the total buyback to over $40 billion. You might recall that back in April of 2013 Apple announced its plan to return $100 billion to shareholders by the end of 2015 including a $60 billion stock buyback. So here we are in early 2014, only 10 months later, and Apple has completed two thirds of its buyback. This is not the sign of a company lacking confidence in its future. Why?

If you read the interview with Cook, he clearly said they wanted to be opportunistic given the stock's decline since the last earnings release. Recall that Wall Street was quite surprised by the so-called "weak" quarter where Apple "only" sold 51 million iPhones, which was a new record, and oh ... they also posted record revenue, and earnings.

Activist shareholder Carl Icahn has been putting pressure on Cook and the board to buy back even more stock than they have been buying, which would mean taking on even more debt. Cook has resisted so far, which I think is smart. I don't want to see Apple burden itself with debt just because theory shows it to be a smarter capital structure. In the real world Apple very well may want to use its cash for a big deal at some point. Cook told the WSJ, "We have no problem spending ten figures for the right company, for the right fit that's in the best interest of Apple in the long-term. None. Zero." Of course ten figures is single digit billions, which would hardly put a dent in Apple's cash pile. I wonder if they'd spend eleven figures for the right deal?

Either way, Apple is clearly more confident in its future than Wall Street. As a shareholder I'm thrilled to see them do $14 billion of stock buybacks following the latest quarterly earnings.

How about you? Would you like to see Apple slow down again, or speed up even more?

Source: WSJ