Apple Cites ‘Tremendous Opportunities’ in Smartphones, Tablets

Seeing “no ceilings” to its continued growth and “tremendous opportunities ahead,” Apple CEO Tim Cook said Monday in a webcast that the company will implement a share repurchase and dividend program that will make it one of the biggest dividend payers in the U.S. The company will distribute $2.5 billion to shareholders, or $2.65 per share, in Q3, subject to a board declaration in July, he said. Apple last paid a dividend in 1995.

The dividend rewards current Apple stockholders and will “broaden Apple’s investor base” by attracting new investors that don’t currently own Apple stock, Cook said. First-year dividend payments are expected to be over $10 billion, according to Chief Financial Officer Peter Oppenheimer. Apple’s $10 billion share repurchase program, to take place over 3 years, was designed to limit further dilution from the company’s employee equity program, and is slated to begin in fiscal Q3, Cook said. In total, the combined program will consume $45 billion of domestic cash in the first 3 years, Oppenheimer said.

In the quarter, Apple sold 37 million iPhones, which represented less than 9 percent of handsets sold overall during the quarter, according to Cook. The handset market is set to grow “dramatically” from 1.6 billion units in 2012 to over 2 billion units in 2015. Eventually all mobile handsets will be smartphones, he said, making the potential for iPhones “enormous.”

IPad sales have reached 55 million since the launch of the first iPad in spring 2010 through the end of the most recent quarter, Cook said. Saying “it just keeps getting better,” Cook cited Gartner Group projections pegging the tablet market at 325 million units by 2015. The tablet market “will eventually surpass the PC market in size, it’s just a question of when,” he said. In computers, Macintosh has outsold PCs for 23 consecutive quarters, but has less than 6 percent share of the 350 million unit market, Cook said.

Apple continues to innovate in products and services “at an incredible pace,” Cook said, citing the iCloud service, which passed 100 million users within a few months of launch. Distribution expansion is moving forward, with 40 stores slated to open this year worldwide, he said. In response to an analyst question about confidence in the product pipeline and an outlook for growth, Cook said “we actually love to announce new products. We just don’t do it in conference calls.” A growth rate of 73 percent last quarter “speaks for itself,” Cook said. “I am extremely confident in our future, and the pipeline is full of stuff,” he said.

Apple’s various successes have resulted in “substantial amounts of cash,” Cook said. Oppenheimer said the company generated $16 billion in Q1 fiscal 2012 alone, leaving the company with about “$98 billion cash” at the end of the December quarter. Of that, roughly $64 billion came from outside the U.S., “plenty of cash to run the business,” he said. Some cash has been poured back into R&D, acquisitions, new retail store openings, “strategic pre-payments in capital expenditures in the supply chain” and infrastructure, all of which will continue in the future, he said. Even with a “war chest” for the strategic opportunities, Apple is left with “plenty of cash” to run the business, which is enabling it to initiate the dividend and share repurchase program, he said. Cook emphasized that “innovation is the most important objective at Apple and we will not lose sight of that."

Wall Street liked the news, sending Apple shares $15.53 higher to $601.10.