* First dividend since 1995, $10 billion stock buyback
* To maintain 'war chest' for strategic opportunities
* No plans to repatriate cash from overseas - CFO
* Shares again set record high
By Poornima Gupta
SAN FRANCISCO, March 19 Apple Inc CEO
Tim Cook, moving swiftly after taking over from late Silicon
Valley icon Steve Jobs, fulfilled a longstanding desire of
investors by initiating a quarterly dividend and share buyback
that will pay out $45 billion over three years.
The world's most valuable company will start paying its
first dividends since 1995 - a regular quarterly payout of $2.65
a share - in July, and buy back up to $10 billion of its stock
beginning in the next fiscal year.
The $10 billion annual dividend program, which Cook said
will be reviewed periodically, ranks among the largest current
U.S. corporate cash payouts.
Yet it disappointed some fund managers, given a 1.8 percent
dividend yield that lags the Standard & Poor's 500 average and
its modest size versus a $98 billion war chest Apple has
accumulated selling Macintosh computers and iPhones.
On Monday, the company said it had sold 3 million of its
latest, 4G-enabled iPads, setting a first-weekend record for the
line of tablet computers.
Cook told analysts on Monday that "making great products"
remained top priority, echoing the sentiments of his former
boss, who died last October after a long battle with cancer.
Jobs' former lieutenant has impressed Wall Street since
taking the helm. He made his mark revealing Apple's production
partners and initiating investigations into allegations of labor
abuse in its supply chain, and addressing investors directly at
this year's Goldman Sachs conference. But the question of
whether the operations maven can envision revolutionary products
lingers for some.
"Already we are seeing more openness, and more willingness
to address issues on many different fronts under Tim Cook than
we had seen in the past," said Connor Browne, portfolio manager
of Thornburg Value Fund.
"While all this other stuff is good, there is still some
pressure on management to come out with fantastic products over
the coming months," he said.
Cook's move came less than a year after he was appointed
head of the company and suggested to many a move away from Jobs'
era, when a dividend was often mentioned but not acted upon.
Under Jobs, Apple maintained that capital preservation was key
and the company needed the flexibility of having a cash pile.
Apple shares ended up 2.7 percent at $601.10, after notching
a record of $601.77 just before its close on the Nasdaq.
When Cook was announced as CEO of one of the most highly
recognizable brands, Wall Street feared he lacked Jobs' uncanny
vision for ground-breaking consumer electronics. But Apple's
shares have gained more than 50 percent since Jobs' death and
set a record above $600 last week as investors noted the
assurance with which Cook has taken the reins.
Within company headquarters at 1 Infinite Loop, there
remains a sense of urgency despite the success, former Apple
executive and venture capitalist Jean-Louis Gassee said.
Cook "was part of what made Apple such a juggernaut when
Steve was running the show," Gassee said. "He now follows
Steve's advice: Don't try to be me, be yourself."
Michael Holt, analyst with Morningstar, said Cook was
"putting his own slant on things" but some of the company's core
areas, such as product development, have not changed under him.
"The influence of Steve Jobs is very heavy on not only the
current products, but also products that are in the pipeline,"
Holt said. "So it's kind of a balance."
Cook, a former IBM executive and Apple long-time chief
operating officer, oversaw the rollout of the iPhone 4S last
year and presided over what he said on Monday was a "record
weekend" of sales for the new, 4G-enabled iPad.
"Innovation is the most important objective at Apple and we
will not lose sight of that," Cook said during the rare
late-quarter conference call.
Many investors now await an Apple TV or a similar device: a
gadget that will transform an industry the way the iPhone did.
On a conference call, one of the first questions that cropped up
regarded the product pipeline. Cook declined comment.
"One of the risks with Apple in particular is that they have
very little in recurring revenues. Most of the revenue is new
sales, which means that innovation is absolutely critical,"
Oliver Pursche, manager of the GMG Defensive Beta fund."
"That's one of the reasons that the PE is so low."
Apple joins the ranks of Silicon Valley blue chips that have
recently begun doling out dividends, including Cisco Systems Inc
, which announced its first-ever cash payout in March
2011. Among major technology companies, Apple rival Google Inc
remains a prominent holdout.
Analysts said the initiation of a regular payout would
attract a broader investor base, but added that many funds had
already piled in on hopes of a dividend, after Cook said this
year there were active discussions at the top level about what
to do with its $98 billion hoard of cash and securities.
"A lot of mutual funds that say they're buying dividend
companies had Apple in them. That shouldn't be, but I guess it
was obvious that after Tim Cook spoke last time that this was
the case," said William Lefkowitz, chief options strategist at
Apple expects the share buyback program to run over three
years, with the primary objective to offset the impact of
employee stock options and equity grants.
Its annual dividend yield will come in around 1.8 percent.
That ranks above Oracle Corp and International Business
Machines Corp but falls just short of the average of
around 2.4 percent for companies in the Standard & Poor's 500
index, analysts say.
The company will still maintain a "war chest" for other
strategic opportunities, Cook said. "These decisions will not
close any doors for us."
The maker of the iPhone, iPad and iPod has $98 billion in
cash and securities, equal to about $104 a share.
Apple said it anticipated using about $45 billion of
domestic cash in the first three years of its buyback and
Asked about the substantial cash Apple has parked overseas,
Chief Financial Official Peter Oppenheimer said the company had
no plans to repatriate it at this time.
"The current tax laws provide a considerable economic
disincentive to U.S. companies that might otherwise repatriate
the substantial amount of foreign cash that they have," he said.
"That's our view. And we've expressed it."