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Apple Inc. Innovation Now Means Mimicking IBM


Under continued pressure from Carl Icahn, Apple's board continues the IBM issue-a-buyback-and-raise-the-dividend approach.

If Tim Cook's ingenuity in boosting Apple's (NASDAQ:AAPL) share price could just translate to product innovation, then Apple could really soar again. Unfortunately though, Apple's heyday apparently has come and gone. Its only ingenious strategies are to mimick another former innovator, International Business Machines (NYSE:IBM), with the goal of arm-twisting the stock price higher rather than watching it slide.

Let's face it: There hasn't been much buzz out of Apple for three years now. With its existing product line, it did manage to grow its iPhone sales, but the company saw its iPad sales shrink with negative growth last quarter. We all know that tablets are where the great growth curve lies, and negative growth doesn't speak well for the future, but that's a story for another day. Yesterday Apple's stock was halted after hours as it bombarded the airwaves with surprise after surprise.

Under continued pressure from Carl Icahn, Apple's board continues the IBM issue-a-buyback-and-raise-the-dividend approach, approving an additional $30 billion stock-buyback plan (adding to the $60 billion already planned) and raising its dividend almost 8%. IBM has used this strategy successfully for eight quarters of declining growth to keep its share price elevated. At least Apple doesn't have declining growth yet, so it should get a boost in price as a result. Maybe Cook is brighter than we think. At least he is ramping up the buyback/dividend strategy before a fall in earnings growth.

And then there's the stock split. Let's not leave the little investors out of the mix. If you really want to juice the stock, consider a split; and don't split from $1,100 to $550 like Google (NASDAQ:GOOG) did recently, but rather go for the bleachers -- get the moms and pops involved again. Get the price back under $100 where they can load up. Make Apple affordable. The growth investors no longer flock to Apple, so they need to be replaced. At $550 per share, mom and pop haven't been buying. Now they can.

What they will be buying, though, is a company that certainly appears to be heading down the hill, not up it. The share price continues to trade at a 25% discount to its all-time highs, and getting back to an equivalent high does not appear likely -- fundamentally or technically. Apple is a mammoth cash cow now, willing to pay out dividends rather than innovate and to use capital maneuvers to boost share price rather than new products and vision.
Editor's note: L.A. Little is a professional trader, author, and money manager who has written several books and contributed material to many financial sites in addition to authoring his own: Technical Analysis Today. He brings a unique perspective to technical analysis, incorporating his extensive engineering and modeling skills when analyzing the markets.

Twitter: @tatoday
No positions in stocks mentioned.
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