CUPERTINO, Calif. (TheStreet) -- Apple (AAPL) - Get Apple Inc. Report is now one of a shrinking number of tech heavyweights avoiding dividend payments despite recent calls from shareholders and analysts to rethink its strategy.
Even networking giant
recently succumbed to pressure from shareholders
, which reversed its dividend stance in 2003,
So why is Apple allergic to dividends?
Apple sits astride a vast haul of cash -- almost $46 billion at the last count. It stopped paying dividends in 1995, preferring to focus on growth at a time of stiff competition from the likes of Microsoft. Fast forward 15 years, though, and Apple has a market cap of $261.5 billion, compared to Microsoft's $211 billion. Steve Jobs and his ever-growing array of gadgets have also carved out a unique niche in the public consciousness, with Apple enjoying phenomenal brand loyalty.
Even from this position of strength, though, there are no signs of an Apple dividend.
Earlier this year, at Apple's annual shareholder meeting, Steve Jobs said that he
for potential acquisitions and "bold" investments.
"We know if we need to acquire something, a piece of the puzzle to make something big and bold, we can write a check for it and not borrow a lot of money and put our whole company at risk," he said. "The cash in the bank gives us tremendous security and flexibility."
Some analysts agree, adding that Apple spending money on a big tech buy would be a smart way to bolster the company's reach. "They could easily afford a dividend at any time, however I would rather see them make an aggressive M&A move," Joel Achramowicz, senior vice president of research at investment bank Blaylock Robert Van, told
A big acquisition could significantly bolster Apple's enterprise presence, according to Achramowicz, who suggested
as an attractive target on the strength of is strong consumer distribution platform.
It's also worth noting that
, and this trend is expected to continue, further pressuring rivals such as
Research In Motion
Lastly, a sizable chunk of Apple's money is overseas, making a dividend even less attractive. According to Apple's most recent 10-K filing with the SEC, just over 50% of the firm's cash, cash equivalents and marketable securities are held by foreign subsidiaries. As Apple notes in its filing, "amounts held by foreign subsidiaries are generally subject to U.S. income taxation on repatriation to the U.S."
So, how much would this cost Apple? It has been estimated that Apple
Sure, Apple could easily make a dividend payment, but the tax implications would likely impact earnings greatly.
, it should also be noted that the company is not the only tech giant shunning dividends.
has never paid a dividend. And
has kept its dividend at 8 cents since 1998.
--Written by James Rogers in New York.
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