Introduction

Tim Cook (TC), Apples CEO, and Peter Oppenheimer (PO), the companys CFO, met in their Cupertino, California, offices on April 12, 2013. They were addressing shareholder concerns about Apples cash position, and stockholder pressure to keep developing was intense. They were notably concerned about Apples cash position, which remained at$137 billion as of the companys first-quarter report, especially given the companys stock prices drop from well over$700 in September to around $420 in April. Furthermore, David Einhorn (DE), president of Greenlight Capital (GLC), incited shareholder resentment by proposing that Apple should return the majority of its $137 billion in cash toshareholders rather than allowing it to sit idle. TC and PO were obliged to make a decision about how to address theseconcerns.

History

Steve Jobs (SJ) and Steve Wozniak (SW) launched Apple Computer in 1976, in SJs parents garage. SW, would serve as the engineer; SJ the visionary and businessman. While SW was prepared to give up the design for what would become the Apple I for free, SJ suggested selling it to a local computer store. Apple Computers was practically profitable within 30 days. SW began designing the Apple II after observing how plain and uninteresting the Apple I appeared in comparison to other computers. Nearly six million Apple II computers were sold during a sixteen-year period in a variety of configurations. SJ, however, was restless, as the computer was always viewed as SWs, not his.

Apples financial situation deteriorated over the next several years. Two new projects, the Apple III and the Lisa, were experiencing financial difficulties, as such, SJ was fired from the team while the Lisa was being created.

Between 1985 and 1997, Apple introduced numerous additional computers, which were largely fruitless. SJ, conversely, was revelling in the recent success of Pixar, which he acquired from Lucasfilm in 1986. In 1997, when SJ took over as interim CEO, Apple was ninety days away from insolvency and the companys stock was at a twelve-year low. SJs first priority was to trim both the projects and teams on which Apple was working. Only a product line of four items remained after trimming: a consumer desktop and laptop, a professional desktop and laptop. In 1997, the year before SJ became interim CEO, Apple lost $1.04 billion. They earned a profit of $309 million a year later. That same year, the iMac was released. Between August 1998 until the end of the year, the iMac sold 800,000 copies. Around 32% of these sales were to individuals who had never purchased a computer before. Later that year, SJ hiredTC as the companys new chief operating officer. TC was able to reduce Apples inventory from a month to only six days and halved production time. The board began pressuring SJ to become CEO rather than interim (or as he referred to himself, the iCEO.) SJ formally became Apples CEO in January 2000.

The following decade saw numerous changes. In 2001, Apple introduced the iPod, iTune and

iTunes store, boosting Apples sales. Various variants of the iPod were released over the next several years, some with massive storage capacities and others without screens. SJ was di- agnosed with pancreatic cancer around this period.He kept this information a secret for a long period of time, but underwent surgery in July 2004, designating TC as histemporary re- placement while on medical leave. When he returned, he immediately focused on the iPods successor.Given that it accounted for 45% of Apples sales in 2005, it was critical that they re- mained innovative. "The devicethat has the potential to consume our lunch is the cell phone," he observed. While they initially attempted to just tweak the iPod, they invented the now- famous iPhone. The iPhone was a smashing success, selling 270,000 units in its first thirty hours alone.

In 2008, SJs disease resurfaced; his physical appearance overshadowed the debut of the iPhone 3G in June.Journalists and investors began to press for information about his health. The com- pany said that he was simplyexperiencing a common glitch. Apples stock price began to de- cline. SJ took another medical break in January 2009. His cancer had spread to his liver, rapidly deteriorating his condition. SJ underwent a liver transplant in March 2009, even though cancer had spread beyond his liver and physicians were gloomy about his health. However, SJ healed andreturned to Apple in May. Apples stock began to skyrocket. Revenues increased by more than 65 per cent over theprevious fiscal year. A year later, cancer returned and SJ was forced to take his third medical absence, reestablishingTC as CEO. He would not return this time. SJ died on October 5, 2011, leaving TC as Apples new CEO.

Conclusion

Apple was the non-financial institution with the greatest cash reserves. Apples closest com- petitor in terms of cash reserves was Microsoft, which held little more than half of Apples. TC and PO needed to develop a solution that satisfied shareholders while still allowing the company to innovate. TC and PO had to first decide whether or not toreturn money to share- holders and, if so, how much. TC and PO began by generating a financial estimate to see howmuch cash Apple would accumulate over the next five years if they returned all of it in 2012. They were sceptical of DEs calculations for dividends, repurchases, and iPref and chose to perform their own computations. TC and PO were reminded that even with such a vast sum of money and the pressure it generated, high-class problems remainedproblems.

Question: Following the events noted in this case, state what Apple actually chose to do with their cash (2013 - 2014) and any rationale for this decision.