Apple says it will spend some of its nearly $100 billion in ready cash on a quarterly dividend and a three-year stock buyback program. The dividend is probably a good idea -- investors have been thirsting for a bigger taste of the company's success.
The stock buyback, not so much.
"A quarterly dividend will provide recurrent income to our shareholders, and we also believe it will broaden Apple’s investor base by attracting new investors who don't currently own Apple stock," says Apple CEO Tim Cook. "Innovation is the most important objective at Apple, and we will not lose sight of that. These decisions will not close any doors for us."
Yet buying back its own stock is about as unimaginative a use of money as a company can come up with. It doesn't create new jobs. It doesn't lay the groundwork for new business opportunities or increased production.
All it does it boost the company's stock price, which might make shareholders (including senior executives) happy over the short run but doesn't do much for long-term prospects.
Apple certainly isn't alone in using cash for such purposes. As of November, U.S. corporations had authorized more than $453 billion in repurchases of their own stock, putting 2011 on track for the third-highest annual total behind 2006 and 2007.
Obviously a business is entitled to do what it wants with its profits. But $100 billion could do a lot of good other than making shareholders richer. It could hire more people and create new jobs. It could invest in new equipment and acquisitions. It could reduce workers' ever-increasing healthcare costs.
Cook says innovation is important to Apple. OK, prove it.