DOJ compares AAPL share buybacks with R&D as 'evidence' of lack of competition(9to5mac.com)
9to5mac.com
DOJ compares AAPL share buybacks with R&D as 'evidence' of lack of competition
https://9to5mac.com/2024/03/27/aapl-share-buybacks-verses-rd-spend/
96 comments
The argument is that a company like Apple, instead of investing its cash pile itself, should return that money to its shareholders who will, collectively, better allocate their capital than Apple will. This is almost certainly true.
The company then has essentially two choices on how to return that money. It can pay dividends, which are taxed, or it can do stock buybacks, which are not taxed until investors choose to transact their holdings. Financially, for most investors, buybacks are better.
I'll also point out that buybacks don't obfuscate prices, but instead permanently change them. By reducing the equity outstanding, the equity remaining gets more valuable.
The company then has essentially two choices on how to return that money. It can pay dividends, which are taxed, or it can do stock buybacks, which are not taxed until investors choose to transact their holdings. Financially, for most investors, buybacks are better.
I'll also point out that buybacks don't obfuscate prices, but instead permanently change them. By reducing the equity outstanding, the equity remaining gets more valuable.
There was a company a long time ago that had a clever idea. Instead of doing a dividend they would do a stock split followed by a stock buyback. For example a 1.03 to 1 stock split followed by a buyback of 3/103 of the stock.
So if someone had 500 shares the split took then to 515. Then the buyback bought 15 of those shares. Net result: the person had 500 shares, just like before, plus some money from the company.
The idea was that this would be capital gains income to the shareholders rather than ordinary income.
The IRS was not amused. I don't remember the name of the company of if they got away with it, but the result was an addition to the tax code to make sure it would not work in the future. Then some buybacks that clearly were legitimate got classified as dividends under the new rules, so the rules were modified again so that those would be OK. I think there may have been another round or two of tweaks for more edge cases.
So if someone had 500 shares the split took then to 515. Then the buyback bought 15 of those shares. Net result: the person had 500 shares, just like before, plus some money from the company.
The idea was that this would be capital gains income to the shareholders rather than ordinary income.
The IRS was not amused. I don't remember the name of the company of if they got away with it, but the result was an addition to the tax code to make sure it would not work in the future. Then some buybacks that clearly were legitimate got classified as dividends under the new rules, so the rules were modified again so that those would be OK. I think there may have been another round or two of tweaks for more edge cases.
Apple is unconcerned with the efficient allocation of capital. Hence their shell companies in Ireland.
Money spent on innovation is returned to the market efficiently, and ratchets science and technology forward across the marketplace.
Money spent on innovation is returned to the market efficiently, and ratchets science and technology forward across the marketplace.
The problem is from a tax perspective. Dividends are taxed twice. Once at the corporate level and another at the personal level. So companies in America prefer share buy packs as a work around.
Other countries have fixed this by allowing dividends to be tax free.
I would much prefer having reliable dividend pay outs that stock buy backs.
Other countries have fixed this by allowing dividends to be tax free.
I would much prefer having reliable dividend pay outs that stock buy backs.
...Or, y'know, rather than tilting the tax code even more in favor of those who make money by owning, and not by working, we could even things out by taxing stock buybacks (more).
Anybody can make money by owning - and we do. It's called investing and it's also how pension funds work.
Tilting the tax code against us is tilting it against the people and for politicians, unchecked bureaucrats with their uncontrollable spending thirst.
Tilting the tax code against us is tilting it against the people and for politicians, unchecked bureaucrats with their uncontrollable spending thirst.
Anybody with significant disposable income.
That leaves out, based on figures I've seen, roughly half of America's population.
Get out of your bubble.
That leaves out, based on figures I've seen, roughly half of America's population.
Get out of your bubble.
I have a UK pension with UK stocks that regularly trade sideways for roughly 5-10 GBP per share.
Those stocks reliably pay out a dividend every month and is very much in he reach of the working poor.
I make more monthly income out of my UK pension than I do from stock buy backs.
This is how the stock market used to work in America before the 80s.
Those stocks reliably pay out a dividend every month and is very much in he reach of the working poor.
I make more monthly income out of my UK pension than I do from stock buy backs.
This is how the stock market used to work in America before the 80s.
> significant disposable income
B.S. Last time I checked, accounts at most online brokers were free. And they even allowed purchase of fractional share - so you could start investing with 100 bucks. As long as you do save that $100 and not throw it all away on crap, of course.
B.S. Last time I checked, accounts at most online brokers were free. And they even allowed purchase of fractional share - so you could start investing with 100 bucks. As long as you do save that $100 and not throw it all away on crap, of course.
This just shows how out of touch you are with the problems of the average American, that you see $100 that you don't have to spend on necessities—particularly $100 disposable that you have on any kind of recurring basis—as not being significant.
Are you saying the average american doesn't have a disposable monthly $100? That is demonstrably false - the statistics about current income and life costs paint the opposite picture: not only Americans but average people all over world are wealthier than they've ever been.
There are inequalities, of course, (like Europeans falling behind) but the Americans are doing very well indeed. So please stop with your propaganda.
https://awealthofcommonsense.com/2023/10/americans-have-neve...
Americans have that disposable $100. Now they may very well be deciding to throw it away on cigarettes, alcohol, weed, various entertainment (tv) or all sorts of crap - but that is a whole other discussion altogether.
There are inequalities, of course, (like Europeans falling behind) but the Americans are doing very well indeed. So please stop with your propaganda.
https://awealthofcommonsense.com/2023/10/americans-have-neve...
Americans have that disposable $100. Now they may very well be deciding to throw it away on cigarettes, alcohol, weed, various entertainment (tv) or all sorts of crap - but that is a whole other discussion altogether.
Blame the tax code. Buybacks are a more tax efficient way of returning capital than dividends, which get taxed twice (earnings at corporate and then income at shareholders).
> Does anyone have a market theory justification that makes them comfortable with the idea?
A large component of senior employees' salary at tech companies tends to be stock awards, which requires somebody to buy up the "free" stock to be usable as cash. If the company itself is doing this, then it amounts to a really roundabout way of paying employees. I'm still not comfortable with this idea, but it did change my attitude from "this is an outrageous practice" to "our tax laws are fucking broken."
A large component of senior employees' salary at tech companies tends to be stock awards, which requires somebody to buy up the "free" stock to be usable as cash. If the company itself is doing this, then it amounts to a really roundabout way of paying employees. I'm still not comfortable with this idea, but it did change my attitude from "this is an outrageous practice" to "our tax laws are fucking broken."
On the other hand, it seems like companies award stock as a form of golden handcuffs (you might be "awarded" that stock, but you don't actually get it for a while). If they just paid us with plain old money, instead of adding those hoops, there would be no problem to solve.
Employees benefit incidentally, buybacks are a manifestation of corporate and capital interests alone. What's "fucking broken" is innovation in the monopolized market.
The standard answer I get from finance types about any of this stuff is that it increases liquidity in the market so when you the little guy decides to sell, you can do so quickly instead of waiting until there's someone who wants to buy the stock because they're interested in investing in the company's future.
Some are saying that this allows people to postpone taxes, but not really. Not in aggregate. Someone has to sell their shares for companies to buy back stocks. For those who sell during the buyback, that profit is subject to taxes. Moreover, the market cap stays the same. Technically the shareholders already owned that cash they used for the buyback. All it does is move places on a report. If it were better used in R&D, that is a complaint they would be motivated to take up with management, since otherwise the buyback would be losing them money.
Wouldn’t the people selling those shares already be selling them (and paying taxes) regardless of whether they’re selling to someone else or to Apple? Unless they sold with the specific knowledge the shares were going to Apple, which doesn’t really make sense.
Those sellers are already going to be paying taxes no matter who they sold to, and then they’re out of the market. So if the stock price goes up, only the people who held would gain any value from it.
Those sellers are already going to be paying taxes no matter who they sold to, and then they’re out of the market. So if the stock price goes up, only the people who held would gain any value from it.
When you have a buy back, you have more buyers in the market, which puts upward pressure on price, which increases the likeliness that someone sells (and then the increased selling puts downward pressure on the price).
And I would argue that those who hold didn't actually gain any value from it, unless the stock price was lower than it should've been at the time of the buy back.
And I would argue that those who hold didn't actually gain any value from it, unless the stock price was lower than it should've been at the time of the buy back.
It seems it'd be a net benefit to make most share buyback programmes illegal; or increase the taxes on them dramatically. If frequent and at scale, they just seem to be prima fasce evidence of a market failure.
Stock buybacks used to be illegal.
> “Prior to 1982, stock buybacks were considered illegal stock manipulation, but President Reagan's Securities and Exchange Commission implemented a rule to exempt them.
http://chuygarcia.house.gov/media/press-releases/representat...
> “Prior to 1982, stock buybacks were considered illegal stock manipulation, but President Reagan's Securities and Exchange Commission implemented a rule to exempt them.
http://chuygarcia.house.gov/media/press-releases/representat...
Posting a politicians platform on stock isn't exactly a good argument. It doesn't explain why they should be considered market manipulation. Why is buying back a share manipulation but a dividend not be? Should issuing dividends be illegal since "worker pay hasn't kept up"?
> Posting a politicians platform on stock isn't exactly a good argument. It doesn't explain why they should be considered market manipulation. Why is buying back a share manipulation but a dividend not be? Should issuing dividends be illegal since "worker pay hasn't kept up"?
I didn't take that as toomuchtodo trying to make an argument personally.
toomuchtodo pointed out that they were illegal in the past, and shared a statement from a politician who wants to outlaw them again. Both of these are direct responses to mjburgess. That stock buybacks were illegal in the past is a relevant factual statement, as is a politician having a platform (seemingly) aligned with the wishes of mjburgess.
I didn't take that as toomuchtodo trying to make an argument personally.
toomuchtodo pointed out that they were illegal in the past, and shared a statement from a politician who wants to outlaw them again. Both of these are direct responses to mjburgess. That stock buybacks were illegal in the past is a relevant factual statement, as is a politician having a platform (seemingly) aligned with the wishes of mjburgess.
This. First google result for “illegal stock buybacks.” Can’t wait for GPTs to replace this need (citation for assertion), as first page Google results aren’t great (insert elaine benice i hate it meme here).
Sure, but why does something being illegal in the past matter without the reasoning of why it should be illegal again? There are plenty of immoral and unjust laws in the past.
> Sure, but why does something being illegal in the past matter without the reasoning of why it should be illegal again?
It's an interesting tidbit and gives a jumping off point for the person who was asking about it to research further if they want. I wouldn't have guessed that they were illegal once, but after toomuchtodo's comment I looked it up. Now I know more!
One shouldn't assume that just because someone chimed in with a fun fact they're an expert on it or have some opinion they want to push for unless they said or implied otherwise, which toomuchtodo didn't do.
As an example: I have minimal interest in anything related to stocks or finance. My only interest here was your response seeming a bit out of place :)
It's an interesting tidbit and gives a jumping off point for the person who was asking about it to research further if they want. I wouldn't have guessed that they were illegal once, but after toomuchtodo's comment I looked it up. Now I know more!
One shouldn't assume that just because someone chimed in with a fun fact they're an expert on it or have some opinion they want to push for unless they said or implied otherwise, which toomuchtodo didn't do.
As an example: I have minimal interest in anything related to stocks or finance. My only interest here was your response seeming a bit out of place :)
A company acting to make money for the people who own it. What a novel concept.
Rules and laws can change at any time, especially if they’re not encouraging the desired outcome. It’s all a shared delusion on a spreadsheet, not immutable laws of physics.
Companies exist because they are allowed to.
Companies exist because they are allowed to.
Stock buybacks should be outlawed. They're really a waste for the economy; cash is being used up to buy up imaginary assets to make your previously-owned imaginary assets more valuable.
Why not use that money on more impactful things? Like higher salaries, social programs, or just R&D in general.
Why not use that money on more impactful things? Like higher salaries, social programs, or just R&D in general.
The number I've not seen that I most want to see is the amount of share buybacks compared to the number of shares the company gives to its employees as RSUs or stock options.
Given that tech salaries tend to have a sizable pay component made up of stock, my gut feeling is that share buybacks are in large part a roundabout way to pay their employees.
(Now, let's also go fix the laws that make it tax-advantaged to pay people via such an indirect manner.)
Given that tech salaries tend to have a sizable pay component made up of stock, my gut feeling is that share buybacks are in large part a roundabout way to pay their employees.
(Now, let's also go fix the laws that make it tax-advantaged to pay people via such an indirect manner.)
Is it tax-advantaged? My impression is that RSU costs count as cash at grant time, which is a good deal (for the company) when the stock is going down but a bad deal when the stock is going up. The RSUs you get are counted as ordinary income when they vest.
Whether this is a good deal for the employee is a bit complicated: you're effectively holding stock for 4 years but taxed at ordinary income rates (as opposed to long term capital gains). On the other hand, if the stock goes up you've locked in being paid substantially above market. During the hot market times this effectively was an option: if they stayed they got stock granted at a low price, but they could leave if a different company was paying more.
Private companies can offer ISOs which do have a nice tax treatment, but this is all predicated on public company buybacks where that doesn't apply.
Whether this is a good deal for the employee is a bit complicated: you're effectively holding stock for 4 years but taxed at ordinary income rates (as opposed to long term capital gains). On the other hand, if the stock goes up you've locked in being paid substantially above market. During the hot market times this effectively was an option: if they stayed they got stock granted at a low price, but they could leave if a different company was paying more.
Private companies can offer ISOs which do have a nice tax treatment, but this is all predicated on public company buybacks where that doesn't apply.
> Why not use that money on more impactful things? Like higher salaries, social programs, or just R&D in general.
Because the money would not be spent on any of those things. Buybacks are a favorite boogeyman, but they are just tax efficient dividends. They certainly give people something to complain about though.
Because the money would not be spent on any of those things. Buybacks are a favorite boogeyman, but they are just tax efficient dividends. They certainly give people something to complain about though.
> Buybacks are a favorite boogeyman, but they are just tax efficient dividends.
"Tax-efficient" is weasel language. If the money was spent as dividends it would be taxed and then would benefit someone besides the executive suite and investors. If they were unwilling to pay that tax, then the money would need to be reinvested in the company in the form of higher salaries or R&D. So yes, if buybacks were illegal the money WOULD go to one of these things.
"Tax-efficient" is weasel language. If the money was spent as dividends it would be taxed and then would benefit someone besides the executive suite and investors. If they were unwilling to pay that tax, then the money would need to be reinvested in the company in the form of higher salaries or R&D. So yes, if buybacks were illegal the money WOULD go to one of these things.
It's not really weasel language, the potential taxable events are limited to the people who are selling their shares back to the company instead of every shareholder.
The potentially taxable dollars are the same (non-withstanding the buyback excise tax), it's just shaped differently.
The potentially taxable dollars are the same (non-withstanding the buyback excise tax), it's just shaped differently.
> Like higher salaries, social programs, or just R&D in general.
Because that could be a waste as well.
Stock buybacks are just a tax-advantaged form of dividends (and shouldn't be legal for those reasons). Just do dividends.
Because that could be a waste as well.
Stock buybacks are just a tax-advantaged form of dividends (and shouldn't be legal for those reasons). Just do dividends.
I would argue in a global sense its more tax-efficient that tax-advantaged (which is admittedly pedantic).
The main idea people need to remember is that if a company buys back its stock, someone else is selling it.
For equality sake, assume that it's been held for a year (so both the cap gains and equivalent dividend would be taxed at the same rates).
For an X amount of dollars, dividends and buybacks are going to generate the roughly a similar kind of 'tax footprint' for lack of a better term. The potential taxable events are just filtered to 'the entities that wanted to sell their shares' vs 'every equity holder'.
The main idea people need to remember is that if a company buys back its stock, someone else is selling it.
For equality sake, assume that it's been held for a year (so both the cap gains and equivalent dividend would be taxed at the same rates).
For an X amount of dollars, dividends and buybacks are going to generate the roughly a similar kind of 'tax footprint' for lack of a better term. The potential taxable events are just filtered to 'the entities that wanted to sell their shares' vs 'every equity holder'.
> For equality sake, assume that it's been held for a year (so both the cap gains and equivalent dividend would be taxed at the same rates).
A dividend is always taxed as income.
If you inflate the price of the stock to pay the dividend (stock buyback), it's taxed as capital gains.
A dividend is always taxed as income.
If you inflate the price of the stock to pay the dividend (stock buyback), it's taxed as capital gains.
In the average case it's a fair assumption the dividend is going to be qualified, and the owner is going to meet the 60/120 holding period, which effective means it will be taxed at cap gains rates. If not that's kinda their own deal.
I think people fixate too much on pricing dynamics. Kind of at a Gaussian surface level, the simple way to explain a price is eps * earnings multiple, where your inflated demand dynamics get lumped in with the multiple. The issue is an earnings multiple encompasses so much information as to be of little use, it's not trivial to quantify anything from it.
Let me be clear, buybacks can be a bad use of capital. The stock can go down to any number of factors, general market downturn etc. A buyback is an investment of the company in itself, and investments can be bad.
But if you have a number of earnings and a number of shares, if you reduce the number of shares, you have more earnings per share. At a constant multiple, an increase in eps should dictate an increase in price. That's as real as you and me.
I think people fixate too much on pricing dynamics. Kind of at a Gaussian surface level, the simple way to explain a price is eps * earnings multiple, where your inflated demand dynamics get lumped in with the multiple. The issue is an earnings multiple encompasses so much information as to be of little use, it's not trivial to quantify anything from it.
Let me be clear, buybacks can be a bad use of capital. The stock can go down to any number of factors, general market downturn etc. A buyback is an investment of the company in itself, and investments can be bad.
But if you have a number of earnings and a number of shares, if you reduce the number of shares, you have more earnings per share. At a constant multiple, an increase in eps should dictate an increase in price. That's as real as you and me.
Is this really an "absurd" take? How else do you increase stock price so easily and manipulate key metrics for investing (EPS)? Is the point of AAPL at this point to make computers or increase share holder value? Is a stock buyback truly a sign of confidence in the company?
Is it? Or is it a sign that the company is confident in itself?
What is the difference between a stock buy back and a dividend? Both increase shareholder value by returning cash to investors. If not share buy backs, they would just issue a special dividend to accomplish essentially the same thing just without reducing the outstanding share count.
If companies have the ability to issue new shares, why shouldn't they have the ability to reduce the shares with a buy back? What is the negative consequence?
Further, if a company is flush with cash but the stock price is too low, is there any reason they shouldn't be allowed to buy it back to tell the market that they're wrong?
What is the difference between a stock buy back and a dividend? Both increase shareholder value by returning cash to investors. If not share buy backs, they would just issue a special dividend to accomplish essentially the same thing just without reducing the outstanding share count.
If companies have the ability to issue new shares, why shouldn't they have the ability to reduce the shares with a buy back? What is the negative consequence?
Further, if a company is flush with cash but the stock price is too low, is there any reason they shouldn't be allowed to buy it back to tell the market that they're wrong?
> they would just issue a special dividend to accomplish essentially the same thing just without reducing the outstanding share count
Yeah. People seem to think if a company didn't do a buyback they would spend the money on salaries or R&D. No, the company would issue a dividend instead. One consequence of a dividend is they typically trigger a taxable event vs. a buyback which gives the investor more options to control their tax burden. Personally, I prefer buybacks over dividends in stocks I own for this reason.
Yeah. People seem to think if a company didn't do a buyback they would spend the money on salaries or R&D. No, the company would issue a dividend instead. One consequence of a dividend is they typically trigger a taxable event vs. a buyback which gives the investor more options to control their tax burden. Personally, I prefer buybacks over dividends in stocks I own for this reason.
Confidence? Increase the stock price simply buy taking excess money and reducing share supply, that doesn't seem like confidence, but it is a short term price gain -- whether it is long-term price gain would be to-be-determined. Re-issuing shares because there buybacks intentionally change the price, seems like the financial engineering aspect of huge corporations, not really anything related to R&D creating new revenue streams.
I don't know, I'm not convinced yet, buybacks just seems like a fast way to increase price/"returns on investment in the stock" and market cap and appease investors with large holdings. Surely, yes, you could take loans out against the new market cap or issue debt, but why not just have used the existing cash to do that already. The only explanation could be that investors can cash out and different taxes have affect (or not!) and innovation is less of a need than continuing to exist and buy back stocks.
I don't know, I'm not convinced yet, buybacks just seems like a fast way to increase price/"returns on investment in the stock" and market cap and appease investors with large holdings. Surely, yes, you could take loans out against the new market cap or issue debt, but why not just have used the existing cash to do that already. The only explanation could be that investors can cash out and different taxes have affect (or not!) and innovation is less of a need than continuing to exist and buy back stocks.
Or it could be that the stock market unrealistically expects stock prices to constantly increase in perpetuity and if this doesn't happen, the stocks are penalized by wall street market manipulation, shorts and investors with short term expectations?
It is the game of the market and financial deregulation and maximizing profit (company, and at minimum personal). Yes there are strategies to develop related to these financial levers, but it's quite cynical for a corporation to strategically dodge taxes of their own, then also create a buyback program that strategically dodges taxes of say dividends. In an ideal world, the taxes could be put to good use, and one could argue that even just have appropriate taxes may allow good use because there is taxed money to work with --- this can be lost at city, county, state, and federal levels. The company definitely pays the right people to continue to exist the way it does, so a select few truly benefit massively financially; while, others less so.
The company does buy backs and dividends with the excess cash that it has, after paying taxes on all of the income, property taxes on their facilities, sales taxes on equipment, employment taxes for all of their staff and then the income taxes related to all of their staff.
We have a spending problem in this country, not a lack of tax money.
We have a spending problem in this country, not a lack of tax money.
True, "spending problem" is what an ideal scenario would not have -- a spending problem could also be not having enough to spend. But again, let's look at tax rates over-time, corporate tax rates in the US versus corporate profits, buybacks, etc over-time in the past 100 years. What would we see? I'm definitely curious where all this money is going...
For non-US investors who resides in a jurisdiction that does not have tax treaty with US, dividends are taxed at 30% rate, while capital gains (expected outcome of buyback) are not (taxed by US govt).
The recent movement against stock buybacks in the US makes US stocks much less attractive to foreign investors like me. Aside from the tax thing, I don’t see what’s the practical difference between buybacks and dividend either (besides potentially a difference in opinion of the company’s view on the stock price) , but apparently some people are outraged at one but not the other.
The recent movement against stock buybacks in the US makes US stocks much less attractive to foreign investors like me. Aside from the tax thing, I don’t see what’s the practical difference between buybacks and dividend either (besides potentially a difference in opinion of the company’s view on the stock price) , but apparently some people are outraged at one but not the other.
> What is the difference between a stock buy back and a dividend?
A dividend payout is cash in your hand, a share buyback is theoretical gains that may be gone by the time you sell.
A dividend payout is cash in your hand, a share buyback is theoretical gains that may be gone by the time you sell.
In essence the government is miffed that they don’t get to tax unrealized gains via share price appreciation like they would dividends.
I’ve long wondered if Apple (or anyone targeted by sites like a 9to5[brand], or other niche blogs) use them as an unofficial mouthpiece.
Get someone from management on their good side with planted leaks, then drop something like “wow, management is talking about how absurd this comparison is, I mean look!!1!! this is absurd” to them. Bam you have yourself a stew of PR.
Get someone from management on their good side with planted leaks, then drop something like “wow, management is talking about how absurd this comparison is, I mean look!!1!! this is absurd” to them. Bam you have yourself a stew of PR.
If the company (and the industry) is maturing, then buybacks and dividends are indeed a sign of confidence.
Buybacks are a tax dodge. Nothing else. Dividends are the proper way to pay out excess cash the enterprise generates. Society decided how much to tax such distributions, and a certain class of people didn't like paying even that laughably small share.
Buybacks were justified by a whole lot of things that simply are outright lies. Take away the tax benefit and you'd see them go away overnight.
Buybacks were justified by a whole lot of things that simply are outright lies. Take away the tax benefit and you'd see them go away overnight.
Discussions on the morality of buybacks are unrelated to the question of whether or not Apple’s ratio of R&D to buybacks (and dividends, which are also referenced in the filing) indicates lack of confidence in the company’s prospects.
Dividends are taxed directly and generally aren't tied to CEO compensation, unlike buybacks. Buybacks are more a sign of management incentive structure.
The filing references dividends in addition to buybacks, stating that their ratio to R&D indicates anti-competitive behavior.
Confidence and maturation, or stagnation? I can see good arguments being made for both directions.
Yeah it’s pretty crazy. The DOJ is going to start ascribing appropriate capital structures I guess. Eventually they can get everything so regulated it’s essentially state owned.
In the article they say, Apple spent $33B on R&D and $77B on stock buybacks.
The fact that they leverage their all encompassing 30% App Store fee, a tax on actual PRODUCTIVE smaller businesses, and then funnel that back directly to their investors for capital gains is a cause for concern.
The fact that they leverage their all encompassing 30% App Store fee, a tax on actual PRODUCTIVE smaller businesses, and then funnel that back directly to their investors for capital gains is a cause for concern.
You would be surprised what the margin is in retail.
Gross margin is often that high or higher, but net margin is often single digits.
That's in contrast to Apple with has essentially zero costs on the things sold in their store and has a sky-high net margin.
That's in contrast to Apple with has essentially zero costs on the things sold in their store and has a sky-high net margin.
this is wrong. look up both gross and net margins for top retailers (say Kroger and Walmart) and learn a thing or two before making such clearly wrong claims.
Isn't a stock buy back equivalent to a reverse stock split with the gains being split between those who want to sell their stock getting immediate money while those who don't get higher value stocks? I've seen a lot of negativity about the process, but I don't see how it is any worse than anything else involving moving stocks.
Take a company with X non-liquid value and Y liquid value. They want to spent some part of Y, let's call it Z, doing a stock buy back. There are M stocks to start with, and after a buyback there will be N stocks.
Default (do nothing): Original stock holders have M stocks worth (X + Y) total. Total value, X + Y.
Pay dividends instead: Original stock holders have M stocks worth (X + Y - Z) total and Z dividends. Total value, X + Y.
Do stock buyback: Original stock holders have N stocks worth (X + Y - Z) total and Z buyback payments. Total value, X + Y.
The only difference between 1 and 2 vs 3 is how the value is split. In 1 each stock holder holds stock proportional to how many stocks they held at the start. In 2, each stock holder holds stocks and dividends proportional to how many stocks they held at the start. In 3, stock holders hold different allocations of stock and buy back money based on if they sold or not, but with the total value proportional to how many stocks they held at the start.
What makes 3 so much worse than 1 or 2?
Take a company with X non-liquid value and Y liquid value. They want to spent some part of Y, let's call it Z, doing a stock buy back. There are M stocks to start with, and after a buyback there will be N stocks.
Default (do nothing): Original stock holders have M stocks worth (X + Y) total. Total value, X + Y.
Pay dividends instead: Original stock holders have M stocks worth (X + Y - Z) total and Z dividends. Total value, X + Y.
Do stock buyback: Original stock holders have N stocks worth (X + Y - Z) total and Z buyback payments. Total value, X + Y.
The only difference between 1 and 2 vs 3 is how the value is split. In 1 each stock holder holds stock proportional to how many stocks they held at the start. In 2, each stock holder holds stocks and dividends proportional to how many stocks they held at the start. In 3, stock holders hold different allocations of stock and buy back money based on if they sold or not, but with the total value proportional to how many stocks they held at the start.
What makes 3 so much worse than 1 or 2?
While not 'evidence' per se, it's a common trend with monopolies (e.g. Xerox back in the day) to shift engineering/R&D budgets to marketing for a better ROI.
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Stock buybacks are a great way for executives to further line their pockets inconspicuously and to allow shareholders to dodge corporate and dividend taxes. It does nothing for the health of the company.
There should be a cap on executive compensation - say 100 times the average employee salary. Barring that, there should be a millionaires and/or wealth tax, so that they at least pay the same tax rate as their secretary.
There should be a cap on executive compensation - say 100 times the average employee salary. Barring that, there should be a millionaires and/or wealth tax, so that they at least pay the same tax rate as their secretary.
Stock buybacks look extra suspicious when majority of compensation for executives is based on stock value... So they can both manipulate the price of stock and also reap benefits from that manipulation. With dividends they have to actually hold the stock to benefit from them.
The "Wealth Tax" proposed currently by Sen Warren & a few others seems more like attention grabbing than a serious plan. They've been tried in other countries & failed miserably. They're hard to manage & imo seem like a poor choice.
If you want to increase taxes on the wealthy I would go after loopholes instead, which Sen Warren & others are also trying to do to be fair. You could also look closer at trying to slightly increase tax on sales transactions or taking loans against your equity. It would need to be a small enough amount that makes a difference to tax income but not enough that people try hard to avoid it.
If you want to increase taxes on the wealthy I would go after loopholes instead, which Sen Warren & others are also trying to do to be fair. You could also look closer at trying to slightly increase tax on sales transactions or taking loans against your equity. It would need to be a small enough amount that makes a difference to tax income but not enough that people try hard to avoid it.
Peter Thiel must be smiling :)
Apple should not be saving money, they should be spending it no matter what, even on things that don't matter. If they need money for something they should just borrow. This is how it's done in the government and it always seems to work out pretty well. — the DOJ probably
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Mobile phones are locked in the Apple Google duopoly for the foreseeable future.
Apple the only one being able to make money while Google based manufacturers are competing for scraps.
Google’s indirect monetization of Android makes it impossible for competitors to emerge.
DOJ is shooting at the wrong guy if what they want is more competition.
Apple the only one being able to make money while Google based manufacturers are competing for scraps.
Google’s indirect monetization of Android makes it impossible for competitors to emerge.
DOJ is shooting at the wrong guy if what they want is more competition.
> while Google based manufacturers are competing
Yes, this is exactly what the DOJ likes in that part of the situation. Companies that compete.
Yes, this is exactly what the DOJ likes in that part of the situation. Companies that compete.
None of these companies make enough money to compete with Apple. That is why there is a lack of innovation and why a true third-party competitor cannot emerge. Google makes plenty of money indirectly by their ad-profiling business spending some of it sponsoring Android and some of it paying off Apple.
"A new report highlights what probably amounts the most most absurd stretch in the DOJ’s antitrust lawsuit."
Suppose Apple spent more on R&D, made the iPhone even better, and thus increased its market share. The DOJ would probably cite that market share as evidence of a monopoly too.
Suppose Apple spent more on R&D, made the iPhone even better, and thus increased its market share. The DOJ would probably cite that market share as evidence of a monopoly too.
Apple isnt being sued because they make nice hardware that people like to buy. They're being sued because they use their position in the marketplace to stifle competition, restrict developer choices, and lock customers into their ecosystem.
The DOJ wrote up their exact rationale for the suit, so it would be nice if people would take the time to understand the actual situation instead of arguing against their prefered strawman.
I will never understand why people are out there falling over each other to be the white knight for a company with a 2.6 trillion dollar market cap.
The DOJ wrote up their exact rationale for the suit, so it would be nice if people would take the time to understand the actual situation instead of arguing against their prefered strawman.
I will never understand why people are out there falling over each other to be the white knight for a company with a 2.6 trillion dollar market cap.
It makes people uncomfortable to think that maybe massive, powerful companies do bad things, especially if they are either employed by one or hope to start one of their own. It's not fun being on the other side of the wealth divide in this country, and people will fight tooth and nail to prevent it from happening to themselves and their families. Unfortunately, the more precarious life gets, the harder people will fight. It's not looking good out there.
> I will never understand why people are out there falling over each other to be the white knight for a company
Because a company is giving us awesome products and services which we willingly spend our hard-earned money for.
It's also creating (well paid) jobs which we can choose to take and platforms where other businesses thrive and build even more jobs.
Finally, as investors, it's allowing us to participate in and benefit from its success.
On the other side we see politicians - bureaucrats that never built anything in their lives. Parasites living off our work. Greedier and greedier every year they forcefully confiscate more and more of our sweat and blood while "giving" us crappier and crappier services in exchange. Finally, when a psychopathic leader inevitably takes over - they literally send us to die in their sick wars or attack others for their enrichment.
Because a company is giving us awesome products and services which we willingly spend our hard-earned money for.
It's also creating (well paid) jobs which we can choose to take and platforms where other businesses thrive and build even more jobs.
Finally, as investors, it's allowing us to participate in and benefit from its success.
On the other side we see politicians - bureaucrats that never built anything in their lives. Parasites living off our work. Greedier and greedier every year they forcefully confiscate more and more of our sweat and blood while "giving" us crappier and crappier services in exchange. Finally, when a psychopathic leader inevitably takes over - they literally send us to die in their sick wars or attack others for their enrichment.
> On the other side we see politicians - bureaucrats that never built anything in their lives. Parasites living off our work. Greedier and greedier every year they forcefully confiscate more and more of our sweat and blood while "giving" us crappier and crappier services in exchange.
Slow down there, John Galt.
How is discouraging monopolistic practices going to line the pockets of these parasitic bureaucrats? If Apple has enough control of the marketplace that nobody can meaningfully compete with them, do you think that's better or worse for "us"?
Slow down there, John Galt.
How is discouraging monopolistic practices going to line the pockets of these parasitic bureaucrats? If Apple has enough control of the marketplace that nobody can meaningfully compete with them, do you think that's better or worse for "us"?
> How is discouraging monopolistic practices going to line the pockets
Three easy ways come to mind:
1) Play the stock market using the insider info on decisions and regulations politicians know well in advance.
2) Regulations and laws once enacted have to be implemented. So many compliance chief or consultant positions suddenly opening up at multinational corporations.
3) Cheap populism moves work wonders on economically-ignorant voters. "I smacked Apple/Microsoft/Google" guarantees years of sucking from the public teat
The bitter irony is that the only effective way to deal with monopolies is though free market competition. And regulation is the polar opposite of that: regulation discourages startups and favors the incumbents.
So, yes, heavily regulated markets guarantee less competition which is worse for "us".
Three easy ways come to mind:
1) Play the stock market using the insider info on decisions and regulations politicians know well in advance.
2) Regulations and laws once enacted have to be implemented. So many compliance chief or consultant positions suddenly opening up at multinational corporations.
3) Cheap populism moves work wonders on economically-ignorant voters. "I smacked Apple/Microsoft/Google" guarantees years of sucking from the public teat
The bitter irony is that the only effective way to deal with monopolies is though free market competition. And regulation is the polar opposite of that: regulation discourages startups and favors the incumbents.
So, yes, heavily regulated markets guarantee less competition which is worse for "us".
So you think that if you wanted to start a business to compete with Apple in any of the spaces talked about in this lawsuit (hardware, web browsing, messaging etc) your greatest challenge to competing in that market would be regulation? Not Apple?
I wouldn't even consider starting a business in a heavily regulated field. I can (and I did) fight any competitors, no matter how big they are, using my ideas, creativity, network and hard work. It's not easy, but it's doable - there are lots of startups started every day in giant-dominated fields. And you also get lots of help along the way, because it's fun and because there are lot of gains to be had on the tiny chance you make it.
But I can't fight the government. I wouldn't even try. It's an immovable object. There is nothing to win there. It's all dead. Better to just get a cushy job at some gov agency. Just like most of Europe's best and brightest currently do - leading to a continent left behind, while the US high tech (both startups and giants) are soaring.
But I can't fight the government. I wouldn't even try. It's an immovable object. There is nothing to win there. It's all dead. Better to just get a cushy job at some gov agency. Just like most of Europe's best and brightest currently do - leading to a continent left behind, while the US high tech (both startups and giants) are soaring.
Because this is the government (or bureaucrats on a power trip) picking winners/losers?
Law Prof from Madrid:
https://twitter.com/laz_radic/status/1771152693291057439
> The DOJ complaint against Apple filed yesterday has led me to think, once again, about the increasing chasm that exists between antitrust theory and basic common sense & logic. I think this dissonance is getting worse and worse, to the point of mutual exclusion.
> Here's where I'm coming from: what I have always viewed as a modest tool for correcting blatant anticompetitive conduct is increasingly being wielded as a weapon to redraw minute product design choices, redesign markets, and pistol whip companies for political gain.
> What worries me aren't a couple of contrived cases brought by unhinged regulators at either side of the Atlantic, but that this marks a much broader move towards a centrally-administered economy where choices are made by anointed regulators, rather than by consumers.
> And, to be clear, I am aware that the DOJ is saying that Apple is maintaining its iPhone market position thanks to anticompetitive practices but, quite frankly, discounting the possibility that users simply PREFER the iPhone in this day & age is ludicrous to me.
> But in the real world, there exists no legal obligation to be productive or to use one's resources efficiently. People aren't punished for being idle. Yet a private company harms us when it doesn't design its products the way public authorities thinks is BEST?
> Would X be better if the length of all tweets was uncapped? Would McDonald's be better if it also sold BK's most popular products - like the Whopper? Would the Playstation be better if it also had XboX, Nintendo and PC games? I don't know, maybe. Does it matter?
> The magic of antitrust, of course, is that if one can somehow connect these theoretical shortcomings to market power — no matter how tenuously — all of a sudden, one has a blockbuster case against an evil monopolist & is on the right side of history.
> But this puts the cart before the horse. Competition authorities need to stop pinning contrived market failures on companies they dislike, and go back to pinning companies on market failures. Ultimately, we're fighting the latter, not the former.
Law Prof from Madrid:
https://twitter.com/laz_radic/status/1771152693291057439
> The DOJ complaint against Apple filed yesterday has led me to think, once again, about the increasing chasm that exists between antitrust theory and basic common sense & logic. I think this dissonance is getting worse and worse, to the point of mutual exclusion.
> Here's where I'm coming from: what I have always viewed as a modest tool for correcting blatant anticompetitive conduct is increasingly being wielded as a weapon to redraw minute product design choices, redesign markets, and pistol whip companies for political gain.
> What worries me aren't a couple of contrived cases brought by unhinged regulators at either side of the Atlantic, but that this marks a much broader move towards a centrally-administered economy where choices are made by anointed regulators, rather than by consumers.
> And, to be clear, I am aware that the DOJ is saying that Apple is maintaining its iPhone market position thanks to anticompetitive practices but, quite frankly, discounting the possibility that users simply PREFER the iPhone in this day & age is ludicrous to me.
> But in the real world, there exists no legal obligation to be productive or to use one's resources efficiently. People aren't punished for being idle. Yet a private company harms us when it doesn't design its products the way public authorities thinks is BEST?
> Would X be better if the length of all tweets was uncapped? Would McDonald's be better if it also sold BK's most popular products - like the Whopper? Would the Playstation be better if it also had XboX, Nintendo and PC games? I don't know, maybe. Does it matter?
> The magic of antitrust, of course, is that if one can somehow connect these theoretical shortcomings to market power — no matter how tenuously — all of a sudden, one has a blockbuster case against an evil monopolist & is on the right side of history.
> But this puts the cart before the horse. Competition authorities need to stop pinning contrived market failures on companies they dislike, and go back to pinning companies on market failures. Ultimately, we're fighting the latter, not the former.
It looks like Apple's lack of R&D could become a threat to their future.
Many companies are able to build a phone these days.
But not every company will be able to build a top-notch AI assistant.
The race is on. Whoever will have the best AI will dictate everybody else the conditions for using it.
If it turns out that only Google has the infrastructure to digest all the world's information in real-time and feed it into a top-notch LLM - that would be the biggest threat. Then maybe nobody can compete. Because nobody has built a search engine on par with Google yet. Which probably means that nobody else has figured out how to ingest data on the scale Google does.
Many companies are able to build a phone these days.
But not every company will be able to build a top-notch AI assistant.
The race is on. Whoever will have the best AI will dictate everybody else the conditions for using it.
If it turns out that only Google has the infrastructure to digest all the world's information in real-time and feed it into a top-notch LLM - that would be the biggest threat. Then maybe nobody can compete. Because nobody has built a search engine on par with Google yet. Which probably means that nobody else has figured out how to ingest data on the scale Google does.
Lack of R&D?
>In fiscal 2023, which ended September 30, the company spend $29.9 billion on research and development
>In fiscal 2023, which ended September 30, the company spend $29.9 billion on research and development
That is less than Google. And Apple seems to have spent theirs on the wrong projects. A car which they binned and a headset which seems to not be what people are looking for.
What people are looking for is software which does their work for them.
The two big assets Apple has at the moment are the trust of their users and good chip production capabilites.
We'll see where that leads to.
My feeling is that software is more valuable than brand and hardware. So I have the feeling that Google and Microsoft currently have a better starting position into the advent of AI than Apple.
What people are looking for is software which does their work for them.
The two big assets Apple has at the moment are the trust of their users and good chip production capabilites.
We'll see where that leads to.
My feeling is that software is more valuable than brand and hardware. So I have the feeling that Google and Microsoft currently have a better starting position into the advent of AI than Apple.
The largest chunk of R&D spending is going to be employee comp, that differential is almost certainly due to google hiring like mad during the pandemic versus Apple famously running very lean.
R&D in accounting is very broad, even people who maintain existing systems can be expensed as R&D
Does anyone have a market theory justification that makes them comfortable with the idea?