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Summary:

UBS compares Apple and IBM and suggests based on their similarities Apple should do a bigger stock buyback and start a yearly analyst meeting to get analysts more face time with company executives.

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Wall Street is full of “creative” suggestions for how Apple could increase its faltering stock price, from making a cheaper iPhone to splitting the stock to issuing a whole new class of shares that pay a permanent dividend. In general, financial analysts’ tips for how to run Apple run from wishful thinking to concern trolling. But some suggestions — even while unlikely to come to fruition — can be sober and interesting, like what UBS analyst Steve Milunovich suggested in a note to investors Thursday morning: that Apple “take a page from IBM’s playbook.”

Those familiar with Apple’s history may note the irony in that statement. But Apple is no longer the underdog — it’s a company that is wildly successful and starting to mature. Here’s how Milunovich explains his thinking:

  • Milunovich compares the two companies, saying that like IBM, “Apple might struggle at the top line given prior iPhone success but will generate cash.”
  • Both companies “emphasize quality of revenue—IBM in high value segments and Apple in building great products.”
  • Like IBM, who started returning cash to shareholders once its business matured, Apple should consider the same. He predicts Apple will go with more stock buybacks in the next few months over a larger dividend.
  • Apple should be more open with analysts. Milunovich suggests Apple start an annual analyst meeting. “Without pre-announcing products, management should be able to outline how it thinks, highlight strengths, and showcase management depth.”

Above $700 back in September, Apple shares are hovering above $400 right now, and the people who once set insane price targets for Apple’s stock are thrashing about to come up with a solution to stop the bleeding. But what UBS is asking seems more sensible than other suggestions. It’s possible Wall Street types might be less likely to launch a proxy fight or high-profile lawsuits against the company if they feel like they have a better idea of what the company is up to.

To be fair, Apple already started to re-purchase stock beginning a year ago and it offers a quarterly dividend. And in the theme of more transparency, CEO Tim Cook has now attended Goldman Sachs’ Technology conference two years in a row as the keynote speaker. He’s used the occasion to give some insight on how he views Apple’s business; and for Apple, that’s already more transparency than it offered before Cook assumed the CEO role.

As far as the question over what it should do with its cash, Cook has shown that he listens to his investors; he’s given them a stock buyback and a dividend already. After the David Einhorn episode, he promised the company is “actively discussing” what to do with its cash, so it seems a good bet that Apple will make another move on that.

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  1. Only Wall Street would want Apple to be more like IBM — the rest of us are happy with Apple the way they are.

    1. The crisis revolves around overvaluation of Apple stock in a bubble atmosphere, not real problems at Apple. Yes the Iphone 5 is a dissapointment that has done well. No company can revolutionize industry every year forever especially when the former head was indisputable genius in production, quality control, marketing, and sales. Let it rest Wall Street! This “problem” is a Wall Street problem.

  2. MountainWalker Thursday, March 7, 2013

    The worst thing that could happen for Apple is they start taking strategy advice from those not as good as them or not even in the game. They need to be focusing their core, which is creating great, mind-blowing products, not playing with stock price.

  3. Apple’s days became numbered the day Steve Jobs left this Earth. Sure, it may survive in some fashion, but it will become a shell of it’s former self. Apple, sans Jobs, is too proprietary in an increasingly open world. Jobs’ ability to market new products to make them seem indispensable buoyed the company. That ability is now gone with no signs of anything to replace it.

    There was a reason that Apple languished in Jobs’ absence. That reasoning has not changed. If anything, it has been amplified.

    Apple can either join an open world or die a slow, painful death.

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