What’s the most expensive mistake you’ve ever made?
For me, it’s telling the tire company I needed my front tires replacing, only to find out afterwards that it was actually the back ones, and my front ones had been as good as new. I still hold a bit of a grudge that they didn’t double check, but at least it didn’t cost me $100,000,000,000.
That’s the amount Apple CEO Tim Cook sunk into a project that Forbes contributor Eric Jackson once described as his ‘biggest mistake as CEO’ – but a decade on, the benefits of the project have been paying off in a big way.
What was Apple’s pricey project?
The project in question was a capital return program first announced in April 2012, less than a year after Cook took over from Apple co-founder, Steve Jobs.
In an opinion piece written for Forbes in 2014, Jackson explained how the program was launched after Wall Street analysts began to notice that Apple was holding on to a lot of cash, rather than investing it or returning it to shareholders.
To tackle this ‘problem’, Cook launched the capital return program, and by 2014 Jackson shared estimations that Apple had spent more than $100 billion of its cash on dividends and stock buybacks.
Jackson described the cost as ‘madness’, and he apparently wasn’t the only one who thought so. Apple’s move was painted by some as an indication the company had run out of innovative ideas – but times have changed since then.
How successful was the capital return program?
A decade after it was first announced, CNBC issued a report detailing the power of the program, noting that Apple had become the biggest repurchaser of its own shares in the S&P 500 – the 500 biggest companies listed on stock exchanges in the US.
The program was credited with boosting Apple’s stock, which at the time touched a $3 trillion market value.
In 2021, Apple spent $85.5 billion to repurchase shares, as well as $14.5 billion on dividends.
Between March 2012 and summer 2021, Apples was reported as spending more than $467 billion on buybacks.
How does the program work?
By buying back shares, Apple reduces the number of shares in the market and consequently boosts not only its stock price, but also its earnings per share.
The implementation of the program performed so well that it ended up earning Apple the nickname of the ‘poster child’ for share buybacks from S&P Global Market Intelligence, CNBC reports.
