Business

Why Is Apple Proposing A Stock Split?

After posting strong earnings in Q2 of 2014, Apple announced it will add $30 billion to its buyback plan and split its stock.

Why Is Apple Proposing A Stock Split?
Apple
SMS

Apple's known to sell products at a hefty premium — from thousand-dollar entry-level laptops to black trash-can shaped cylinders that have a starting price close to a down payment on a new car.

But there won't be a premium price on the company's stock for much longer. In the company's quarterly earnings report Monday, Apple announced it had accumulated just over $10 billion in profit from about $45 billion in revenue, prompting the company to split its stock for the first time in nine years. (Via The Verge)

Apple will exchange seven shares for each share held on June 2. Bloomberg points out this will remove the biggest obstacle to including Apple in the Dow Jones Industrial Average. It had previously been kept off the average because at $500 per share, it was deemed too influential. But changes in the Dow are rare, and Bloomberg notes Apple's inclusion is no sure thing.

Apple also announced a $30 billion increase in its buyback plan Monday, a move The Wall Street Journal called a "nod to restive shareholders." Apple CEO Tim Cook said the company is increasing its buyback from $60 billion to $90 billion because it believes its stock is undervalued.

The company posted stronger-than-expected iPhone sales in the second quarter, selling more than 43 million iPhones — a 17 percent increase from the same period a year ago. Though iPad sales fell 16 percent and iPod sales dropped dramatically, the company's revenue increased 5 percent year over year. (Via Apple)

In an interview with The Wall Street Journal, Cook reiterated the company plans to move into new product categories this year but remained silent on what products those are and exactly when they will be released.

Cook told the Journal: "You want to take the time to get it right. Our objective has never been to be first. It's to be the best. ... It's the way we've operated for years and it's the way we still operate. I feel great about what we’'ve got coming. Really great and it's closer than it's ever been."

So if you were waiting for Apple stock to cost less than an iPhone, you will be in luck at the beginning of June. But as far as news of an Apple watch or television is concerned, you will have to wait.