Using your cash to buy back your shares already sends a bad signal to the investors
No it doesn't. On the contrary, numerous empirical studies have shown that share buy-backs increase shareholder value. Look through the 1970s and 1980s editions of the Financial Analysts Journal, the Journal of Finance and others if you don't believe me.
This is because cash on deposit earns an interest rate lower than the rate of return the company is getting from its core business. Therefore, the weighted return being earned is being suppressed by the low interest rate on the cash. Shareholders can deposit cash themselves so they don't pay management a premium to do it on their behalf. Instead, the share price is depressed because of the lower than otherwise weighted return. Return that cash to the shareholders and two things happen:
1. the share price drops (because the cash-backed portion of the share price has just been returned to the shareholders); and
2. the share price increases (because future 'weighted returns' will be higher);
These two movements happen at the same time. The observed result is that the share price falls by less than the amount of cash that's been returned, ie. the shareholder is better off: his portfolio of shares+cash is now worth more even though the share price has 'fallen'.
So why hasn't Apple done this already? Because of US Tax laws. US companies with highly profitable foreign subsidiaries in tax jurisdictions that have a lower tax rate than the US, eg. Ireland, find it next to impossible to repatriate that cash back to the US without paying to the IRS, the difference between the two tax rates. Paying taxes reduces shareholder value. The pre-tax profits a company earns get split 3 ways : tax payments to the IRS, interest payments to any bond holders and then whatever is left goes to the shareholders (either as a cash dividend or retained in the company to be paid out later). The more tax the company pays, the less available to the shareholders. This problem has always been there for Apple. It's just that shareholders are now beginning to take more notice of it because the outlook for Apple is not as rosy as it was when Steve Jobs was around. While Steve was there, shareholders didn't care too much about the repatriation issue, because Apple was so profitable and looked as though it was going to continue to make stellar profits for its shareholders. Now that he's gone, everyone is beginning to question the future 'stellar' profitability of Apple. People are looking around for more value and the repatriation of foreign profits issue has taken on greater importance.
That's why shareholders want Apple to find ways of repatriating the cash without paying any more taxes.
Biting the hand that feeds IT
