Going by a recent report by Financial Times, Apple (AAPL) is all set to acquire a premium phone and music accessories maker for $3.2 billion.
This comes after the company’s CEO Tim Cook himself announced that the company had made 24 acquisitions in the last 18 months. The company had in the recent past announced its $17 billion bond sale. The company plans to continue with its buyback program as well as invest in its inorganic growth with these additional funds.
Acquisitions In Line:
Apple is reportedly trying to acquire the headphone maker Beats Electronic in a $3.2 billion deal, which could be announced as early as next week. The deal could significantly enhance Apple's footprint in the music accessories market and would support its online music business.
Beats, a premium headphone maker, could be significantly overvalued if Apple acquires it. The company, valued at $1 billion, could be overpriced by Apple if they bought it at $3.2 billion. The deal could be huge news for Apple, not only due to its size, but also due to Apple's history. Historically, under its founder Steve Jobs, the company has shied from making any large acquisitions. In fact, the company has never made billion dollar acquisitions.
- Warning! GuruFocus has detected 7 Warning Signs with AAPL. Click here to check it out.
- AAPL 15-Year Financial Data
- The intrinsic value of AAPL
- Peter Lynch Chart of AAPL
Bonds Sold By Apple:
Continuing with their tradition, Apple last month, sold bonds valued at $12 billion, taking advantage of the low interest rates and strong demand from investors Last year, the company sold $17 billion of bonds, which was the biggest bond offering in the corporate world at that time. On the day of the offering, nearly $40 billion of orders were reported but final books were closer to $35 billion. The company has a lot to offer to the investors. The company has massive cash reserves of nearly $150 billion, 88% of which are held in overseas markets. To add to that, the company is assuring the investors to go for a $90 billion buyback program ending in 2015.
Apple started buying shares back around 2012. Since then, it has spent nearly $30 billion on buybacks. The company has now devised bond sale programs to reward (or rather, attract) shareholders. The company has already ramped up its buyback program from $60 billion to $90 billion. Moreover, the company has also increased its dividends by 8%.
Increased Market Share In China:
Apple has been going great guns in China. The company has captured a sizeable portion in the Chinese smartphone, PC and tablet markets. For the record, Apple’s revenues from China have increased by 13% to about $9.8 billion. The overall iPhone sales in China rose by 28%. Similarly, the company sold 13% more Mac units when IDC predicted 8% decline in the market.
The analysts have predicted that Apple could see a surge in its revenues of around 18.4% from FY2013 to $202.32 billion while its earnings will increase by 29% to $51.31 per share. Overall, it wouldn’t be wrong to say that Apple is a buy. The company offers a decent return of 2.42%. The shares, for that matter, are priced just 14 times its trailing earnings, which is cheaper than the industry's average of nearly 16 times trailing earnings. If the recent statistical evidences of the company’s performance are anything to go by, that one stock that is currently doing great and is expected to continue doing so in times to come is Apple.