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Apple Needs A Stock Repurchase Plan

You could do a lot with $18 billion. That's why Business Week is proposing that Apple use some of its enormous cash pile to buyback some stock to help boost the company's share price. After topping out at $199.83 in December, Apple's stock has fallen 38 percent to $122.96. With an $18 billion-plus cash hoard (the third most in the tech sector, behind Cisco Systems and Microsoft), and at a time when analysts expect consumer spending on products like the iPod to slow, it might be time for a buyback.

A stock repurchase program would accomplish three goals: One, it would instill confidence in investors that Apple believes the company's best days are still to come. The move would also likely lift the stock price; the 295 companies on the S&P 500 that announced repurchasing programs since 2003 have averaged a gain of more than 66 percent over five years, with gainers outnumbering losers by more than 5 to 1.

The final reason is that by reducing the number of outstanding shares would boost earnings per share, depending on how much the company buys back. Fore example, a $10 billion repurchase would boost Apple's earnings per share by a hefty 10 percent, and perhaps open the company up to possible acquisitions.

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