It's OK to cut Apple some slack

By virtue of its success, Apple can be a lightning rod for critics. But the best-run company with the best products doesn't need to follow the same rules as everyone else.

By Jim Cramer Mar 3, 2011 10:20AM

jim cramerthestreetThe caller was angry. He wanted to know how Apple(AAPL) could sit on that $60 billion cash war chest and not return that to shareholders. He wanted to know why Apple hasn't split the stock. He wanted to know why these injustices occur.

 

I thought about it for a moment, knowing that I favor dividends and returning capital to the shareholders. I don't have much of a love for splits, but I know -- rightly or wrongly -- that such an event would attract a lot of new buyers to the stock.

 

But then I just let loose. When you perform as well as Apple does; when you invent a whole new ecosystem; when you are the world's best engineering, designing, manufacturing and retailing name; when you have changed as many games as they have and when you have made as much money for shareholders as they have, then you know what? You don't have to play by the rules that others do.

 

Post continues after video:

 

I think Apple can sit with that cash as long as it pleases. (And can you imagine what this company will earn when the Fed starts raising rates?) I have told people over and over again that if the high dollar amount of the stock is intimidating or you can't get enough bang for the Apple buck, the business allows you to purchase deep-in-the-money calls (something I spend 100 pages on in Getting Back to Even), which allows you to get some exposure at a lower price and with less risk.

But all of this reminds me that Apple, by virtue of its success -- most companies would kill to have a stock trajectory and a product lineup and a balance sheet that Apple has -- gets more than its fair share of attention. Just think about how many people in the press debate whether Apple is being "outrageous" in its non-delineation of Steve Jobs' successors. Or how much heat it took for the "bad" iPhone antenna.

 

Slack is an odd thing in this business. Whenever you cut it for a company or your own rules that are meant to protect yourself, you tend to get hurt. But I think the exception must be made here. Apple, when you back out the cash, sells for about a market multiple. Having devoured as many inches as possible of cyber-ink about the iPad 2, I think the product leaps ahead of all others. The iPhone rollout is steady for Verizon. The Macs are selling terrifically. The expansion continues.

I say, let them burn the cash for all I care. This company's stock is a winner, with or without a dividend, with or without a split and with or without Steve Jobs, because it is the best-run company with the best-run products built within an ecosystem of 200 million users that is growing faster than just about any enterprise I follow.

 

If it sold for 30 times earnings, I would be more worried. But it sells for 15 times earnings. Stop griping. Start buying.

 

At the time of publication, Cramer was long Apple.

 

Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.

 

Follow Cramer’s trades for his Charitable Trust.

 

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1Comment
Mar 3, 2011 2:21PM
avatar
A lot of hubris showing there Jim.  If Apple split their stock 5 or 10 to one resulting in a $70 or 35 share price it would probably run up 10-20% much quicker.  The cash hoard is a separate issue that requires careful analysis of acquisition vs. organic growth opportunities.  If that analysis indicates excessive cash then it should be returned to shareholders and would also increase share prices.  Share buy back would be last option as it seems to accrue the least increase in share value relative to capital costs.
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