Apple splits stock as iPod sales soar

Apple Computer announced a two-for-one stock split Friday, giving investors twice as many bites at the computer maker.

Investors who hold Apple shares as of Feb. 18 will receive one additional share of stock for every share of Apple they own. The stock will begin trading on a split-adjusted basis starting Feb. 28.

Apple's stock, which earlier this month rose to a new 52-week high of $81.99, has been on a tear in the past year, rising fourfold. To attract new investors, companies often split their stock if it reaches a certain level, even though the move does not change the actual ratio of what they are paying for the stock.

Apple's stock has been fueled over the past year by the company's booming iPod sales and by other developments, including its Macworld announcement of a mass-market, low-price PC called the Mac Mini.

Last month, the company's first-quarter results also soared past analysts' expectations. Apple generated net income of $295 million, or 70 cents a share, compared with net income of $63 million, or 17 cents, a year earlier.

Analysts had predicted that the PC maker would earn 49 cents in the quarter, according to Thomson First Call.

As part of its stock split plans, the company will increase its authorized shares of common stock to 1.8 billion from 900 million.

[bigduke]

Split stock, Why???

It reminds me of a loaf of bread. Cut it in half and you have the same amount of bread, but it now requires two wrappers. This is the news stock certificate that now twice the number as before, but with half the value. Multiply the total authorized shares before, about 900 million, by two and this puts the issue to 1.8 billion shares. This is a zero sum game, but also has costs the are real so now the company has expenses in the transaction.

If you want to view the result of not splitting look at BRK.A shares that are worth about $90,000 each. Some years back Mr. Buffett issued a new stock that has a value of 1/30 of the A shares. So one can buy these shares for about $3000 each. Ten of these would almost pay a year in an Ivy school.

All splits do is make money for the transfer agent, printers of certificates and the postal system in the distribution of the new half valued shares.

Since it is now possible to purchase less than 100 share lots on the markets without extra cost, there is no reason to waste money pushing half value shares out the door.

Disclaimer: I have BRK.B shares. No Apple shares, and more Macs in the house than fingers on my right hand. Oldest one still in use is almost eleven years old. Newest is a 12 inch power book.