By James Saft
(Reuters) – Based on its own history, and the broader experience with other companies, Apple’s plan to buy back $60 billon of its own shares will probably end as a bit of a disappointment.
That’s because companies on the whole buy their own shares badly, a generalization which Apple seems well on its way to fulfilling.
Under intense pressure from activist investor Carl Icahn to up that $60 billion by another $50 billion, Apple last week beat earnings and revenue estimates but managed to disappoint the market anyway, sparking a double-digit percent sell-off in its shares.
Apple’s buybacks during the quarter were central to the story in two ways: first, they flattered earnings in a way only a sycophant would believe; second, they lost money anyway.
That second point should come as no surprise to students of corporate history, or for readers of a newly revised study by academics at the University of Kentucky which shows that, on the whole, executives do a worse job timing share buybacks than if they simply left the task to a robot.