BW Online | July 23, 2003 | Time for Apple to Rethink Its Options

In January, 2003, Microsoft announced that it would pay its first dividend. Then, on July 9, CEO Steve Ballmer said Microsoft would stop issuing stock options and expense outstanding ones, starting with the first fiscal quarter of 2004, which ends on Sept. 30. The result, Microsoft told investors, should be larger dividends in the near future.

Approximately 10% of the shares tallied on rival Microsoft's (MSFT ) 10-K annual filing with the Securities & Exchange Commission were outstanding options. In comparison, they make up 25% of shares on Apple's 10-K. True, the average strike price on Apple's options is in the $28 range, still underwater considering that the stock is trading in the $20 range. But Apple shares are up almost 33% since the beginning of the year.

Expensing options or doing away with them isn't enough. Apple needs to start paying a dividend, too. Jobs is sitting on $4.5 billion in cash, while Apple's market capitalization stands at $7.6 billion. By comparison, Microsoft has cash reserves of $49 billion and a market capitalization of $289 billion. Yes, Apple has more cash on its books per dollar of market cap than Microsoft does. An Apple dividend at $1 per share would set the outfit back only a few hundred million dollars, according to my calculations -- barely enough to dent the loot stashed in the vaults at One Infinite Loop!