On February 5th, 1996, the cover of Businessweek magazine read “THE FALL OF AN AMERICAN ICON,” with the iconic Apple logo perched atop the foreboding phrase. Twenty-two years later, Apple just became the first corporation in history to eclipse a valuation of $1 trillion, following the decade-long success story that is the iPhone. As we pointed out yesterday, the valuation itself doesn’t mean much, but it goes to show just how drastic of a turnaround Apple was able to make just a couple of decades after being on the brink of going under.
The record-breaking performance apparently prompted a memo from Apple CEO Tim Cook, which Buzzfeed News was able to get its hands on just hours after he sent it out to his employees. Cook is celebratory in his reaction to the news, but reminds his team that a share price is “not the most important measure of our success.”
You can read the full memo here to see what Tim Cook had to say after markets closed on Thursday evening:
But as enforcement loosened, notably under the Reagan administration, buybacks began to increase. Now, they are omnipresent. A Roosevelt Institute study released on Tuesday found that corporations spent 60 percent of their net profits on stock buybacks between 2015-2017. Buybacks have continued to boom in the wake of the $1.5 trillion tax cut passed in December. J.P. Morgan estimates that $800 billion will be spent on buybacks in 2018, obliterating the previous record of $587 billion in 2007—a spree that ended when the economy collapsed.
The goal of buybacks is straightforward: They prop up share prices and reward shareholders by increasing the value of the piece of the company that they own. There is no conclusive evidence that buybacks boost share prices in the long term, but as The Motley Fool explains, “In the near term, the stock price may rise because shareholders know that a buyback will immediately boost earnings per share.” But buybacks may not be a particularly efficient way to prop up a share price. Earlier this month, The Wall Street Journal found that “57% of the more than 350 companies in the S&P 500 that bought back shares so far this year are trailing the index’s 3.2% increase.” (Apple’s stock, however was an exception—its shares had jumped 11 percent at the time of the report.) Nevertheless, given the amount of pressure that CEOs are under, and the fact that buybacks are applauded by the shareholders that profit from them, it’s no wonder that public companies in the U.S. have spent the majority of the windfall they received from last year’s tax cut buying back their own stock.
Because companies are spending so much on buybacks, they’re neglecting to invest in their workers or their products. “Stock buybacks undermine the productive capabilities of companies and their ability to generate new products that compete on the market, and this is going to, at some point, show up in stock price,” University of Massachusetts professor William Lazonick, who studies buybacks, told me. Buybacks, as the Roosevelt Institute study found, also keep wages low by giving money to shareholders rather than investing it in workers.
All of this is direct result of the short-term focus of the economy. “I attribute it a lot of it to the financialization of the economy,” Lazonick said. “Once you’re willing to spend two or three or four billion or more a year on buybacks for a large company, you start becoming much more willing to lay off 5,000 people even in a prosperous period to pump your stock price up.”
Tim Cook, Apple’s CEO, has argued that stock buybacks are ultimately good for the economy, because investors have to pay capital gains tax when they sell stock. This is something of a novel argument—it was made in a MarketWatch article published a few days earlier—but it’s not a particularly convincing one because most of the money would go directly to shareholders and executives, rather than the government or workers. Cook’s argument is also at odds with history. “Usually the conventional wisdom is the opposite,” John Cochrane, a senior fellow at the Hoover Institute, told Business Insider. “Stock buybacks started in the 1990s as a way of helping people to avoid taxes.”
Photo by Sal Veder/AP/REX/Shutterstock (5953805a)Steve Jobs, Steve Wozniak, John Sculley Steve Jobs, left, chairman of Apple Computers, John Sculley, center, president and CEO, and Steve Wozniak, co-founder of Apple, unveil the new Apple IIc computer in San Francisco, CalifApple Wozniak Jobs, San Francisco, USA.
Apple was formed in 1976 by Steve Jobs and Steve Wozniak.
By 1980 its first shares went public.
On Aug. 2, 2018, the company was the first American publicly traded company to hit a value of $1 trillion.
As a company, Apple’s had its share of firsts. On Aug. 2, 2018, the Cupertino, Calif.-based tech company cemented itself as the first U.S. company in history to be worth $1 trillion. It’s hard to remember a time when Apple wasn’t on top and leading the competition.
Before words like FaceTime, App Store and Apple Watch were ingrained in public vernacular, Apple was a nascent computer startup venture between two friends in Northern California. Take a look at Apple history in this timeline to see how the company crossed this historic milestone.
Click to see 10 stocks that could be the next Apple or Amazon.
A Timeline of Apple and AAPL Stock Success
1971: Steve Jobs and Steve Wozniak meet. The two formed a friendship over their shared love of electronics.
1976: Jobs and Wozniak form Apple. The origin of the company’s name is hotly disputed; Wozniak said the name came to Jobs as the two were driving and neither could think of a better name. The same year, the Apple I computer debuts. Now a collectors’ item, the original Apple I — of which only 200 were built — sold for $666.66.
1980: Apple goes public. Shares of Apple began trading on Dec. 12, 1980, opening at $22 a share. On that day, Apple boasted a market cap of $1.2 billion.
1985: Jobs and Wozniak leave Apple. After surviving a plane crash in 1981, Wozniak took a leave of absence, briefly returned, and then walked away in 1985. As for Jobs, he was ousted by the board of directors in an apparent coup. The company’s leadership instability resulted in the stock falling to below $2 per share.
Quiz: See Which of These CEOs Gets Paid More
1997: Steve Jobs returns. Jobs was brought back as interim chief.
1998: The first iMac is unveiled. Jobs introduced the colorful and translucent desktop less than a year after he returned to the company.
2000: Power Mac G4 Cube is released. The computer, which was less than a quarter of the size of most PCs as the time, packed performance into an 8-inch cube, according to a press release.
2000: Mac OS X operating system is unveiled. Over 100 developers had pledged their support for OS X, including Adobe and Microsoft, according to a press release.
2001: iPod debuts. Commuting, running and errands all changed when the digital music player entered the market. Apple didn’t invent the first portable MP3 or music player; it created the first wildly successful one.
See: The Cost of the Most Noteworthy Apple Products Through the Years
2007: The iPhone debuts. The mobile device signaled the beginning of the mobile revolution. The iPhone was the best-selling tech product in 2017, ten years after its launch, USA Today reported.
2011: Tim Cook becomes CEO after Jobs resigns. The same year, Jobs died of pancreatic cancer. During the change in leadership, annual revenue had reached $110 billion, the stock was at roughly $380 per share and Apple’s market capitalization had reached $360 billion.
2014: Apple stock splits. AAPL share prices dropped from a prohibitive $645.57 to about $92.44.
2015: Apple unveils Apple Music. The subscription service for listeners to stream Apple’s catalog of music and a live radio station, and interact in its social network.
2016: Apple catches the attention of Warren Buffett. Buffett is notorious for shying away from technology investments. Still, Berkshire Hathaway, Buffett’s investment company, bought more than 9.8 million shares during the first quarter of 2016, CNN Money reported.
2018: Apple hits $1 trillion.
The company’s fuel injection of cash, praise and achievement proves that the monolith shows no signs of slowing down anytime soon.
Click to read more about what it means to invest in a stock like Apple.
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Susan Kim contributed to the reporting for this article.
This article originally appeared on GOBankingRates.com: Apple Stock History Timeline: The Path to $1 Trillion
