Apple Announces 7-for-1 Stock Split

Tech giant reports strong first quarter earnings.
4:57 | 04/24/14

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Transcript for Apple Announces 7-for-1 Stock Split
-- and Thursday April 24 in the markets in New York -- -- today's big number is seven. It's all about apple announcement of the seventh for one stock split. Tech giant. Everyone I'm Dan -- there. So here to help slice of the Apple iPod -- -- -- -- join us this Thursday morning so Mike what is the deal breakers -- enforce what's apple doing. Also they're gonna split their -- seven form which means every share that apple that an investor -- we'll turn into seven shares and therefore trade at 17 the price. It would before some economically speaking stock splits don't actually change the game. Obvious to be a lot more routinely used to be a little bit of resistance to having a very high price stock apple trades about 570 dollars a share right now reached as high as 700. A couple years ago so used to be a little more accessible to smaller investors. It's become a little bit less the fashion to split -- stock that used to be as technology has allowed investors to basically not pay as much attention to the nominal price of -- stop. And this is what apple said in a statement there apple said it wanted its stock more accessible to a larger number of investors begin your point might bring it down for five when it I'm sure it's only five bucks. Obviously it's certainly doing that and the question is though what does that actually due to those shareholders value that they are that they already have so gone -- -- provide 25. You look at that that the number of -- you have been each of -- shares now is worth less. It doesn't do anything to it it's you know the old analogy is that it's like splitting a pizza into sixteen slices instead of eight. You know you don't have more food it's not -- -- it's just a cosmetic thing. You know from back in the old days he used to be a little of kind of a -- expression of a confidence by the management -- case nobody really wants to sort of have. -- -- -- a -- very very low price of people were afraid things weren't going well on the face but the stock. Penetrated at 57 or seven -- whatever it is and had the risk of going to Kennedy wanna see that. I think there's a back -- logic to it as well which is that apple is not in the Dow Jones Industrial Average. It's been explicit by the people who run the index that is because the price is very high the Dow is -- price weighted index so apple would have too much influence -- -- Placed in their same rules also not in there so I do think it's job. That's a very secondary reason but that might be some motivation is well. Is it a bit of a smokescreen -- to pull away attention from the fact that apple has introduced a blockbuster product re really. Since the -- that was what four years ago. Yeah I wouldn't really call it a smoke screen but I do you think that apple management right now is in a phase where. They don't have an obvious next big thing it's not that they're not trying to look for something but you -- you can't just snap your fingers and get something like that. No other company really is had a next big thing since the -- paid either it's not as if everybody else has been out innovating images hasn't been -- a tectonic shift in and device technology. But what I will say is. They have to focus there would have had to focus on more financial matters to have an enormous hoard of cash -- using a lot of it to buy -- a lot of stock. And to increase their dividends so while they're waiting I guess for the innovation machine to -- to kind of come up with some kind of a genius move. They're kind of trying to manage the finances a little more rational answer to some degree under pressure to do that because they do -- -- so much cash without an obvious need for. They are seeing a lot of cash generics in our priest in quarters love it or is just arena yesterday. Decent showing there. He's taken a look at ten point two billion dollars and that was about 1162. A share I mean. That obviously speaks to them into the to the strength of the company right now and and potentially overshadow any concern about those new products that we just talked about. -- for sure I mean there's an enormous financial power to apple and you know even when it's not growing very fast it's still -- fabulously. Profitable business in fact the driver this this time of the upside surprise in the earnings was the iPhone which of course has been out for years. And that's because it's now being carried by our new carries in China and elsewhere. And so I don't think they necessarily. Truly need. That next thing to come along its almost an unreasonable expectation that the same company acted to you know -- being asked to kind of change our lives again you know just like -- did with the iPhone. But I do think it shows you that just -- having. That what they call the ecosystem of apple once -- you know and apple owner iTunes member you're locked in it's a bit of -- cash cow business I do think there's enormous power and that as they figure out. You know what what major new direction to take the business -- Much like the followers of The Grateful Dead right. In fact it. Well I'm glad -- -- -- the first -- -- the apple of folks have been compared to The Grateful Dead and now I'm I'm not sure I'm sure as well like -- finance the Thursday morning Mike thanks appreciate that. Thank of course you give -- latest headlines right here at abcnews.com. -- watching big number to York.

This transcript has been automatically generated and may not be 100% accurate.

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