We opted to go with a hybrid approach after doing a lot of analysis and thinking, and frankly, listening to the input we were getting from shareholders. So we’ve put most of our emphasis to begin behind our dividend, that’s where the majority of the cash that we will return will go.
We expect to pay in our first year more than $10 billion out in dividends, and it will make us one of the largest dividend payers in the United States. And then, we also wanted to commence a share repurchase program with the primary objective to neutralize dilution from our future employee equity grants and employee stock purchase programs. That’s something else that we thought was important that we heard about about. And then most importantly, we want to maintain sufficient U.S. cash to be able to quickly take advantage of strategic opportunities that might present themselves and we did not want to incur a tax cost to repatriate the foreign cash at this time.
Cross: Tim, could you talk maybe philosophically a little bit about your thoughts on needing a cash cushion, or having a cash cushion? I know some people talk about tech companies, given how product cycles change and how consumer behavior changes and the economy, need to have a pretty substantial one, how do you think about it? Is it more a tax issue here, or a real comfortable cash cushion going forward, because clearly you’ll have a substantial amount of cash even after the three years?
Cook: The way that we looked at this was, because of the tax consequences of repatriating the foreign cash, we focused on the domestic cash. And within the domestic cash, our first and foremost objective, as it will always be, will be to make the most innovative products in the world. And so we decided how much cash that we needed to do that, and of course there’s a wide range of investments that obviously I won’t detail in here.
In addition to that, we looked at other things that we might invest money in that would come out of domestic cash, and after we had done all of that—and allowed for a war chest to do things that today we can’t predict, but opportunities that might come along in the future—we had extra cash left over. And so we concluded we had plenty of cash to run the business and given that we felt it would be the right action to initiate a dividend, and expand Apple shareholder space in the process, and so it’s great for current shareholders and it’s fantastic for attracting new investors. And then we felt the share buyback program was also in the best interest of Apple and its shareholders. So that’s how we looked at it.
Kulbinder Garcha ,Credit Suisse: On the question of the cash balance on-shore, Tim, do you think you actually need like a $30 billion cash pile number domestically too, to offer all the flexibility you want? Or could it be the case of two or three years down the road, once you’ve maybe executed on whatever you’re going to do in terms of growth you could actually even have a lower level? And then, how widely held is your stock by employees? I’m just thinking this should be a good income generator, good for motivation for employees.
Cook: Well, I think it’s great for shareholders—it’s great for employees which are also shareholders—so I think it’s great all the way around. And to your question about, is there a magic number, there’s not a magic number here that we’re trying to keep in terms of cash balance. There’s a judgement, and that judgment as we tried to articulate will continually be looked at over time, so we’ll continue to evaluate how much money should go into dividend and how much money should go into buyback, how much money we need for investments, et cetera. That’s what we’re paid to do.
Oppenheimer: Relating to your employee question, at the end of the December quarter, there were about 17.7 million RSUs outstanding, that had not vested, and employees also participate in Apple stock through our employee stock purchase programs as well.