Berkshire Hathaway's Warren Buffett revealed that Steve Jobs consulted him on the use of Apple's cash. Buffett believes that if a company has excess cash and its stock price is below intrinsic value, buying back its own stock is a reasonable choice. Ultimately, Jobs did not adopt this suggestion and chose to retain cash instead.

Buffett's criteria for buybacks are not simply "having cash on hand to buy," but rather two conditions must be met: after the buyback, the company must still have sufficient capital to meet operational, R&D, acquisition, and risk buffer needs for the next five to ten years; and the market price must be significantly below the company's conservative intrinsic value. If either condition is not met, the buyback could turn from a capital return into a poor decision of buying back at a high price or weakening the balance sheet.

At that time, Apple was rapidly accumulating cash and experiencing high business growth. Jobs preferred to retain funds to keep options open for the supply chain, product development, retail expansion, and future strategies. After Tim Cook took over, he changed the capital allocation strategy, initiating a large-scale stock buyback, which has exceeded $650 billion in cumulative buybacks in recent years. Existing shareholders benefit from reduced shares in circulation, increasing their equity per share, but the effectiveness of the buyback still depends on the purchase price and the company's ongoing profitability.

From a market mechanism perspective, buying back shares when undervalued reduces the number of shares in circulation, converting company cash into higher per-share ownership for continuing shareholders; buying back shares when overvalued is akin to using shareholder funds to purchase expensive assets, potentially diluting long-term returns. Management, long-term shareholders, and value investors typically benefit from undervalued buybacks; short-term sellers, business units needing funds for expansion, and remaining shareholders after high-priced buybacks may bear opportunity costs.

Source: Public Information