When the new Apple headquarters was proposed, it was $3 billion and essentially Steve Jobs' 2.8 million-square foot corporate paradise with wooded paths, fruit orchards, imported 40-foot panes of glass and underground parking.
That was in 2011. Since then, the costs for Apple Campus 2 have risen steadily to $5 billion and the move-in date has been delayed until 2016 -- because the company is trying desperately to cut $1 billion from the budget, according to Bloomberg Businessweek. The reason? Because investors are unhappy and cost overruns for a gigantic conceit that is more expensive than the World Trade Center complex won't be received very well.
Bloomberg talked to three unnamed sources who are familiar with the project -- which is still being bid on by subcontractors. The lead architect Foster + Partners is working to help lean the budget before continuing the project.
Investors aren't going to view the costs lightly. While it's only a drop in the bucket to Apple, which has $137 billion in its coffers, to investors who have lost 38 percent of share value since last fall it could be seen as reckless spending. The idea isn't helped by Greenlight Capital's David Einhorn's
repeated attempts to get more investor payouts because of Apple's less than stellar share performance.
“It would take some convincing for me to understand why $5 billion is the right number for a project like this,” Keith Goddard, the chief executive of Tulsa-based Capital Advisors, told Bloomberg. Capital Advisors holds more than 30,000 shares of Apple stock. “This is rubbing salt in the wound, to spend at a level that most anyone would say is extravagant, at a time when they’re being so stingy on dividends.”
Will the $1 billion savings, likely on less expensive fixtures and finishings, be enough to divert an investor backlash? We think those that are demanding higher dividends will use this piece of news to argue for more payouts. The truth is that an impressive headquarters is a necessary conceit for Silicon Valley tech companies, and Apple is worthy of a doozy. Yes, it probably could have been done more cheaply, but no one was complaining when its stock price was much higher.
Published at 1:51 PM PDT on Apr 4, 2013