As a small shareholder of Apple (own about $150,000) I agree with Mr Icahn in theory. Warren Buffet himself told Steve Jobs to buy back stock if he believed the shares were vastly undervalued. So far Apple has bought back about $30B in shares and the stock has gone up about 15% since then. That's about $5B they saved right there.
Looking at a 5 year cash flow perspective I see no problem with such a plan:
Cash at 6/30/13 - $150B
Cash at 12/31/13 - $180B
Less buyback - $150B
5 years @ $50B free cash flows per year
Cash at 12/31/18 - $280B
That's almost enough money to buy Google. Without an increased buyback the balance would be $400B. That's totally ridiculous. Keep in mind that IBM bought back about 40% of its shares in a 10 year period. It's not unprecedented. Just the dollar amounts seem so ridiculous because of Apple's size.
I do disagree on a tender offer. I'd rather Apple buyback shares strategically instead of all at once. I'd start with buying back when the stock drops for stupid reasons and also buyback BIG on OPEX fridays. That would really screw up market makers who tried to manipulate during monthly options expiration days. They would need to buy back about 280,000,000 shares. That's only about 28 trading days worth of volume.
Don't forget its the SHAREHOLDERS that own Apple. Not Tim Cook. Not the Board of Directors. I'd love to see this proposal being voted on during the next annual meeting. Let the SHAREHOLDERS decide.
I agree with you completely, but isn't the majority of Apple's cash held in overseas accounts? I think a relatively small portion is in the US - they can't repatriate the rest without paying taxes. So, they couldn't use a lot of their own money, ironically enough. They'd have to do a bond offering or something (which would still make sense for them).
All I had to read is this: "the result would be an immediate 33% boost to earnings per share, translating into a 33% increase in the value of the shares...."
Clearly, this is just another vulture trying to make a quick buck.
"Icahn got some great points. I hope Apples board listens, and issues a $150b tender offer at $525. Apple must invest in itself now, and reduce the share count by 30%. The $60b was a good start, now lets add another $150b. In a couple of years, Apples balance sheet will still hold more than $200 billion."
How does this benefit Apple though? Not being sarcastic, just curious because it doesn't seem to help Apple in any way, especially if they need to throw $150 billion at acquiring another company.
Or instead of signing up for the square roundtable for exclusive access to this missive, we can read it in its entirety above (or skip over it as I did).
WTF is that cartoon supposed to represent?
Nothing. The only tyrant is that world-class criminal speculator called "Icahn" - now if only SJ were alive...he would definitely NOT afford his time to having such "dinners" with that kind of scum.
Carl says that he would withhold his shares from the proposed tender offer%u2026
Of course he would. If Apple bought more APPL back from everyone else but Carl, wouldn't that just make his ownership % and clout with Apple that much stronger to influence what he wants done at Apple while making his value shares worth more?
It doesn't take an expert in mathematics to figure that one out.
Icahn does have some valid points. And the shareholders do own Apple.
But there is a difference in being an investor and a speculator. Wall Street used to be about investing in companies for long-term growth and investment returns, not making a quick buck on the movement of the stock price up or down.
I wonder if Icahn would be willing to accept a buyback plan that stipulates shareholders with a large stake in Apple to be required to hold their stock for one year after the buyback and not cash out after the buyback raises the per share price?
As a small shareholder of Apple (own about $150,000) I agree with Mr Icahn in theory. Warren Buffet himself told Steve Jobs to buy back stock if he believed the shares were vastly undervalued. So far Apple has bought back about $30B in shares and the stock has gone up about 15% since then. That's about $5B they saved right there. .....
As an investor, you're no doubt aware of the phrase ... don't put all of your eggs in one basket. Icahn wants Apple to "invest in itself" .... Bullshit ! ... What Icahn wants is Apple to invest in Icahn, period. Apple is already buying back shares in a well thought out and logical plan with minimal risk to its "cash hoard". It makes more sense for Apple to use that cash to invest in itself by continuing to do what they do best. Innovate, design and market the very best products that they can. They continue to build the company by building new infrastructure, buying small innovative tech companies and keeping a safe cushion of cash to allow itself to always be in a position to expand without the need to go into debt.
In this very volatile economy, who can predict, with any certainty, the economic future ? We still haven't "solved" all of the problems that created the last meltdown ... world currencies continue to lose value (in real terms) and idiots like Icahn wants Apple to borrow the equivalent of it's total cash balance to what end ? .... increase the value of his investment? I think predators like Icahn should be held in the same esteem that you would have for any other "snake in the grass". Go away, Icahn ... you may be appreciated somewhere .... but not here.
Icahn does have some valid points. And the shareholders do own Apple.
But there is a difference in being an investor and a speculator. Wall Street used to be about investing in companies for long-term growth and investment returns, not making a quick buck on the movement of the stock price up or down.
I wonder if Icahn would be willing to accept a buyback plan that stipulates shareholders with a large stake in Apple to be required to hold their stock for one year after the buyback and not cash out after the buyback raises the per share price?
What drove Apple's stock price down was panic on the part of fund managers and large institutional holders, who dropped there AAPL holdings by about 1/3. All Mr. Icahn is suggesting is that Apple take advantage of their herd mentality to do what Apple intends to do anyway much, much faster, thus hugely magnifying the "bang per buck" and buying back a lot more shares for the money.
Why is Carl Ichan worth $10,000,000,000? The dude knows Wall Street and is a legendary investor.
I'm not saying he's an idiot. But the stock/company's success shouldn't be attributed to him. He's along for the ride while trying to suck out every dime for himself.
He has a point in technical terms and his objective is very clear. As much as I want to believe that Apple has good plan to invest the money for strategic reasons, its hard to conceive why a company like Apple would need such a huge pile of cash. The fact that Cook and Oppenheimer met with him indicates to me that they are running out of ideas/opportunities to put that money to good use.
You fools! ???? what do you think they are going to use to fuel the Spaceship campus? That sucker will only be in Cupertino until they have enough cash to propel it into orbit.
I'd just like to know why Google doesn't have to do anything to make its stock rise to $1200 a share and yet Apple has to bribe everyone on Wall Street just to get to $600 a share.
CEOs don't set their their company's share price; the market does. Why don't you ask the market?
" My firm's success and my expertise as an investor would be difficult for anyone to argue."
Of course, we know that you want to increase 1/2 percent share in the company to 1% without adding any more cash and do it immediately.
"I hereby agree to withhold my shares from the proposed $150 Billion tender offer."
Of course, as soon as the share price jumps, you would be more than happy to take it off the table.
"There is nothing short term about my intentions here."
We know, your long term commitment is anywhere from 6-12 months.
He has a point in technical terms and his objective is very clear. As much as I want to believe that Apple has good plan to invest the money for strategic reasons, its hard to conceive why a company like Apple would need such a huge pile of cash. The fact that Cook and Oppenheimer met with him indicates to me that they are running out of ideas/opportunities to put that money to good use.
Apple will need the money on the day the bubble bursts for Google, Netflix, Amazon, Priceline, and Facebook, fundamentals do matter over the long haul.
I'm not saying he's an idiot. But the stock/company's success shouldn't be attributed to him. He's along for the ride while trying to suck out every dime for himself.
The idiots are the people usually small investors, who listen to these guys Jamie Dymon, Bain inc.., Hedge Funds and Carl Icahn are parasites.
Apple is buying back some shares, that's good. But what I'd rather see is Apple making strategic investments in the future using that massive cash hoard.
Have Apple Worldwide Inc fund Apple Silicon Inc (a subsidiary of Apple Inc) to create their own fab here in the US (thus avoiding taxes on moving the money). Hire away as many Intel engineers as you can get your hands on. It would be a long-term project, but if you look at the battery life difference between the old and new MacBook Airs, then think about an iPad with the A7 on an Apple-owned 14nm process instead of the current Samsung 28nm process then you can see the potential of a 24 hour battery life instead of 10 hours, and it's something your competitors can't match without an equal investment.
Or maybe look at buying QualComm so you own the cellular technology; maybe sell off some of the other parts of the business to recoup some of the investment.
Maybe you do try to undercut Google... hire some really good engineers and make iAds available on all platforms (including the web) and try to steal some of Google's revenue.
They certainly need to grow their cloud/services/server teams. Imagine if iCloud were available as an SDK across platforms, where I could have my web UI hook into the same back end as my iOS app with minimal effort, hosted by Apple for a monthly fee. They could also invest in maps, buying Tom Tom or someone else, and really putting the boots on the ground to catch up with Google Maps.
They could invest in better repair/services (which would greatly appeal to enterprises). Offer same-day repair or swap of any Apple hardware in major cities, next-day elsewhere. People already want the mac hardware, you could do a lot to erase IT anti-Mac feelings by building a top-notch service organization. You could even offer something like $59 home visits for AppleCare+ members to have someone come help you with your Mac/iPhone/iPad at home. For that matter, hire a couple of AD/LDAP experts and offer your own Group Policy snapins for AD. That would make Macs much better corporate citizens and demand from employees (especially execs) would override the pricing objections. Imagine Apple starting to steal Windows revenue from enterprises... that would stick in Microsoft's craw.
There are a thousand different things they could be doing with that cash to make themselves indispensable to customers, improve areas they fail at currently (eg: Cloud services), or make investments for future competitive advantages. Investing $150B in safe bonds is not a good strategy, and Apple needs to get on with it.
Nothing. The only tyrant is that world-class criminal speculator called "Icahn" - now if only SJ were alive...he would definitely NOT afford his time to having such "dinners" with that kind of scum.
You are right why have dinner or take calls from people like him makes absolutely no sense, Tim Cook has enabled this guy.
Comments
As a small shareholder of Apple (own about $150,000) I agree with Mr Icahn in theory. Warren Buffet himself told Steve Jobs to buy back stock if he believed the shares were vastly undervalued. So far Apple has bought back about $30B in shares and the stock has gone up about 15% since then. That's about $5B they saved right there.
Looking at a 5 year cash flow perspective I see no problem with such a plan:
Cash at 6/30/13 - $150B
Cash at 12/31/13 - $180B
Less buyback - $150B
5 years @ $50B free cash flows per year
Cash at 12/31/18 - $280B
That's almost enough money to buy Google. Without an increased buyback the balance would be $400B. That's totally ridiculous. Keep in mind that IBM bought back about 40% of its shares in a 10 year period. It's not unprecedented. Just the dollar amounts seem so ridiculous because of Apple's size.
I do disagree on a tender offer. I'd rather Apple buyback shares strategically instead of all at once. I'd start with buying back when the stock drops for stupid reasons and also buyback BIG on OPEX fridays. That would really screw up market makers who tried to manipulate during monthly options expiration days. They would need to buy back about 280,000,000 shares. That's only about 28 trading days worth of volume.
Don't forget its the SHAREHOLDERS that own Apple. Not Tim Cook. Not the Board of Directors. I'd love to see this proposal being voted on during the next annual meeting. Let the SHAREHOLDERS decide.
I agree with you completely, but isn't the majority of Apple's cash held in overseas accounts? I think a relatively small portion is in the US - they can't repatriate the rest without paying taxes. So, they couldn't use a lot of their own money, ironically enough. They'd have to do a bond offering or something (which would still make sense for them).This is win-win OPPORTUNITY for CI.
AAPL's going up with or without CI. CI knows this and only stands to gain by being an agitator. WIN - WIN for CI.
- CI identified what we ALL know is an undervalued stock.
- Apple's faces NO risk of failing (despite what the tech and financial press would have you believe).
- With LISTEN TO ME NOW shares in hand, CI's making a public demand that he fully realizes is simply a STARTING point.
- CI will NEGOTIATE an inevitable outcome that will ultimately only accelerate CI's eventual - and very profitable - EXIT.
As for me? I registered my own website: stopfuckingwithmyfutureicahn.com.
WTF is that cartoon supposed to represent?
Barbarians at the Gate ?
Clearly, this is just another vulture trying to make a quick buck.
How does this benefit Apple though? Not being sarcastic, just curious because it doesn't seem to help Apple in any way, especially if they need to throw $150 billion at acquiring another company.
Or instead of signing up for the square roundtable for exclusive access to this missive, we can read it in its entirety above (or skip over it as I did).
WTF is that cartoon supposed to represent?
Nothing. The only tyrant is that world-class criminal speculator called "Icahn" - now if only SJ were alive...he would definitely NOT afford his time to having such "dinners" with that kind of scum.
Of course he would. If Apple bought more APPL back from everyone else but Carl, wouldn't that just make his ownership % and clout with Apple that much stronger to influence what he wants done at Apple while making his value shares worth more?
It doesn't take an expert in mathematics to figure that one out.
Icahn does have some valid points. And the shareholders do own Apple.
But there is a difference in being an investor and a speculator. Wall Street used to be about investing in companies for long-term growth and investment returns, not making a quick buck on the movement of the stock price up or down.
I wonder if Icahn would be willing to accept a buyback plan that stipulates shareholders with a large stake in Apple to be required to hold their stock for one year after the buyback and not cash out after the buyback raises the per share price?
As a small shareholder of Apple (own about $150,000) I agree with Mr Icahn in theory. Warren Buffet himself told Steve Jobs to buy back stock if he believed the shares were vastly undervalued. So far Apple has bought back about $30B in shares and the stock has gone up about 15% since then. That's about $5B they saved right there. .....
As an investor, you're no doubt aware of the phrase ... don't put all of your eggs in one basket. Icahn wants Apple to "invest in itself" .... Bullshit ! ... What Icahn wants is Apple to invest in Icahn, period. Apple is already buying back shares in a well thought out and logical plan with minimal risk to its "cash hoard". It makes more sense for Apple to use that cash to invest in itself by continuing to do what they do best. Innovate, design and market the very best products that they can. They continue to build the company by building new infrastructure, buying small innovative tech companies and keeping a safe cushion of cash to allow itself to always be in a position to expand without the need to go into debt.
In this very volatile economy, who can predict, with any certainty, the economic future ? We still haven't "solved" all of the problems that created the last meltdown ... world currencies continue to lose value (in real terms) and idiots like Icahn wants Apple to borrow the equivalent of it's total cash balance to what end ? .... increase the value of his investment? I think predators like Icahn should be held in the same esteem that you would have for any other "snake in the grass". Go away, Icahn ... you may be appreciated somewhere .... but not here.
He's right.
I'm not saying he's an idiot. But the stock/company's success shouldn't be attributed to him. He's along for the ride while trying to suck out every dime for himself.
Go play somewhere else
CEOs don't set their their company's share price; the market does. Why don't you ask the market?
" My firm's success and my expertise as an investor would be difficult for anyone to argue."
Of course, we know that you want to increase 1/2 percent share in the company to 1% without adding any more cash and do it immediately.
"I hereby agree to withhold my shares from the proposed $150 Billion tender offer."
Of course, as soon as the share price jumps, you would be more than happy to take it off the table.
"There is nothing short term about my intentions here."
We know, your long term commitment is anywhere from 6-12 months.
He has a point in technical terms and his objective is very clear. As much as I want to believe that Apple has good plan to invest the money for strategic reasons, its hard to conceive why a company like Apple would need such a huge pile of cash. The fact that Cook and Oppenheimer met with him indicates to me that they are running out of ideas/opportunities to put that money to good use.
Apple will need the money on the day the bubble bursts for Google, Netflix, Amazon, Priceline, and Facebook, fundamentals do matter over the long haul.
I'm not saying he's an idiot. But the stock/company's success shouldn't be attributed to him. He's along for the ride while trying to suck out every dime for himself.
The idiots are the people usually small investors, who listen to these guys Jamie Dymon, Bain inc.., Hedge Funds and Carl Icahn are parasites.
Disclosure: I'm an Apple investor.
Apple is buying back some shares, that's good. But what I'd rather see is Apple making strategic investments in the future using that massive cash hoard.
Have Apple Worldwide Inc fund Apple Silicon Inc (a subsidiary of Apple Inc) to create their own fab here in the US (thus avoiding taxes on moving the money). Hire away as many Intel engineers as you can get your hands on. It would be a long-term project, but if you look at the battery life difference between the old and new MacBook Airs, then think about an iPad with the A7 on an Apple-owned 14nm process instead of the current Samsung 28nm process then you can see the potential of a 24 hour battery life instead of 10 hours, and it's something your competitors can't match without an equal investment.
Or maybe look at buying QualComm so you own the cellular technology; maybe sell off some of the other parts of the business to recoup some of the investment.
Maybe you do try to undercut Google... hire some really good engineers and make iAds available on all platforms (including the web) and try to steal some of Google's revenue.
They certainly need to grow their cloud/services/server teams. Imagine if iCloud were available as an SDK across platforms, where I could have my web UI hook into the same back end as my iOS app with minimal effort, hosted by Apple for a monthly fee. They could also invest in maps, buying Tom Tom or someone else, and really putting the boots on the ground to catch up with Google Maps.
They could invest in better repair/services (which would greatly appeal to enterprises). Offer same-day repair or swap of any Apple hardware in major cities, next-day elsewhere. People already want the mac hardware, you could do a lot to erase IT anti-Mac feelings by building a top-notch service organization. You could even offer something like $59 home visits for AppleCare+ members to have someone come help you with your Mac/iPhone/iPad at home. For that matter, hire a couple of AD/LDAP experts and offer your own Group Policy snapins for AD. That would make Macs much better corporate citizens and demand from employees (especially execs) would override the pricing objections. Imagine Apple starting to steal Windows revenue from enterprises... that would stick in Microsoft's craw.
There are a thousand different things they could be doing with that cash to make themselves indispensable to customers, improve areas they fail at currently (eg: Cloud services), or make investments for future competitive advantages. Investing $150B in safe bonds is not a good strategy, and Apple needs to get on with it.
Nothing. The only tyrant is that world-class criminal speculator called "Icahn" - now if only SJ were alive...he would definitely NOT afford his time to having such "dinners" with that kind of scum.
You are right why have dinner or take calls from people like him makes absolutely no sense, Tim Cook has enabled this guy.
If an individual has that many shares, public CEOs have an obligation to meet with him/her. I'm pretty sure Carl doesn't need an enabler.