Preliminary Apple proxy filing details Carl Icahn's $50B stock buyback plan up for shareholder vote

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  • Reply 61 of 120
    MarvinMarvin Posts: 15,264moderator
    People keep saying $150b in cash. Their $150b is mostly in long term securities, which can fluctuate in value. They could take on more debt to finance the buyback and the value of their securities can drop. While they still generate lots more income every year, the ultimate aim is to increase the share price.

    Investors talk as though the share price dictates the company value and if it's down, the company is struggling. The share price is determined by traders/gamblers and can go up or down regardless of what Apple is doing - Apple pretty much did nothing and it nearly doubled in less than 6 months. Apple could buy back a load more shares, release an iPhone 6 that traders aren't impressed with and the stock price doesn't move or moves very little. All this does is lose the company (and shareholders) a lot of money.

    Apple is not undervalued at its current stock price. It has the highest market cap of any company in the world - 14% higher than the next company. Their profits aren't growing and they have hit the market limits.

    The investors pushing for the buyback want the stock market value of their holdings to go up, it has nothing to do with Apple's best interest, it is for their own self-interest (shouldn't come as a surprise as this is the MO of stock traders).

    It is true that inflation can slowly devalue Apple's securities but not if those securities increase in value - Apple invests its money for growth too. Having people with a profit motive (regardless of the effects on Apple) calling the shots is a bad thing for Apple's long-term interests.

    Let's say that Apple doesn't increase the buyback and they sustain their revenue and margins for the incoming year. If Apple is undervalued, the market will push the stock price up anyway and Apple will have both lots of securities and a high market value.

    If the market doesn't push the stock price up and Apple increases their securities without any plans to spend it, they can accelerate the buyback at that point because the stock price is still down and they have more assets to use.

    There's no urgency to increase the debt, Apple is stable and very healthy. Any urgency comes from investors whose other interests aren't as stable and they need growth. Icahn is a major shareholder in Federal-Mogul which has a lot of staff and it or any of the other companies he invests in could require him to have money for certain business transactions:

    http://www.businessweek.com/news/2012-12-03/carl-icahn-s-federal-mogul-seeks-to-extend-1-dot-8-billion-debt

    The people who talk about Apple losing money by not doing a buyback speak of value in terms of the value traders put on the company, which is extremely volatile. Apple buying back a share doesn't give them an asset with assured growth, they are exchanging assets for something valued by traders. That doesn't mean it's pointless doing it at all as they can be given as awards to staff instead of assets and they can grow in value quickly when the company is undervalued but as I say, they aren't.
  • Reply 62 of 120
    sog35 wrote: »
    Not a good reason to own a stock. You are better off donating to your favorite charity. Can you remind everyone what percentage of apples profits were donated to charity last year.

    Don't read it from the perspective of a stockholder, read it from the perspective of a human being.. Then it will make sense.

    Tim Cook has already announced a buyback program, he knows the benefits of it. At $560 per stock, it doesn't sound like an incredible buy to me. I think 60 billion in stocks is plenty at that price. If your narrow view of this is "how can we maximize profits from Apple stock within 6 months", then yes spend all the money on stock buybacks, don't stop at $50B more. If your view is: what's best for Apple, then let this All-Star team think outside the box, they don't need a one-trick pony investor's advice. They made it this far, now all the big "wigs" come out of the woodwork with invaluable advice that Apple just couldn't survive without.
  • Reply 63 of 120
    jungmarkjungmark Posts: 6,926member
    sog35 wrote: »
    My point is the board can make mistakes. Many of you are acting like the board is infallible.

    And Icahn can't make mistakes?
  • Reply 64 of 120
    jungmark wrote: »
    And Icahn can't make mistakes?

    If Icahn had a controlling interest in Apple, he'd want the company split up and sold off to Samsung, Microsoft and Google.
  • Reply 65 of 120
    Quote:

    Originally Posted by SpamSandwich View Post





    Give it a rest. Neither you nor any of us here know what Apple's future plans are. And I'm pretty sure Icahn has no knowledge in this matter either. I trust the board over Icahn with few exceptions (and a board that included Icahn would be a massive mistake if he has designs on such a thing).

     

    But we all bloviate on this news and rumor site, don't we? :) 

  • Reply 66 of 120
    Quote:
    Originally Posted by ChristophB View Post





    He reminds me of an old man I'd expect to see on The Muppets.

     

     

    Quote:
    Originally Posted by Cpsro View Post

     

    (Photo taken in the weeks before Carl Icahn's bar mitzvah.)


    You're both wrong...

     

     

    Quote:
    Originally Posted by AppleInsider View Post

     
    Icahn


     


    He's the Dos Equis "Stay thirsty, my friends" guy. <img class=" src="http://forums-files.appleinsider.com/images/smilies//lol.gif" />

  • Reply 67 of 120
    Originally Posted by jungmark View Post

    And Icahn cant

     

    Dah DAH, dat-dat-dat-dat dah dah dat-dat-dat-dat dah dah dat-dat-dat-dat dah-dah-dah-dah-dah-dah-dah-dah!

     

    Oh dear, him in a tutu just flashed through my mind

     

    Originally Posted by Dickprinter View Post

    He's the Dos Equis "Stay thirsty, my friends" guy. <img class=" src="http://forums-files.appleinsider.com/images/smilies//lol.gif" />


     

  • Reply 68 of 120
    Since when is Paul McCartney crap.. There is a reason that the franchise is so valuable. It's income is the highest.
  • Reply 69 of 120
    No Google purchased Calico
  • Reply 70 of 120
    sog35 wrote: »
    Would it be better to buy back the stock when it's $560 or when it's $700? At this rate Apple will be buying back stock all the way till late 2015 when the price will be much higher than now. All Icahn wants to do is accelerate the buy back and add $13B.

    If Apple does not think it is a good idea to accelerate the buyback.do they owe the stockholders an explanation?
    Also what training and background does Cook have in finance?
  • Reply 71 of 120
    flabingo wrote: »
    If Apple does not think it is a good idea to accelerate the buyback.do they owe the stockholders an explanation?
    Also what training and background does Cook have in finance?

    He's the CEO of Apple. I think being the hand picked leader of the most valuable company on Earth counts for something.
  • Reply 72 of 120
    Quote:

    Originally Posted by SpamSandwich View Post





    He's the CEO of Apple. I think being the hand picked leader of the most valuable company on Earth counts for something.

    Cook is a good ceo.. perhaps very good, but he's not perfect.  

    It's a non binding resolution.  Even if it passes or fails, he's not obligated to respond to it or act on it.  Having said that, I'm going to vote for it.  It makes a lot of financial sense, and even in the worst case scenario, I can't see any harm coming out of it for Apple.

  • Reply 73 of 120
    Originally Posted by Flabingo View Post

    Also what training and background does Cook have in finance?

     

    Are you mental?

  • Reply 74 of 120
    When Jobs died Apple was left without any entrepreneur, in management or on the board. In the next two months we are going to learn whether Apple is a growth company, or a wonderful safe investment for widows and orphans. The ball is in Apple's court., management is not going to change, but one or two board members could be a positive. How about Elon Musk?
    When you talk to a good financial advisor, the first question is comfort and ability to invest in growth stocks.
    It was only 18 months ago that Apple stock was higher than Google, now it is half. What happened?
    The same management is at both places.
    DOES it bother anybody that the chairman of the board of Apple, Arthur Levinson is the CEO of Calico, which was recently purchased by GOOGLE?
  • Reply 75 of 120
    asciiascii Posts: 5,936member
    Quote:
    Originally Posted by Flabingo View Post



    When Jobs died Apple was left without any entrepreneur, in management or on the board. In the next two months we are going to learn whether Apple is a growth company, or a wonderful safe investment for widows and orphans. 

     

    I don't know about the next 2 months, but some time in 2014 there will be a new product line.

     

    From a strategy point of view, the interesting thing will be how Samsung reacts. Apple beat Microsoft, not with the Mac like everyone was expecting, but by redefining home computing with iDevices and then beating them in that market. 

     

    Now we have the same situation with Samsung and their Galaxy devices. While everyone is watching iPhone vs Galaxy market share numbers, Apple may be planning to beat Samsung a whole different way.

  • Reply 76 of 120
    rayzrayz Posts: 814member
    He's the CEO of Apple. I think being the hand picked leader of the most valuable company on Earth counts for something.

    And I imagine that he will have at least studied corporate finance during his MBA.
  • Reply 77 of 120
    rayzrayz Posts: 814member
    sog35 wrote: »
    Icahn came from a family with modest means.  Now he's one of the richest men in the entire world.  I think he knows what he's doing regarding increasing shareholder value.

    Yes, that's the problem. Being good at increasing shareholder value isn't the same as being a good CEO.

    Could be that Apple has a huge chunk of cash earmarked for something. Icahn doesn't know, and I don't see why Apple should tell him; his exposure ain't that great.
  • Reply 78 of 120
    jungmarkjungmark Posts: 6,926member
    sog35 wrote: »
    Icahn came from a family with modest means.  Now he's one of the richest men in the entire world.  I think he knows what he's doing regarding increasing shareholder value.

    Tim Cook is a great COO/CEO.  But is their CFO really that great?  I'm not so sure.  Apple has tons of talent with creating awesome products and marketing them.  But I'm not sure if they know what the hell they are doing with capital allocation.  Having $150B of cash earning 1% is a major failure IMO.  They could have used that money to buy Twitter, Facebook, Nuance (company behind Siri tech and Google Now).  They have improved the situation with the $60B buyback but more is needed.   Unless they are planning on spending $100B in the next few years in acquistions/capital than there is no reason to hold $200B earning 1%.

    The opportunity cost of $200B earning 1% is massive.  Even at a low 9% return they are losing $16,000,000,000 every year.  Why not distrubute that excess money if Apple can't do anything with it?

    flabingo wrote: »
    When Jobs died Apple was left without any entrepreneur, in management or on the board. In the next two months we are going to learn whether Apple is a growth company, or a wonderful safe investment for widows and orphans. The ball is in Apple's court., management is not going to change, but one or two board members could be a positive. How about Elon Musk?
    When you talk to a good financial advisor, the first question is comfort and ability to invest in growth stocks.
    It was only 18 months ago that Apple stock was higher than Google, now it is half. What happened?
    The same management is at both places.
    DOES it bother anybody that the chairman of the board of Apple, Arthur Levinson is the CEO of Calico, which was recently purchased by GOOGLE?

    Are you both f'n stupid? I'm not going to bother with you two anymore.

    Vote No.
  • Reply 79 of 120
    MarvinMarvin Posts: 15,264moderator
    sog35 wrote: »
    So you don't think Apple is cheap?  Really?

    Its market cap is $500B.  Minus $150B in cash you get $250B sans cash.  Last year they made $37B in profits.  That gives you a PE ration of 6.75.  That is beyond cheap.  Total ridiculous.  Companies that are dying get higher PE Rations than 6.75.

    It's the same for Exxon, Microsoft, Berkshire Hathaway, Wal-Mart. The P/E ratio doesn't tell you much at all about how traders are going to value a company. Amazon's P/E is over 1400 and traders keep pushing that stock up.

    If people don't expect the big companies can grow then they aren't going to see it as a good return on investment and that's not a problem. Those people should go invest in startups with low P/E.
    sog35 wrote: »
    The reason is Wall Street is not give Apple any credit at all for their excess cash.  In fact I argue that they view it as a negative.

    It doesn't matter what Wall Street's opinion is of Apple. It doesn't affect the way they do business in the slightest.
    sog35 wrote: »
    You say Apple invests its $150B for GROWTH. BS. Total BS. They have been returning 1% the last 3 years because the majority of the cash is in safe CD's. If they had it in a index fund they would have returned almost $30,000,000,000 in 2013.  Thats right.  They would have almost DOUBLED their net income for the year.

    1% growth is still growth. I was referring to their investments countering some of the effects of inflation. If they only got 1% return then that's not enough to counter it but they state explicitly that they invest most of it in a way to keep it safe.
    sog35 wrote: »
    You said Apple almost double the last 6 months by doing nothing ( You are wrong, it went up 40%).

    I didn't say the last 6 months, I was talking about the period between November 2011 and April 2012, it actually took 12 months to double but it shot up 75% in 6 months.
    sog35 wrote: »
    the buyback and dividend is attracting other types of investors.  An accelerated buyback in 2014 would help even more.

    Why do you think they need to attract investors? Do they have a shortage of assholes telling them how to run their business? I think not.
    sog35 wrote: »
    "Their profits aren't growing and they have hit the market limits."  Really?  You conclude after ONE year of declining profits that Apple will forever stop growing?  Didn't you notice that profits shrank but units of iPhones/iPads exploded 25% in 2013?  And how do you know what the market limits are for products that have NOT EVEN BEEN RELEASED YET?  You do know Samsung sells 100,000,000 high end smartphones a year.  You don't think Apple could steal 20% of those sales and grow their iPhone profits by 20%? 

    It depends on how much those smartphones sold for. Overall, Samsung sells 3x the smartphones that Apple sells along with washing machines, TVs and so on and still makes roughly the same profit as Apple.

    How would you propose they go about stealing these sales anyway?
    sog35 wrote: »
    Having $150B of cash earning 1% is a major failure IMO. They could have used that money to buy Twitter, Facebook, Nuance (company behind Siri tech and Google Now). They have improved the situation with the $60B buyback but more is needed. Unless they are planning on spending $100B in the next few years in acquistions/capital than there is no reason to hold $200B earning 1%.

    The opportunity cost of $200B earning 1% is massive. Even at a low 9% return they are losing $16,000,000,000 every year. Why not distrubute that excess money if Apple can't do anything with it?

    Buying out companies for growth is a good idea but you criticize 1% returns and suggest they buy Twitter to improve things. Twitter is valued at $35b but in the first 6 months of 2013 made a loss of $69m on revenues of $254m. How exactly do they get the money back from that investment?

    You conveniently avoid mentioning the risk involved with higher return investments. Something that gives a 'low 9%' return could also turn into a 'low 9%' loss. The way they handle investments now doesn't run with the risk of losing all of the profit they made in a year.

    If they don't have ways to grow their business that fit with their way of working, a further buyback is a waste of money. If they put money in high return investments, they can lose a lot of money if they go bad as they carry more risk. At this stage, I don't think they are undervalued (almost by definition as they are valued more highly than any other company) and they are being sensible in protecting shareholder's equity.
  • Reply 80 of 120
    gatorguygatorguy Posts: 24,084member
    sog35 wrote: »
    Nuance (company behind Siri tech and Google Now). 
    Tiny correction Sog: Nuance has no involvement at all with Google Now. Never has.
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