The buy back math seems to work. Even if Apple doesn't add to their buy back plan, they should spend all their planned buy back dollars now, not over 3 years.
They should buy back more earlier but I think increasing the buyback at the request of an outsider who just invested in the company is not the right thing to do. This is outsiders looting the company's cash reserves.
The initial buyback was plenty. Apple should spend its cash on acquiring other companies and associated talent. Depleting cash reserves for the benefit of people who have been investors in the company for a couple of weeks looking for short-term gain does the company no benefit at all.
For much less than the suggested $50b extra, Apple could instead buy Netflix and get its 40 million subscribers, put pay-per-view content on it in addition to the normal business model tied to the iTunes billing details. They can run their keynotes on it and use it as a media platform. First-run DVD releases plus subscribed content. The subscribed content gets people in to watch, when they search for other content, worst case they have to pay a rental fee for a paid movie. They'd offer it via the web to anyone but optimize the app only on iOS and can even offer free subscriptions to iPhone subscribers paying a certain amount.
They should buy back more earlier but I think increasing the buyback at the request of an outsider who just invested in the company is not the right thing to do. This is outsiders looting the company's cash reserves.
The initial buyback was plenty. Apple should spend its cash on acquiring other companies and associated talent. Depleting cash reserves for the benefit of people who have been investors in the company for a couple of weeks looking for short-term gain does the company no benefit at all.
For much less than the suggested $50b extra, Apple could instead buy Netflix and get its 40 million subscribers, put pay-per-view content on it in addition to the normal business model tied to the iTunes billing details. They can run their keynotes on it and use it as a media platform. First-run DVD releases plus subscribed content. The subscribed content gets people in to watch, when they search for other content, worst case they have to pay a rental fee for a paid movie. They'd offer it via the web to anyone but optimize the app only on iOS and can even offer free subscriptions to iPhone subscribers paying a certain amount.
For much less than the suggested $50b extra, Apple could instead buy Netflix and get its 40 million subscribers, put pay-per-view content on it in addition to the normal business model tied to the iTunes billing details.
Brilliant suggestion. Something like that might be a game-changer.
Netflix's market cap is ~$15B. Even thought it is overvalued, despite the premium that would have to be paid, the total cost would be a fraction of $50B. There will be synergies aplenty.
Here's the way this will work IMHO. The price will be up quite a bit, when this dinner takes place. Icahn will ask for them to buy back his stake, at the current price, directly from him, instead of the open market. Will make a cool billion or 2, and will still stick Tim with the dinner tab. Totally Legit.
As I recall, any sale of Netflix would NOT include their existing studio deals for content. Those deals are non-transferable. So Apple acquiring Netflix would be pointless.
As I recall, any sale of Netflix would NOT include their existing studio deals for content. Those deals are non-transferable. So Apple acquiring Netflix would be pointless.
Why would the studio deals be cancelled by someone buying up the shares? Icahn himself even started buying up Netflix shares - 10%:
Lovefilm's studio deals didn't didn't get cancelled when they were bought out by Amazon. It would be pointless buying any company if all the supplier contracts got cancelled as soon as they were bought out.
If Apple can replicate Netflix's business model and can negotiate the same or better deals then they can do the same thing without them but Netflix has some good exclusives. If a significant portion of the 40 million customers are not already Apple customers and they make their software exclusively optimized for iOS, they may be persuaded to buy Apple hardware.
Tom Tom is another company Apple could get. That would replace all those portable Satnavs with iPod Touches, iPhones and iPad Minis.
Back to basics. Apple isn't buying back shares for the benefit of anyone except itself. As long as the market price is attractive, they'll buy, because it's a good purpose for cash when it's not needed to run the business and offers better potential for returns than trying to invest it elsewhere. When the share price rises to a certain point, Apple will stop buying simply because it has stopped being a bargain. Icahn certainly factors this into his thinking. It's a good time for him and Apple and other investors at the moment because the shares are still a good buy at $500. But what if the stock shoots to $600 in just the next few months? You can bet that Icahn will stand pat on further purchases and be planning when he might want to start unloading. Think about it. Icahn is never going to command enough resources to control a company the size of Apple. He's carrying weight with the public as an investor with a long and successful track record. In Apple's case he's put his money where his mouth is, and both have lent further credibility to what many have been saying already about Apple being undervalued. It doesn't matter a rat's ass to me whether Icahn is loved or hated. In this case, he's being smart.
Lovefilm's studio deals didn't didn't get cancelled when they were bought out by Amazon. It would be pointless buying any company if all the supplier contracts got cancelled as soon as they were bought out.
If Apple can replicate Netflix's business model and can negotiate the same or better deals then they can do the same thing without them but Netflix has some good exclusives. If a significant portion of the 40 million customers are not already Apple customers and they make their software exclusively optimized for iOS, they may be persuaded to buy Apple hardware.
Tom Tom is another company Apple could get. That would replace all those portable Satnavs with iPod Touches, iPhones and iPad Minis.
Investing in a company is not the same as buying the company. As I say, if memory serves, these agreements with the studios do not survive the sale of the company (they are non-transferable). This is similar to the situation with MTV, and like MTV it is why Netflix has been developing their own content. They only own the information relating to the viewing habits of their users and their own programming and I suspect they will continue to bolster their own portfolio, conceivably to the point of trying theatrical releases.
Investing in a company is not the same as buying the company.
It's the same process. If Apple bought 50% +1 of the voting shares in a company they'd control it. For Netflix right now, that's about $8.1b. They'd have advantages with 100% of the shares and that's what Amazon decided to do with Lovefilm. They had 42% and then bought out the remaining investors to get 100% of the shares:
Buying all the shares would allow Apple to do whatever they wanted like bringing it in-house and operating it under the Apple brand. They could alternatively just buy a majority share and control how it's run and sell their stake if it didn't work out but I doubt they'd want to operate it like that because doing things like making it iOS exclusive wouldn't be seen as appropriate for the company and the other shareholders.
As I say, if memory serves, these agreements with the studios do not survive the sale of the company (they are non-transferable).
The licensing agreements weren't cancelled when Amazon bought Lovefilm. It doesn't make sense in any circumstance for this to happen. Why would Amazon buy a company that rents out content if they had to renegotiate all the licensing deals, risk not getting them and then losing all the customers they just acquired?
Investing in a company is not the same as buying the company. As I say, if memory serves, these agreements with the studios do not survive the sale of the company (they are non-transferable). This is similar to the situation with MTV, and like MTV it is why Netflix has been developing their own content. They only own the information relating to the viewing habits of their users and their own programming and I suspect they will continue to bolster their own portfolio, conceivably to the point of trying theatrical releases.
It's the same process. If Apple bought 50% +1 of the voting shares in a company they'd control it. For Netflix right now, that's about $8.1b. They'd have advantages with 100% of the shares and that's what Amazon decided to do with Lovefilm. They had 42% and then bought out the remaining investors to get 100% of the shares:
Buying all the shares would allow Apple to do whatever they wanted like bringing it in-house and operating it under the Apple brand. They could alternatively just buy a majority share and control how it's run and sell their stake if it didn't work out but I doubt they'd want to operate it like that because doing things like making it iOS exclusive wouldn't be seen as appropriate for the company and the other shareholders.
The licensing agreements weren't cancelled when Amazon bought Lovefilm. It doesn't make sense in any circumstance for this to happen. Why would Amazon buy a company that rents out content if they had to renegotiate all the licensing deals, risk not getting them and then losing all the customers they just acquired?
SInce I doubt that either of you has seen the agreements between Netflix and the content providers, it's pointless to argue about it. An agreement like that can say anything. It might forbid transfer of rights only if all the shares are sold. Or if an entity gets voting control. Or even if greater than x% of the shares are owned by any one entity. Any one of those would be a legal agreement and without seeing the documents, no one here knows which of those is in the agreement (or something entirely different).
Better question is why isn't this considered a "pump and dump" scheme when a major stock holder wants the company to buy back it's stock (thus raising the stock price) only to flip it later and let it sink?
its not manipulation. talking to major shareholders is NORMAL.
Is publicly announcing in media releases the specific meetings and what the discussion will be about also normal? I'm not a terrible active investor but it sure sounds kinda like an attempt to manipulate the market.
Same here Marvin, buying companies, talent & content would be a better investment.
I'd also like to add I'd rather see Apple build a better black box that will make any decent modern TV a smart Apple TV, maybe even offer a TV Box/Mac computer option
Comments
They should buy back more earlier but I think increasing the buyback at the request of an outsider who just invested in the company is not the right thing to do. This is outsiders looting the company's cash reserves.
The initial buyback was plenty. Apple should spend its cash on acquiring other companies and associated talent. Depleting cash reserves for the benefit of people who have been investors in the company for a couple of weeks looking for short-term gain does the company no benefit at all.
For much less than the suggested $50b extra, Apple could instead buy Netflix and get its 40 million subscribers, put pay-per-view content on it in addition to the normal business model tied to the iTunes billing details. They can run their keynotes on it and use it as a media platform. First-run DVD releases plus subscribed content. The subscribed content gets people in to watch, when they search for other content, worst case they have to pay a rental fee for a paid movie. They'd offer it via the web to anyone but optimize the app only on iOS and can even offer free subscriptions to iPhone subscribers paying a certain amount.
I totally agree with you.
Quote:
Originally Posted by Marvin
For much less than the suggested $50b extra, Apple could instead buy Netflix and get its 40 million subscribers, put pay-per-view content on it in addition to the normal business model tied to the iTunes billing details.
Brilliant suggestion. Something like that might be a game-changer.
Netflix's market cap is ~$15B. Even thought it is overvalued, despite the premium that would have to be paid, the total cost would be a fraction of $50B. There will be synergies aplenty.
As I recall, any sale of Netflix would NOT include their existing studio deals for content. Those deals are non-transferable. So Apple acquiring Netflix would be pointless.
Why would the studio deals be cancelled by someone buying up the shares? Icahn himself even started buying up Netflix shares - 10%:
http://news.yahoo.com/netflix-moves-block-hostile-takeover-145250190--finance.html
Lovefilm's studio deals didn't didn't get cancelled when they were bought out by Amazon. It would be pointless buying any company if all the supplier contracts got cancelled as soon as they were bought out.
If Apple can replicate Netflix's business model and can negotiate the same or better deals then they can do the same thing without them but Netflix has some good exclusives. If a significant portion of the 40 million customers are not already Apple customers and they make their software exclusively optimized for iOS, they may be persuaded to buy Apple hardware.
Tom Tom is another company Apple could get. That would replace all those portable Satnavs with iPod Touches, iPhones and iPad Minis.
Investing in a company is not the same as buying the company. As I say, if memory serves, these agreements with the studios do not survive the sale of the company (they are non-transferable). This is similar to the situation with MTV, and like MTV it is why Netflix has been developing their own content. They only own the information relating to the viewing habits of their users and their own programming and I suspect they will continue to bolster their own portfolio, conceivably to the point of trying theatrical releases.
It's the same process. If Apple bought 50% +1 of the voting shares in a company they'd control it. For Netflix right now, that's about $8.1b. They'd have advantages with 100% of the shares and that's what Amazon decided to do with Lovefilm. They had 42% and then bought out the remaining investors to get 100% of the shares:
http://techcrunch.com/2011/01/20/if-amazon-got-lovefilm-at-a-312m-valuation-who-is-buying-the-drinks-tonight-2/
Buying all the shares would allow Apple to do whatever they wanted like bringing it in-house and operating it under the Apple brand. They could alternatively just buy a majority share and control how it's run and sell their stake if it didn't work out but I doubt they'd want to operate it like that because doing things like making it iOS exclusive wouldn't be seen as appropriate for the company and the other shareholders.
The licensing agreements weren't cancelled when Amazon bought Lovefilm. It doesn't make sense in any circumstance for this to happen. Why would Amazon buy a company that rents out content if they had to renegotiate all the licensing deals, risk not getting them and then losing all the customers they just acquired?
SInce I doubt that either of you has seen the agreements between Netflix and the content providers, it's pointless to argue about it. An agreement like that can say anything. It might forbid transfer of rights only if all the shares are sold. Or if an entity gets voting control. Or even if greater than x% of the shares are owned by any one entity. Any one of those would be a legal agreement and without seeing the documents, no one here knows which of those is in the agreement (or something entirely different).
Is publicly announcing in media releases the specific meetings and what the discussion will be about also normal? I'm not a terrible active investor but it sure sounds kinda like an attempt to manipulate the market.
I'd also like to add I'd rather see Apple build a better black box that will make any decent modern TV a smart Apple TV, maybe even offer a TV Box/Mac computer option