The specific example is what WAS the horrible empire that is your "location". A totalitarian regime competing with the Third Reich to be the worst. Did they lock you in Room 101 so you'd forget about it? Actually, I don't know why I'm wasting my time on you.
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Carl Icahn's Stake in Apple Passes $3 Billion Amid Continued Stock Buyback Pressure
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The specific example is what WAS the horrible empire that is your "location". A totalitarian regime competing with the Third Reich to be the worst. Did they lock you in Room 101 so you'd forget about it? Actually, I don't know why I'm wasting my time on you.
I don't think he's sidestepped it. I think he just also wants to cash in short-term after the buyback. I agree with the reasoning. AAPL is shaky, gotta find some point at which to liquidate it. I'd do the same thing. I can't see any reason for Apple to grow beyond what is expected of it right now.
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Starting with the last bit: it isn't giving shareholders money for "no reason," but because they are shareholders. That's about as far from not being "no reason" that I can consider.
I'm sure I don't get your S&P 500 question. Perhaps you could explain the relevance.
I wouldn't assume anything about valuations. I don't get into that discussion. But most of what you suggest as alternatives to buybacks are operational expenses, not capital expenses, so they'd come out of revenues, not accumulated cash. So they'd have the effect of lowering earnings. Not what I'd call an exciting prospect for stockholders. Scary, actually. More dividends would be fine, though. No objections there.
Using the cash to make arbitrary acquisitions is probably the scariest suggestion of them all. Not that they'd need anything like $150B to do it anyway.
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Nope. Wrong. The borrowing was to finance the last buyback, not dividends, which Apple was able to borrow at extremely low interest rates easily supported by cash flow. This means nothing about new borrowing, nothing whatsoever.
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He is not right.
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And you already know this, but it's not actually "money" until the shares are sold.
The nuance here that the MR peanut gallery exaggerates, but that you seem to completely sidestep - is that Icahn is not likely in this for the long term. Just as there may have been stock price benefits with all his tweeting today, there will be consequences when he goes to cash in on the raised share price after his proposed buy-back.
I am a shareholder, and I have made money from AAPL. But I do not support Icahn's motives of making money - at least, not in the way that he proposes. The value of my shares tripled long before any dividend or buy-back program, and I'm fine with that. Icahn wants to profit, at the possible expense of others - perhaps many of us. Not interested. He has no fiduciary responsibilities to me like the Apple Board does, and if Apple is damaged after he is liquidated, I'm sure he could care less. So, while his motives are understandable and completely legal - surely you can comprehend why I distrust his manipulative behavior, to the extent that it may impact me outside of my best interests.
As to the scale of Apple's cash hoard, you are totally correct that I (and most people) can't even begin to fathom it. But I also can't fathom what Apple could do in the next 20 years. When it comes to Mars, iColony has a nice ring to it, actually.
I step nothing, side or otherwise. I don't care what term Icahn is in for. It makes zero difference to me. I find it ridiculous in the extreme to criticize someone for wanting to make money in the stock market. That's like hanging out in bars and being shocked by the number of people drinking. This "damage" thing you refer to mystifies me. I am truly trying to understand how Apple could be damaged by not continuing to accumulate a billion dollars of new cash every week. Please explain. Nobody else has even tried.
I don't have to trust or distrust Icahn, the issue simply doesn't come into the picture, perhaps because I see that his influence is extremely limited.
First part: I was meaning to ask if your position in AAPL has anything to do with your stance on the buyback. Because for me, it would/did.
Second part: You're referring to nuances of numbers spooking less experienced investors, or those who predict that less experienced investors will sell. Yes, it would decrease earnings for that quarter, but even if that does cause some selling, it would be corrected next quarter when the numbers are back to normal, definitely in the long term. But remember that attentive investors wouldn't be deceived by the drop in earnings and often look at the revenue as well.
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How do you think earnings would be affected? Use accounting terminology please.
Expenditures on something like that, take acquisitions for example, are counted into the costs. The costs are subtracted from revenue to find earnings. So more acquisitions with the same revenue means lower earnings.
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This is a totally Business moron way to think of it. It has never been Apples modus operandi to care that much about shareholders. It has never been under Steve Jobs. The board and Tom Cook thinks about what is best for the company and not for shareholders.
It's been like this for decades. Not happy with it? Sell your stock or get enough shares to kick the board. And see how that goes.
Icahn says there was no business man at the Apple board. Well... Does he know **** about the industry? He is a good investor. Good in the way that he makes a lot of money- not that the companies he invests in grow and do well.
Then the Board and Apple management should be sued for breach of fiduciary duty.
This man has already billions of US$, that's enough for the rest of the life, and his life will last for 10-20 years at max, but still such people need more and more money. I don't understand it. What are you going to do with those millions? Take it to the grave?
There's no logic at all. It's either pure greediness either his real goal is not to help but to hurt Apple.
There's no logic at all. It's either pure greediness either his real goal is not to help but to hurt Apple.
I guess you didn't live at that "location", right? If so then it sounds pretty arrogant and rude. Plus your knowledge in this case leaves much to be desired.
And I wouldn't go into disscussing what a horrible empire is your location since I hopefully don't live there.
Then it must be the case that those who invest in the stock market on the basis of fluctuating stock price rather than dividends have precognition. Oh wait, 2008 proved they didn't.
People have seriously lost site of how dire Apple's situation was throughout the 90's, the company was on the brink of bankruptcy... If Steve Jobs has any legacy with Apple today I think one of his smartest moves was ensuring they have a very healthy cushion of money in the bank should they ever see themselves in a similar position.
Too often investors think about the short term next quarter benefit for themselves rather than looking at the longterm multi-year benefit.
No. The primary fiduciary duty really is to the corporate entity itself, not to the shareholders.
http://www.directorship.com/stout-shareholders-as-owners/
Because...
Thanks, seems like the person is just throwing out terms and hoping they work.
Alright, you're confusing me. You don't want them to have 150b just sitting there, but you're arguing against me when I say they should use it for something other than "give it back to shareholders".
What?
If by "a year or so ago" you mean roughly 5 months ago, then yes.......AAPL has not announced a large cash use since mid-August.
Proline,
Apple borrowed at less than 3% interest (it was a series of bonds with the 30 year bonds being at 3.8% and the 10 year bonds being at 2.5% or something like that, but 3% is about the average). In any case, this rate is so low it is below the projected inflation rate during the borrowing period. The interest is also a tax deduction and the cash they didn't touch is left invested making interest of its own. The net result is that no, the interest charges on the borrowing is not actually going to result in anything approaching significant losses to the shareholders.
Apple did that loan because rates were so low. Apple could (a) do another much larger loan or (b) use US cash to pay dividends or (c) bite the bullet and pull the foreign cash back to the US and pay the tax. But they certainly have the cash to do a larger dividend or stock buyback.
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Was that when Icahn first bought his big chunk of Apple and started calling for a bigger buyback? I thought it was longer ago than that. Apple has done large buybacks, but with 20-20 hindsight, we can see that larger buybacks earlier this year when the stock was trading at $450 or lower (it was in the high $390s or so at one point as I recall, partly because I bought a few shares at that price) would have resulted in a great return.
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A billion dollars is just much more money that you realize. This is beyond a cushion. Apple is sitting on more cash than any company has ever sat on, by a lot. It is more than what all their competitors combined keep on hand. And there is no reason to think that huge amounts of cash isn't coming in the weeks, months and years to come.
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Sure, I am speaking as a stockholder (of more than 16 years now). The principles would be the same even if I wasn't, but then I would probably not be very interested.
It wouldn't spook inexperienced investors so much as it would spook the most experienced investors, especially the institutions. They are buying earnings too. If some sort of scheme to use retained earnings to goose sales is only short term in duration, then both the financial consequences and the impact on sales would be short term in duration. This looks like a gimmick to me. Where is the net return?
Apple is a R&D driven company, and like any company driven by new ideas, the relative cost of investing in R&D declines when they can sell increasingly large numbers of copies of their products. It's a great problem to have, but it still raises issues that should not be ignored.
No, nobody has forgotten that during the '90s Apple turned out sucky products and lacked direction and leadership. Oh wait, maybe you did.
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No, I'm not. I am simply repeating what you have already said yourself: that none of what's been suggested requires anything like $150B to accomplish, let alone $200B, which is where their retained earnings would probably be in a year if they do nothing.
I'm all for Apple reinvesting in growth, but at some point (long past) they hit a wall beyond which they'd be spending just because they can. This is a bad strategy, and I am happy with management that they haven't been tempted to make unwise investments just because the money is available.
But it can be a true statement as well. Apple is massively profitable because of many visionary engineering accomplishments. Icahn isn't suggesting for a second that he knows what Apple should make next. He is simply pointing out that there is a financial move here that would make sense. This doesn't really have anything to do with running the company Apple. The cash horde really isn't doing anything that is part of the Apple business. Apple has $100 billion of marketable securities (and that was last quarter's statement, it is probably up now after the Holiday shopping). Basically Apple has bought the bonds of other companies and governments giving those entities the cash to do investments in return for a promise of future payment and very very low interest.
Icahn wouldn't question Apple if it invested this money in its business. But Apple is not doing that. Apple is lending the cash to other business, governments, and security holders other than its shareholders. Why do that year after year for billions upon billions of dollars? Just pay the cash to your shareholders instead.