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Carl Icahn Asks for Accelerated Stock Repurchase Program in Letter to Apple's Tim Cook
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Yea. But anyone with a memory will recall that apples downfall last time was releasing mediocre products too early and having to wide a product range.
Look at how apples product range has expanded since jobs handed over to cook and how many premature software releases there have been.
Ipod are being shut down and they're releasing 1 more phone, the 5c replaces the 5... So. As for software.. Huh? The same people in charge then were in place when Jobs were there.
You have a very idealized vision of Apple under Jobs.
People with money, make money.
Why? Cause they have the capital to invest, especially in risky ventures with high reward. Now they control 51% of the market, while everyone else fights for their share in "The American Dream", which has gone the way of the dodo. The NFL, one of the largest socialized programs in the nation, is owned by billionaires (the Bills were bought by former neighbors of my family's from the Pittsford/Fairport area in Rochester, NY for $31 billion, from an institution that benefits greatly from tax breaks and other handouts).
This is the new America, unregulated capitalism. After larger banks bought out smaller banks during the 2008-09 financial collapse (JPMorgan Chase Bank N.A. cleaned house and now own a large market from east to west coast, area's that never had Chase Banks), kiss student loans and fair interest rates buh-bye. Carl Icahn is just another example of the 1% dominating and commanding markets while we have the lowest minimum wage of all the first world nations. It's pathetic.
Why? Cause they have the capital to invest, especially in risky ventures with high reward. Now they control 51% of the market, while everyone else fights for their share in "The American Dream", which has gone the way of the dodo. The NFL, one of the largest socialized programs in the nation, is owned by billionaires (the Bills were bought by former neighbors of my family's from the Pittsford/Fairport area in Rochester, NY for $31 billion, from an institution that benefits greatly from tax breaks and other handouts).
This is the new America, unregulated capitalism. After larger banks bought out smaller banks during the 2008-09 financial collapse (JPMorgan Chase Bank N.A. cleaned house and now own a large market from east to west coast, area's that never had Chase Banks), kiss student loans and fair interest rates buh-bye. Carl Icahn is just another example of the 1% dominating and commanding markets while we have the lowest minimum wage of all the first world nations. It's pathetic.
Haha. You have a point if you were remotely right. Look at all the low level employees that became millionaires when Facebook, Dell, Microsoft, and others went public. It's not false value, it's value period. If you have a problem with it, log off your computer, shut your internet, smash your light bulbs... Actually just go and live in the woods. It's how the world works, friend, and it's worked pretty well until now.
Finally...some intelligent forum members who actually get it
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unlike this guy:
So you want to hit a guy just based on his looks? Wow...just wow.
If that were true Icahn wouldn't be trying to manipulate Cook with this open letter.
Dear Tim,
I too was frustrated at the RAM issue, and Jeffy just called and let me know that he has no problems, and literally (and he uses that term literally) laughed out loud when he saw your and Vertigo's response, and he sincerely said that he appreciates the ribbing, as there are too many serious things to worry about, and it's good to have a common understanding and fun while commenting on the issues of the day, like that 334 point stock market drop.
Your BFF,
Carl
the vampire just woke up again this quarter...
this guy is truly annoying, i was wondering if Tim Cook could lose his temper and tell him to get the **** off ?
A wise CEO doesn't tell his boss to (whatever) off:
The employee reports to his/her manager.
The manager reports to his/her manager.
...
The manager reports to his/her director.
The director reports to his/her VP.
The VP reports to his/her SVP.
The SVP reports to the CEO.
The CEO reports to the shareholders.
Carl is a shareholder of some significance, as he owns 0.88% of the company.
So, if Tim did tell Carl to (whatever) off, it'd be like you or me (assuming that you're not a CEO, or a business owner) telling your boss to (whatever) off.
Except that the central thesis of this guy's post is that the expansion of Apple from this will be done through acquisitions. Acquisitions are notorious for destroying value.
Odd.
I think my issue is that the benefits to Carl Ichan are contingent on him selling his shares, rather than holding a long position. He's advocating from the position of a shareholder who intends to become a former shareholder.
That's not advocating for my interests.
There's a tax cost to capital gains as well, and at the moment they're equal with dividends for long term capital gains.
Blackberry also isn't exactly pulling out of it. I'd like to see Apple be able to pull itself out of the doldrums, not get eviscerated by activist investors (as it was at risk of last time it was in trouble), etc. That takes cash.
And I'd just generally like more evidence of long-term thinking, and massive buybacks don't say that to me.
Long Term Thinking (Introduce more products that people want, and give customers reasons to buy more of your products)
1.
Watch (I know on this site, the people that don't like it are a louder voice than people that do, but I like it, and I think there is one with my name on it, come 2015) - Used with #2 below, this is a long term profit making venture.2.
Pay - Free money for Apple in .15% of a bunch of transactions used by the service3. iPhone 6/6+ Bigger than bigger. My prediction that the sales will prove that.
4. Mac Pro - Pros will buy it, and where are they going to get the upgrades? Apple.
5. IBM deal to get more Apple into businesses
6. Healthkit - Get into the health business. Deals with Dexcom for contiuous glucose monitoring and the like are the tip of the iceberg. I already have my medical emergency information so EMTs can see who to call in an emergency, and my condition (type I diabetic, although I have been called, "juvenile", but not in the diabetic context...)
7. Homekit - Making home automation easier than Homeseer (which is incredibly easy) and mainstream
8. (7 items, and now we're getting into speculation) New iMacs with 4K/5K displays. I'd expect lines for this one as well.
9. iPad Pro with a 12.9" screen. Bigger than bigger than bigger.
10.
TV refresh, with games and homekit. Making things fun. It'd be nice to have Amazon Prime app on there as well, so we could disconnect the DVD player.Honestly, if the company I worked for had doldrums like these, I'd be doing cartwheels.
You guys have simply proven my point.
Wrong. In this analogy, my kid would be Tim Cook, not Carl Icahn, i.e. an active executive, not a passive armchair shareholder not willing or able to do any work or real value creation, but simply there just long enough to extract some money from it.
Really? I admit openly that there are a couple of companies that Icahn has raped and pillaged that actually needed it because they did have bad management and were in otherwise need of a shake up or redefinition. However, Icahn has done nothing in his life with anybody else in his mind but himself. The rhetoric he uses, that you continue to repeat, is ridiculous. Just like in your unfortunate analogies. Any "owner" of a company (read shareholder here) whose sole purpose is to extract a return on their investment without regard to the consequence of achieving that return, is a leech, parasite, whatever you want to call it on that company. Period.
Seriously? This has happened and will continue to happen COUNTLESS times. Just look at what happened with the bogus #bendgate issue if you want to look at the most recent instance of APPL stock price manipulation. The financial instruments market has proven itself gullible and stupid over and over again. Willfully so on many occasions.
Nope. You are buying a share in the company at its fair market value at that moment in time. I get what you want to say. Since there are 6B shares of stock at $100 and $130B in the bank, one share has a theoretical right to not only its share, but also to that's share's portion of the cash stockpile. But it isn't an obligation. Any dividend is at the discretion of the BoD according the AoI and Bylaws of the company. This is known when the new owner buys the share, and the share price paid reflects this.
This buyback scheme was not a product of Carl Icahn's pushing. It was already in motion when he made his first public outcry.
The stock price of a company only matters if you are selling it. If Carl Icahn is so concerned about APPL's price, then he is maneuvering to sell it. The only way every other shareholder makes money with Icahn is to sell it at the same time as Icahn. If there is a mass sale of stock to make money, then what happens to APPL stock? Exactly. Do you think Carl Icahn is going to stay in APPL if they did exactly as he says? Nope.
It is artificial value creation not connected in any way to growth or increased earnings or anything at all that has to do with Apple's business. Besides that, I thought that the market reflected the fair price at all times, so how can one then say that the stock is undervalued by the market?
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Long Term Thinking (Introduce more products that people want, and give customers reasons to buy more of your products)
1.
2.
3. iPhone 6/6+ Bigger than bigger. My prediction that the sales will prove that.
4. Mac Pro - Pros will buy it, and where are they going to get the upgrades? Apple.
5. IBM deal to get more Apple into businesses
6. Healthkit - Get into the health business. Deals with Dexcom for contiuous glucose monitoring and the like are the tip of the iceberg. I already have my medical emergency information so EMTs can see who to call in an emergency, and my condition (type I diabetic, although I have been called, "juvenile", but not in the diabetic context...)
7. Homekit - Making home automation easier than Homeseer (which is incredibly easy) and mainstream
8. (7 items, and now we're getting into speculation) New iMacs with 4K/5K displays. I'd expect lines for this one as well.
9. iPad Pro with a 12.9" screen. Bigger than bigger than bigger.
10.
Honestly, if the company I worked for had doldrums like these, I'd be doing cartwheels.
Note that none of those things are a stock buyback...
C'mon man.
(the whole quote):
Greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms: greed for life, for money, for love, knowledge, has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much.
Much has been said of greed, and who is/is not greedy. Here's my definition:
Greed is the demand for money that is not yours by right.
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I was just giving evidence (both reality and speculative, albeit, my predictions are just that - speculative) of the increasing shareholder value that you had in the line:
And I'd just generally like more evidence of long-term thinking, and massive buybacks don't say that to me.
My theory on the buybacks is this:
P/E ratio is 16ish:1
EPS is 6.2
As the shares decrease (and earnings stays the same), the EPS goes up. As the EPS goes up, the P/E goes down, and the price compensates by going up.
Yeah, this is getting very close to a political socio-economic discussion now, but if you are happy with the wealth distribution in the USA, then you must be one of the 1% who likes to turn a blind eye.
It's not false value, it is artificial value. An IPO literally creates money out of nothing, just like a central bank does when it prints money, or like a normal bank does when it gives you a loan. The stock price climb during an IPO is what makes people rich in seconds. They only become rich by exercising their options and selling the resulting shares on the open market. The only reason people buy into an IPO is to make money, they don't give a rats behind what the company does or if it goes bust in a year, as long as they can execute their trades at a profit.
Yes this is the way the world works, I am actually a finance executive myself. But it is very easy to see why people revile Icahn. Its because he represents everything that is illogical and "wrong" with the system.
The economy is based on producing actual goods and services, and the financial services industry should be there only to support growth of those endeavours. Today the problem is the financial services industry is arrogant enough to believe that real business operations are only there serve them not the other way around. Housing bubble, anyone? Worthless financial instruments with artificial value like Credit Default Swaps, Multi-billion dollar government bailouts, self regulation in principle?
Unlike what is taught in the theoretical Ivy League business schools - businesses are actually there primarily to provide actual goods or services that of necessity need to generate a profit to perpetuate and grow business operations.
The thesis that a business exists primarily and solely to generate ROI for the shareholders is precisely what is wrong with the current business school of thought and the whole philosophy behind how the stock markets behave. The general sense of entitlement displayed by market professionals is disgusting, and Icahn is just a figurehead for the rest of them.
It is not surprising people express their discontent of people of his profession and character.
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This whole post is almost hilarious.
*Does a Nazi salute and praises Apple in the same sentence*
Wait.. guys... why so negative on me? I praised Apple! Guys...???
It certainly is.
Which on paper sounds like it should matter.
Yes. And like new-school evals, it's completely meaningless by itself.
I'm sure you meant compare it to other tech companies, as P/Es vary widely with different markets. That said, it tends to be revenue, growth, and growth potential which drives a stock, at least in my observation, not P/E.
And even then nothing's guaranteed.
A quick Google search tells me that Apple spent $3.2 billion in R&D, $1b in ads in 2013. That was 2013, likely it was much more this year.
Let's not forget the $3.2b they just dropped on beats, and $100m on U2... oh, right, and everything else.
I think you may have no idea how easy it is to spend $1b in a month.
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I'll be honest I have no idea what you're trying to say here.
Could you give an example? Lol.
Ok...
Not sure what set you off nor do I really care, but I am all for helping lost souls...
FB, Dell and MS didn't run themselves by the Harvard Business School (HBS) "shareholder returns is all that matters" model when those "low level employees" (mail room people? wow!!) became "millionaires". Those companies were driven by innovation and growth.
Today, things are quite different. Dell went PRIVATE. Why is that? Didn't they like shareholder value is all that matters? Shareholders would be all for 'sell the pieces and get out of that low commodity market'. Instead, they went private. Microsoft today is embracing the HBS model, like IBM, like HP and other companies that are seriously screwing themselves. They lack much of the influence they used to have and are much less influential in the very categories they used to dominate.
The HBS model is an absolutely terrible way to run a company. It mandates that you care only about the Quarter; long term growth and vision are often completely forgotten. Under the HBS model, MS today is not NOT minting millionaires out of mail room guys, nor is IBM or HP. The ONLY people making out are higher level execs, because their compensation is tied to this shareholder value nonsense. They are employees who receive huge chunks of the company (shares), become instant 'owners' and use it to get ahead and inevitably at the expense of the long term prospects of the company and their workers.
It is how the world works? Awesome. So is slavery, child labor, murder, theft, mutilation, rape, disease, stupidity, and so on. Should we embrace evil and call it good because 'that is how the world works'? You may if you like but then you become part of the problem.
Financial Engineering is what companies do when they fail to innovate any longer. It wasn't always like this. Once upon a time, MS and HP were able to innovate. Now, they buy back shares and look to the next quarter to see who they can lay off next. I'd rather live in a world where companies engineer great products, not engineer 'profits'.
Not sure what set you off nor do I really care, but I am all for helping lost souls...
FB, Dell and MS didn't run themselves by the Harvard Business School (HBS) "shareholder returns is all that matters" model when those "low level employees" (mail room people? wow!!) became "millionaires". Those companies were driven by innovation and growth.
Today, things are quite different. Dell went PRIVATE. Why is that? Didn't they like shareholder value is all that matters? Shareholders would be all for 'sell the pieces and get out of that low commodity market'. Instead, they went private. Microsoft today is embracing the HBS model, like IBM, like HP and other companies that are seriously screwing themselves. They lack much of the influence they used to have and are much less influential in the very categories they used to dominate.
The HBS model is an absolutely terrible way to run a company. It mandates that you care only about the Quarter; long term growth and vision are often completely forgotten. Under the HBS model, MS today is not NOT minting millionaires out of mail room guys, nor is IBM or HP. The ONLY people making out are higher level execs, because their compensation is tied to this shareholder value nonsense. They are employees who receive huge chunks of the company (shares), become instant 'owners' and use it to get ahead and inevitably at the expense of the long term prospects of the company and their workers.
It is how the world works? Awesome. So is slavery, child labor, murder, theft, mutilation, rape, disease, stupidity, and so on. Should we embrace evil and call it good because 'that is how the world works'? You may if you like but then you become part of the problem.
Financial Engineering is what companies do when they fail to innovate any longer. It wasn't always like this. Once upon a time, MS and HP were able to innovate. Now, they buy back shares and look to the next quarter to see who they can lay off next. I'd rather live in a world where companies engineer great products, not engineer 'profits'.
You are missing the point. I never said Apple didn't have operating costs, like R&D and salaries that in the billions per year. I said actually running a rational company that loses a billion in cash is incompetently hard. Go back to my example of Blackberry. Despite horrific decrease in popularity, they have been able to maintain their cash reserves. (Yes, they've done a lot of one time things to do this, but Apple could do all those same things.) Your argument is that Apple is prudent to keep $166 billion on hand to get it over rough patches. Blackberry has just gone through as rough a patch as any company. And they started this decent with $2.7B in the cash and sit here today with $3.1B. Should Apple keep a cushion? Sure. Should it be much bigger than Blackberries $3 billion cash reserves? Yes. But should it be a $166 Billion cushion? Or $200 billion by next year? You think yes, I think no.
As for Beats, Apple could have acquired it with proceeds from a bank loan (though that would have been a big facility) or stock. It used cash because it has nothing better to spend its cash on. But it didn't need to do so.
That $166b lets the company be EXTREMELY nimble on its feet. They can buy who they want, when they want, how they want, and not have to worry, shuffle money or bother with cashflow problems. Like I said, if the bendgate had been widespread, that $166b would be burning quickly. How many millions of phones do you think they produced? 25 mill? 50? At $500 each (super rough estimate), that's what? $12.5b-25b loss WITHOUT loss of sales, additional R&D to fix/make a new phone, etc. That would have been catastrophic had they only $10b in the bank.
I don't think they necessarily need $166b. But $50-100b isn't bad.
All of that said, it doesn't owe stockholders ****. Yes, I own stock, no I don't feel entitled.