Carl Icahn Asks for Accelerated Stock Repurchase Program in Letter to Apple's Tim Cook

[UpperQuadrant]

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'.

Are you sure these companies are running based on the HBS model? Usually these big companies are doing what they are doing because they are getting pressure from their largest institutional shareholders because the companies aren't managed properly to begin with.

In the case of FB, they were overhyped in the media. I don't think that running at a P/E multiple of 78 is within reason, but there are stupid people buying into this company at an excessively high P/E.

With HP, they screwed up and lost money when they bought Palm, Autonomy, EDS, and they are recovering from that. In terms of their PC business, they just make too many different models and go after the low end market which has basically no profit, so instead of reducing their SKUs to only those that make a decent profit, they are just dumping employees to increase their profitability.

IBM, I haven't been following them as much, but they obviously got out of the PC business because that business segment doesn't make much money.

Companies do have to run their companies to maximize profits, that's not JUST HBS, but they are also to not to run their companies in the ground by making large acquisitions that can't be recouped, run a low profit based business.

Dell went private for several reasons, the stock price was dropping and it was partially because they simply don't know how to make a decent profit margin, they bought Wyse, which didn't prove to be fruitful, PC sales were dropping, and they lost money trying to make an Android phone, etc. and they wanted to avoid being bought out by another company. Going private protects them from an unfriendly buyout.

These examples wasn't based on them innovating. I don't know where you got that crazy notion. Dell, HP, wasn't innovating anything. They were just buying out other companies, wasting too much money and they go after market share by trying to sell tons of $250 laptops and desktops.

I don't know how murder, rape, etc. comes into place on this. Do you know something no one else knows?

As far as child labor? You are confusing Foxconn and other mfg plants in China. Apple, HP, Dell, IBM don't violate child labor laws.

Now, here's what happens, some of these companies will do stupid things to increase the profit margins to help increase the stock price. Apple took on debt to pay dividends and buy stock because they are sitting on billions of dollars in Ireland which they can't bring into the US without having to cough up more money in taxes.

EVERY large publicly traded company has large institutional buyers with lots of voting power and they typically will go to the CEO, Board of Directors to tell them to increase profits, to increase the stock value so they can make a better ROI. If the company doesn't, then these institutional buyers can threaten to vote the CEO out of office, or simply sell of their shares, the stock value will plunge like a sack of wet sand, and the result is even worse. So, the institutional or large share holders pressure the company to make changes to increase the share value. How they go about doing that is what's important. Some do it by just getting rid of the wastefulness within the company and many times, it's having too many managers making large salaries, having divisions that need to be sold off or shut down, etc.

 

[GfPQqmcRKUvP]

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?

You just don't understand finance and won't take the time to educate yourself on it before speaking about it. That's unfortunate because I'm more than happy to have people disagree with me on my conclusions once they've understood and accepted the actual theory that underpins these discussions. Oh well.

 

[Jon the Heretic]

Hbs

Companies do have to run their companies to maximize profits, that's not JUST HBS, but they are also to not to run their companies in the ground by making large acquisitions that can't be recouped, run a low profit based business.

The Harvard Business School made 'Shareholder value' an absolute imperative, substituting it for all other values that a company could have. This is the Zeitgeist of business right now and many people who've never heard of it are quoting it as if it were a moral imperative.

Making a profit is necessary, but "maximizing a profit"? --- which often equates to at any cost, and without any other considerations. That's where you can go from doing good business to doing wrong, period. The HBS model elevates this principle above all else. No, it is not the only way to run a business, but corporate pirates and financial parasites love to quote it to get their way. There are lots of ways to make money and you don't need to throw out all other values, morals, ethics or even the future of the company itself to do it.

I don't know how murder, rape, etc. comes into place on this. Do you know something no one else knows?

It was in response to the last post, who said "that's how the world works, so go live under a rock". There's lots of evil in the world--and why yes, that's how the world works. But just because that's how the world works doesn't mean you have to accept it. Accepting bad things doesn't make one good, it makes you complicit at best.

Ichan and his ilk are a prime example of what is wrong with this country. They are a cancer, and people mistake the vitality of the illness for health. Cancer cells tends to be immortal; I hope they don't prove to be.

----------

You just don't understand finance and won't take the time to educate yourself on it before speaking about it. That's unfortunate because I'm more than happy to have people disagree with me on my conclusions once they've understood and accepted the actual theory that underpins these discussions. Oh well.

Finance today is dominated by this type of thinking today. It is not the only way to do business. MBAs today get indoctrinated in the HBS way to approach business and love to tell other people "you don't understand economics", a very effective way to shut people up who question their values.

 

[IJ Reilly]

Double rolleyes. You lose.

 

[UpperQuadrant]

The Harvard Business School made 'Shareholder value' an absolute imperative, substituting it for all other values that a company could have. This is the Zeitgeist of business right now and many people who've never heard of it are quoting it as if it were a moral imperative.

Making a profit is necessary, but "maximizing a profit"? --- which often equates to at any cost, and without any other considerations. That's where you can go from doing good business to doing wrong, period. The HBS model elevates this principle above all else. No, it is not the only way to run a business, but corporate pirates and financial parasites love to quote it to get their way. There are lots of ways to make money and you don't need to throw out all other values, morals, ethics or even the future of the company itself to do it.



It was in response to the last post, who said "that's how the world works, so go live under a rock". There's lots of evil in the world--and why yes, that's how the world works. But just because that's how the world works doesn't mean you have to accept it. Accepting bad things doesn't make one good, it makes you complicit at best.

Ichan and his ilk are a prime example of what is wrong with this country. They are a cancer, and people mistake the vitality of the illness for health. Cancer cells tends to be immortal; I hope they don't prove to be.

----------



Finance today is dominated by this type of thinking today. It is not the only way to do business. MBAs today get indoctrinated in the HBS way to approach business and love to tell other people "you don't understand economics", a very effective way to shut people up who question their values.

When got my degree in Finance, many of the courses were developed following Stanford's business courses.

They didn't tell people to do something illegal or unethical in order to run their business.

Yeah, I know there are a lot of crooked people running companies and I'm sure we can all dig up facts that aren't publicized in the media.

Apple may have done things that aren't exactly 100% legal, or GTAT for that matter. But some of the things you were saying were extremes. They didn't murder anyone, etc. So, you are using terms and scenarios that aren't applicable in this scenerio.

HBS doesn't tell their students to do something that's unethical or illegal in order to maximize profits.. Seriously, I don't know of ANY college that tells their business students to do things that are illegal and unethical in order to maximize profits.

Sure, these companies lay people off and don't rehire them when the jobs open up in order to replace older more experienced employees with young kids right out of college for lower wages and that's unethical and possibly illegal.

But chastising HBS for unethical and illegal behavior of CEO's that may not have even been to HBS is just ridiculous. You sound like you are blaming the wrong party.

The problem I see is that there are too many CEO's that simply didn't go to college or get an education in business, fell asleep in their ethics courses, or got in their CEO position and became or further developed a drinking problem and that's what sometimes hinders their abilities in making sound judgement.

I actually blame alcoholism as a bigger problem that's simply ignored by most of society when it comes to these CEO's running companies.

I worked for a company where the CEO and other members of upper management the Chairman of the Board were HEAVY drinkers and they IGNORED a major problem with the company which was basically unethical business practices by other members of upper management and basically LYING to the customers and employees. That's one of the many reasons why I can't work for companies where alcohol consumption is promoted. It creates *******s.

Find a large company where alcohol isn't promoted or used by members of upper management. there aren't that many.

Alcohol is the drug of choice amongst modern society and it's one of the worst things to get addicted to, ESPECIALLY the leaders of companies and government.

Name a CEO that doesn't drink that's in the high tech industry. You probably would have a VERY short list of people.

Alcohol is probably the most widely used drug amongst criminals. At least that's what a customer of mine told me and they worked for the Dept of Corrections for California.

 

[TallManNY]

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.

Something like a recall of the iPhone would be a huge blow. And it is the biggest issue I can think of for Apple. But no they haven't made 50 million and they haven't made 25 million at this point. The component cost breakdown is about $200 per phone. Let's round up to $300 and 25 million sold. That is $7.5 billion in phone costs. Even if they recalled the phones, huge portions of the recalled components would be reused. If you have ever seen a refurbished iPhone, yes this happens. Redesign and reselling new "stiffer" phones would cost billions. But keep in mind if Apple has sold 25 million phones at $600 per phone, then they've received $15 billion in cash. And once redesigned the phones would start selling again (the design isn't so great, it is the OS, the CPU and the other things that is causing the 6 to sell). So even this horrific scenario probably wouldn't result in Apple having less cash in the bank by the time it was squared away in six months. They would be hugely less profitable, but making a little bit of money is very different from actually needing to tap reserves. Dipping into cash is about running the company at a large cash loss for long periods of time. There doesn't seem to be anyway that Apple could or would do that over the course of multiple consecutive years. Nor under any scenario should the management be allowed to run the company for many consecutive years at a large cash loss rate.

But we are basically on the same page. $50 to $100B seems a big enough cushion to both of us. I think Apple is being unnecessarily cautious with its cash at $166B. And I think a ton of cash is coming.

 

[Mums]

But in this time of runaway capitalism, where schools and even TV news shows have to show a profit, he's probably going to be lauded as a minor saint after he's dead. It appears that today's business schools could be radically shortened to about a week if they just focused on the many ways to screw the living poop out of as many people as they can.

It still makes me wonder why Bernie Madoff was dealt with so harshly. They didn't like getting cheated like 'the rest of us'?

You're right but it's not runaway capitalism - there is no longer any significant free market in the entire world. The Crown Corporation and its central banks have even managed to fully manipulate the price of gold on an ongoing basis since at least April 2013. The game is over but the jig isn't up.

 

[Dave00]

I don't get it. The time for stock buybacks is not when the stock is at an all-time high, even if it is still somewhat undervalued. A $200 valuation is just pie in the sky, and assumes they would double their earnings despite decreasing margins and a new product cycle. Who knows what happens with the Apple Watch - it could be a big hit, or a massive fail like every other smart watch but the Pebble.

Dividends make a whole lot more sense, as they encourage buy-and-hold. But even that, you're making well over the prevailing interest rate in dividend yield on AAPL right now.

Dave

 

[BuddyTronic]

I don't get it. The time for stock buybacks is not when the stock is at an all-time high, even if it is still somewhat undervalued. A $200 valuation is just pie in the sky, and assumes they would double their earnings despite decreasing margins and a new product cycle. Who knows what happens with the Apple Watch - it could be a big hit, or a massive fail like every other smart watch but the Pebble.

Dividends make a whole lot more sense, as they encourage buy-and-hold. But even that, you're making well over the prevailing interest rate in dividend yield on AAPL right now.

Dave

iWatch will be huge. Right now no teenager wants to wear a wristwatch - so they say. This will soon change when all the media super stars show them that they love it. I'm voting by buying options (calls).

Apple can afford to pay more dividends, yes, very true, and they should, and if they do AAPL share price will also jump. Apple can sustain paying really high dividends, but companies are always cautious about raising divs - it has to be sustainable. Apple surely can sustain paying high divs though.

So the best strategy for Apple would be to buy back shares and increase divs.

This gives the best return for their $133 Billion in cash, which sat for years making next to nothing until iCahn rocked the boat last year and other people put pressure on them to actually do something (prior to iCahn). Tim Cook was slow to act, but did the right thing eventually, so it's all good I guess.

We have a bluechip mega stock here that is also a growth stock - wow.

Yes, $200.00 is where it should correct to. For once I'd like to see Apple being called out for being overpriced. That won't happen until we go much much higher - just look at other stocks financials and where they are sitting. Apple is truly undervalued.

 

[Jon the Heretic]

Or maybe the reverse

HBS doesn't tell their students to do something that's unethical or illegal in order to maximize profits.. Seriously, I don't know of ANY college that tells their business students to do things that are illegal and unethical in order to maximize profits.

Sure, these companies lay people off and don't rehire them when the jobs open up in order to replace older more experienced employees with young kids right out of college for lower wages and that's unethical and possibly illegal.

They redefined what is ethical. Nowadays no one blinks when a healthy company lays off workers, discriminates against older workers, steals pension plans to fatten exec wallets, repackage toxic debt as prime, etc. This is what MBAs have brought the world --- a rickety sense of right and wrong with Maximum Profit Uber Alles at the top. Big companies employ teams of lawyers to find ways of looking for loopholes in tax laws, employment laws, EPA regs, you name it.

In Jersey, it is legal as long as you don't caught.

The problem I see is that there are too many CEO's that simply didn't go to college or get an education in business, fell asleep in their ethics courses, or got in their CEO position and became or further developed a drinking problem and that's what sometimes hinders their abilities in making sound judgement.

Not sure I agree. The CEOs and top execs that I admire the most in the tech industry such as Steve Jobs or Bill Gates were college dropouts. I lay the blame on the MBAs and Sales people who get promoted to top positions and lack a technical understanding of what they make or sell. Jobs took lots of courses in art, the humanities and look what he built, the very areas today's top CEOs thumb their noses at as useless.

Many of today's CEOs receive an education in business and think they don't need to understand anything else. So we get people who are one trick ponies -- slash, cut and layoff -- because they have no understanding of how to actually Innovate since they aren't educated in the right things. You can't innovate by beancounting. Sheer idiocy but that's we've got today.

 

[GfPQqmcRKUvP]

They redefined what is ethical. Nowadays no one blinks when a healthy company lays off workers, discriminates against older workers, steals pension plans to fatten exec wallets, repackage toxic debt as prime, etc. This is what MBAs have brought the world --- a rickety sense of right and wrong with Maximum Profit Uber Alles at the top. Big companies employ teams of lawyers to find ways of looking for loopholes in tax laws, employment laws, EPA regs, you name it.

In Jersey, it is legal as long as you don't caught.



Not sure I agree. The CEOs and top execs that I admire the most in the tech industry such as Steve Jobs or Bill Gates were college dropouts. I lay the blame on the MBAs and Sales people who get promoted to top positions and lack a technical understanding of what they make or sell. Jobs took lots of courses in art, the humanities and look what he built, the very areas today's top CEOs thumb their noses at as useless.

Many of today's CEOs receive an education in business and think they don't need to understand anything else. So we get people who are one trick ponies -- slash, cut and layoff -- because they have no understanding of how to actually Innovate since they aren't educated in the right things. You can't innovate by beancounting. Sheer idiocy but that's we've got today.

You clearly won't listen to reason - you've already made up your mind about all these evil MBA overlords. Have fun living in a world you think is so black and white.

 

[UpperQuadrant]

iWatch will be huge. Right now no teenager wants to wear a wristwatch - so they say. This will soon change when all the media super stars show them that they love it. I'm voting by buying options (calls).

Apple can afford to pay more dividends, yes, very true, and they should, and if they do AAPL share price will also jump. Apple can sustain paying really high dividends, but companies are always cautious about raising divs - it has to be sustainable. Apple surely can sustain paying high divs though.

So the best strategy for Apple would be to buy back shares and increase divs.

This gives the best return for their $133 Billion in cash, which sat for years making next to nothing until iCahn rocked the boat last year and other people put pressure on them to actually do something (prior to iCahn). Tim Cook was slow to act, but did the right thing eventually, so it's all good I guess.

We have a bluechip mega stock here that is also a growth stock - wow.

Yes, $200.00 is where it should correct to. For once I'd like to see Apple being called out for being overpriced. That won't happen until we go much much higher - just look at other stocks financials and where they are sitting. Apple is truly undervalued.

It depends on a few factors how "successful" the AppleWatch will be. If you look at the product, I don't know if it's going to be a product that people will buy and replace every couple of years like an iPhone. If they don't put out major improvements on a yearly basis, then it would make no sense to continually buy a new Apple Watch every 2 years, which is the average for a typical iPhone user. The other factor is what percentage of iPhone users will buy at least one AppleWatch? I honestly think they will sell to ULTIMATELY maybe 25 to 35% of the total iPhone users when they reach the peak, but I'm not sure these same people will continually buy a new AppleWatch every 2 years.

It's not the same product as a smartphone, since it's limited to begin with. I think they will be selling in the 10 to 15 million units a year range and probably stay at that level. Not to say that isn't successful, I just don't see how Apple, or any smart watch maker is going to capture a large percentage of the market regardless of brand and model.

As far as buying back stock? Then why did they even bother with the 7:1 stock split? They should have just done a 3:1 stock split instead.

I think the problem you'll find is that Apple has to increase their Net Profit margin and get a better growth rate and get the stock more valuable without manipulating it. If they increase dividends or buy back stock, they will increase their debt ratio too much and then the company won't be worth as much.

I think they need to increase their cash holdings and make some VERY strategic buyouts that help them cater to a bigger market that they currently aren't involved in. I personally thought Apple might need to buy a company like Cisco, Oracle, etc. so they can better cater to the Enterpise market since that's where Apple lacks. But they can't afford to buy Oracle as Oracle is too expensive, BUT Apple could afford to buy Cisco, which would give them Enterprise networking AND servers. It's just whether or not Cook can handle that end of the computing market.

Apple might have to become bigger in some respects and they COULD get more Enterprise laptop/desktop customers IF they could cater to that crowd, but right now they are very limited in that arena. They don't compete in the server world, they don't compete as well in the desktop/laptop market because they can't do everything. Many companies are buying DELL or HP only because they make everything and unfortunately Windows dominates because of IBM's original efforts and subsequently the marketing efforts of all of the other Windows PC mfg. They just have too much dominance and Apple's only getting some of the tablet and smartphone market.

I'm wondering how successful IBM is going to be and whether these customers that are buying iPads and iPhones are going to want to displace Windows with Macs. I see a potential there, but it's a tough and long road.

But in terms of the stock, they need to leave it alone and focus on the company and let the market respond to Apple's efforts and not stock manipulation.

Apple's in the dead man's land of changing from a high growth company to a dividend company and you can't have both for long period of time.

I think Apple kind of screwed up when they first hit $100 a share and didn't do a stock split. I think if they just kept splitting the stock when it hit $100 a share, then they wouldn't have to buy the stock back until they really needed to. But they can't put themselves in a debt position.

That money in Ireland isn't worth what it is unless they can convince the US Government to give them a tax break, otherwise, they are racking up debt with interest and using the Ireland cash as a means to pay the debt. So, that money isn't worth as much as what's there. How much debt does Apple have? Over $30 Billion in debt. So that money in Ireland is automatically worth $30 Billion less than what's there if they simply paid their debt, but it would be worth even less if they had to bring the money into the uS to pay that debt, which is reduced by another 30%. See how fast that money in Ireland becomes worth less than what's there?

 

[BuddyTronic]

It depends on a few factors how "successful" the AppleWatch will be. If you look at the product, I don't know if it's going to be a product that people will buy and replace every couple of years like an iPhone. If they don't put out major improvements on a yearly basis, then it would make no sense to continually buy a new Apple Watch every 2 years, which is the average for a typical iPhone user. The other factor is what percentage of iPhone users will buy at least one AppleWatch? I honestly think they will sell to ULTIMATELY maybe 25 to 35% of the total iPhone users when they reach the peak, but I'm not sure these same people will continually buy a new AppleWatch every 2 years.

It's not the same product as a smartphone, since it's limited to begin with. I think they will be selling in the 10 to 15 million units a year range and probably stay at that level. Not to say that isn't successful, I just don't see how Apple, or any smart watch maker is going to capture a large percentage of the market regardless of brand and model.

Yes, good points about the number of units since the iWatch is a bit of an "iPhone accessory" - you have to own an iPhone first in order to use the iWatch maybe. At least the first version. (Think back to iPhone and the prerequisite for a computer to use the iPhone in 2007 - Apple solved that a year later or so, and it matched up very well to the current situation where people don't need or want computers as much). Now it's no big deal if you don't have a computer and just want an iPhone.

The thing that really gets me stoked about these things is that Apple doesn't have to make money on them, It just need to be the company that builds the infrastructure/ecosystem for the future utopian world.

For example, iWatch may be an important piece of the puzzle for mass adoption of home automation. Apple TV may also be a piece of the puzzle for home automation. Apple Pay might make zero profit for Apple, but it sandbags their position and also might be a piece of the puzzle.

Apple has a vision, and we all can guess what it all means.

I'm saying that I know what I don't know and I feel that Apple has a huge potential building up. I'm very bullish and now is a great time for Apple. It might even be considered a safe haven for your money, while Europe is in crisis, and Ebola threatens, and people wonder about the economy, Apple transcends these problems very nicely and is undervalued at the same time. It's a great escape from a possible "market correction" that people are talking about. AAPL stock goes up and the rest of the market is red.


Additions:

Apple split 7:1 instead of 3:1 perhaps due to reasons of being part of the DOW averages or something. Also to enable regular people to invest monthly with their savings.

Apple has a lot of cash. It's a good problem. It's good if they make the money work for them.

Apple could buy Facebook outright with their pocket money (almost). Apple has $133Billion and Facebook apparently is worth $160 Billion or something (don't quote me for accuracy on this, but i think it's close).

Apple could buy McDonalds out completely.

They could probably buy cellphone companies too

They could buy a car manufacturing company probably.

Apple will have 12% growth averaged out in the next 3 years (most likely, conservatively). Hard to beat that.

Strategic purchases could and should happen arguably, but counter to that is that they are in the best business and doing a great job at it.

It's a no brainer to buy back their own stock and increase dividends. All the conservative investors will go wild for AAPL if they can offer a dividend that beats out of all other companies dividend offerings.

 

[GfPQqmcRKUvP]

As far as buying back stock? Then why did they even bother with the 7:1 stock split? They should have just done a 3:1 stock split instead.

Stock splits accomplish close to nothing and doing a 7:1 as opposed to 3:1 is inconsequential. Stock splits don't change any fundamentals of the company or the ownership structure.

I think the problem you'll find is that Apple has to increase their Net Profit margin and get a better growth rate and get the stock more valuable without manipulating it. If they increase dividends or buy back stock, they will increase their debt ratio too much and then the company won't be worth as much.

The argument for borrowing to fund share repurchases is as follows: Apple is under-levered and they could reduce their cost of capital by manipulating their capital structure. For a stable company with the cash flow generating power that Apple has, debt is far cheaper than equity. Any action that would reduce the company's cost of capital is value-generating.

I think they need to increase their cash holdings and make some VERY strategic buyouts that help them cater to a bigger market that they currently aren't involved in. I personally thought Apple might need to buy a company like Cisco, Oracle, etc. so they can better cater to the Enterpise market since that's where Apple lacks. But they can't afford to buy Oracle as Oracle is too expensive, BUT Apple could afford to buy Cisco, which would give them Enterprise networking AND servers. It's just whether or not Cook can handle that end of the computing market.

This is EXACTLY why many people believe Apple needs to get rid of its cash. Gigantic M&A deals rarely create value for shareholders and having this much cash burns a hole in Apple's pocket.

I think Apple kind of screwed up when they first hit $100 a share and didn't do a stock split. I think if they just kept splitting the stock when it hit $100 a share, then they wouldn't have to buy the stock back until they really needed to.

As I've explained stock splits don't change anything. Would you rather have four quarters or a one dollar bill? They're worth the same. All a stock split does is multiply shares outstanding and reduces share price by that same proportion.

But they can't put themselves in a debt position.

Using debt in the capital structure would be value-generating for Apple as long as the tax shield they receive from interest payments isn't outweighed by bankruptcy fears. Here's a little experiment: look at Apple's operating cash flow and see how much debt Apple would have to issue to get anywhere near interest payments putting a significant strain on their finances. The number will amaze you - I guarantee it.

 

[IJ Reilly]

I don't get it. The time for stock buybacks is not when the stock is at an all-time high, even if it is still somewhat undervalued. A $200 valuation is just pie in the sky, and assumes they would double their earnings despite decreasing margins and a new product cycle. Who knows what happens with the Apple Watch - it could be a big hit, or a massive fail like every other smart watch but the Pebble

Yes, $200.00 is where it should correct to. For once I'd like to see Apple being called out for being overpriced. That won't happen until we go much much higher - just look at other stocks financials and where they are sitting. Apple is truly undervalued.

A little of both, but not all of either. The $200 share valuation Icahn suggests is possible but requires virtually perfect outcomes. If earnings grow 20-30%, investors begin treating Apple as more of a growth story again (pushing up the multiple), and Apple becomes far more aggressive with buybacks, then a doubling over the next 12 months is not out of the question. Way out on the thin optimistic edge perhaps, but not out of the question. What Icahn is really saying here is that the stock could double if the other things happen AND the value of $166B in cash reserves is fully unlocked. Not that he realistically expects the latter to occur. The point he makes is it could be, and however much of the cash the board decides to keep hidden in a bushel basket is the amount effectively withheld as stockholder value.

 

[UpperQuadrant]

Yes, good points about the number of units since the iWatch is a bit of an "iPhone accessory" - you have to own an iPhone first in order to use the iWatch maybe. At least the first version. (Think back to iPhone and the prerequisite for a computer to use the iPhone in 2007 - Apple solved that a year later or so, and it matched up very well to the current situation where people don't need or want computers as much). Now it's no big deal if you don't have a computer and just want an iPhone.

The thing that really gets me stoked about these things is that Apple doesn't have to make money on them, It just need to be the company that builds the infrastructure/ecosystem for the future utopian world.

For example, iWatch may be an important piece of the puzzle for mass adoption of home automation. Apple TV may also be a piece of the puzzle for home automation. Apple Pay might make zero profit for Apple, but it sandbags their position and also might be a piece of the puzzle.

Apple has a vision, and we all can guess what it all means.

I'm saying that I know what I don't know and I feel that Apple has a huge potential building up. I'm very bullish and now is a great time for Apple. It might even be considered a safe haven for your money, while Europe is in crisis, and Ebola threatens, and people wonder about the economy, Apple transcends these problems very nicely and is undervalued at the same time. It's a great escape from a possible "market correction" that people are talking about. AAPL stock goes up and the rest of the market is red.


Additions:

Apple split 7:1 instead of 3:1 perhaps due to reasons of being part of the DOW averages or something. Also to enable regular people to invest monthly with their savings.

Apple has a lot of cash. It's a good problem. It's good if they make the money work for them.

Apple could buy Facebook outright with their pocket money (almost). Apple has $133Billion and Facebook apparently is worth $160 Billion or something (don't quote me for accuracy on this, but i think it's close).

Apple could buy McDonalds out completely.

They could probably buy cellphone companies too

They could buy a car manufacturing company probably.

Apple will have 12% growth averaged out in the next 3 years (most likely, conservatively). Hard to beat that.

Strategic purchases could and should happen arguably, but counter to that is that they are in the best business and doing a great job at it.

It's a no brainer to buy back their own stock and increase dividends. All the conservative investors will go wild for AAPL if they can offer a dividend that beats out of all other companies dividend offerings.

The money Apple has in Ireland is automatically (at this point due to US Tax liabilities if they brought it into the US) is worth 30% less, right off the bat. Then Apple has about $30 Billion in debt.

I don't know if Apple's going to have a 12% growth rate. They are STILL trying to get to the same level of Profit as they did in 2012, they tanked since then and they are trying to get the Profits back up. IPod sales are now non-existent, iPad sales have been off, for whatever reason, and I think the iPhone 6+'s might actually canniblizing the iPad mini market due to the screen size getting closer. iTunes music sales are down, they don't charge for OS X updates or iWork/iLife anymore, so there are factors limiting Apple's growth. Plus, the shear fact that I don't think Apple is going to have a consistent growth rate simply because I don't think they can CONTINUALLY increase production of iPhones by at least 12% each year. They just implemented 10,000 robots, but apparently from what I heard, they is a lot of room for improvement so I don't know how much capacity Foxconn and others actually have in terms of producing more product. Foxconn is working on their 2nd gen Robots and time will tell how fast they can implement them and how well they work. But it's also the suppliers of critical components. It's a VERY difficult thing to do to ramp up 12% capacity each year CONSISTENTLY at this level. It's a lot easier to make 1,000 phones and ramp up to 1,100 phones than it is to go from 180 Million phones to 200 Million phones to 220 Million phones to 250 Million phones. Remember, a 12% growth compounds the previous year's numbers. They hit that invisible wall at some point. They cap out in terms of production as it takes a long time to build more buildings, buy more equipment, hire more people, at some point they get saturated which is what is happening. I think Apple should be releasing smartphone models twice a year and flip flopping production between the new models because they have this constant see saw effect, which isn't good, they need to get on a more consistent ramping UP, rather than up and down, up and down, up and down.

Cars? NO. If they do that, then they end up having blow ups with the other car mfg they are working with and then you have the Bose/Beats issue where you piss off one mfg because you bought their biggest competitor. Cars are even worse. They need to just partner up with as many car mfg as they can.

TVs might be good, but the problem is that MOST people that bought SmartTVs, only use them for basic TV functionality and they don't use the "smart" functionality all that much, plus people don't replace SmartTVs every 3 to 5 years like a computer.

I think Apple needs to figure out how to penetrate the Enterprise with more Mac sales, that way, they just worry about their current product line and just selling and supporting more Mac users rather than venturing out beyond their boundaries. Venturing too far out usually ends up one or two ways. Either they abandon what they originally did OR they end up screwing up because they are outside their comfort zone.

I think if the new AppleTV box had more functionality, ability to replace a cable box so people can just buy an AppleTV box, have built in DVR and cable TV processing, that would certainly help since that $99 box market would turn into a $600 box market I think they might be able to make some serious money in that. How many people would love to buy one TV box to connect to ANY cable/dish supplier, built in DVR, watch stuff on the internet as they do now, and then maybe run various gaming apps, etc. with one box that costs about $600 to $1000 rather than having an Xbox, a cable box, a computer, and internet streaming boxes laying around the room? Remember, Apple bought Primesense sensors that are used in those Xbox Kinect product for gaming. Who knows what they are working on for an AppleTV replacement.

----------

A little of both, but not all of either. The $200 share valuation Icahn suggests is possible but requires virtually perfect outcomes. If earnings grow 20-30%, investors begin treating Apple as more of a growth story again (pushing up the multiple), and Apple becomes far more aggressive with buybacks, then a doubling over the next 12 months is not out of the question. Way out on the thin optimistic edge perhaps, but not out of the question. What Icahn is really saying here is that the stock could double if the other things happen AND the value of $166B in cash reserves is fully unlocked. Not that he realistically expects the latter to occur. The point he makes is it could be, and however much of the cash the board decides to keep hidden in a bushel basket is the amount effectively withheld as stockholder value.

Apple's not going to continue to have a 20 to 30% earning growth rate. Look at the last 3 years, they went down and they are just trying to catch up to 2012 numbers.

Remember, when you have a consistent growth rate, it's compounding and I just think Apple has maxed out for now, the iPhone 6/6+'s are a definite boost in sales and taking away market from Android, which is all good, but they have to continue that momentum and I just simply don't see it.

At this point, please don't go into this blindly. This same thing happened with Intel, Cisco, Dell, Microsoft, and just about EVERY major company that went through a hyper growth in the high tech industry. At some point in time the company maxes out and I think in many ways, they are maxing out. Some of their products aren't selling, some are, but production levels have to consistently be built and that is just simply too much to ask for. It's easy to develop a product to attract attention, but keeping up with demand? That's a double edged sword.

I just see Apple, the company, leveling off and going from a 30 to 50% a year growth rate down to a 5 to 10% growth rate on a long term basis as an AVERAGE. They might have a quarter hear and there that will be bigger, but they certainly can't do this with shoving most of their new product announcements at the end of the year. They have to spread out product announcements throughout the year.

----------

A little of both, but not all of either. The $200 share valuation Icahn suggests is possible but requires virtually perfect outcomes. If earnings grow 20-30%, investors begin treating Apple as more of a growth story again (pushing up the multiple), and Apple becomes far more aggressive with buybacks, then a doubling over the next 12 months is not out of the question. Way out on the thin optimistic edge perhaps, but not out of the question. What Icahn is really saying here is that the stock could double if the other things happen AND the value of $166B in cash reserves is fully unlocked. Not that he realistically expects the latter to occur. The point he makes is it could be, and however much of the cash the board decides to keep hidden in a bushel basket is the amount effectively withheld as stockholder value.

go look at Apple's product segments and see for yourself how each of their business units are performing over time.

This is an excellent site that has this information.

http://barefigur.es/apple/

Stock splits are good in that when you have a stock split, you can sell portion of your total amount in that stock because it's typically better to buy/sell in blocks of 100 shares, but what happened is that Apple stock got too expensive for the average person to buy a block of 100 shares. The large institutional buyers have abandoned Apple stock and they now have to rely on small time investors that can't afford to buy 100 shares at $700 a share, but they can afford 100 or 200 shares at $100 a share just to get some investment.

The higher the stock price is, the less number of small time investors can afford to jump in. That's why they do stock splits. Icahn has a lot of stock and he wants a quick return on his investment and he's trying to dictate to Apple what to do.

I know Apple is earning the interest on the money in Ireland to pay the interest payments of the debt, but they are screwing up their debt ratio by compiling more debt to do what exactly? Pay dividends and buy pieces of paper to remove from the market? Sorry, that's not a good use of money. i think it's stupid to buy back shares and then issue more shares with a stock split.

How much interest do they actually make AFTER taxes off the money and compare it to how much they paying for the debt? That's just the interest payments, but at some point in time, the bonds have to paid in full.

The stock has gotten overhyped by all of this talk about stock buyback. It's not necessary because it's going to raise the stock price too much where the little people can't afford it. I think they have racked up enough debt right now with what they've done and I think they need to focus on getting the company on a ramp up that's sustainable, they've faltered over the past couple of years since Jobs passed away. I don't know how much is applicable to Cook, but I don't like the way he changed product announcements being shoved at the end of the year. They need to spread them out. Shoving everything so the Christmas season is bigger and bigger WILL eventually catch up to them. I would rather see a more consistent growth pattern rather than the seesaw effect Apple's had over the years. It effects them with the media and what the public perceives. they are in this Apple's great to Apple sucks, back to Apple's great because of this seesaw effect that the company operates in.

 

[MyopicPaideia]

You just don't understand finance and won't take the time to educate yourself on it before speaking about it. That's unfortunate because I'm more than happy to have people disagree with me on my conclusions once they've understood and accepted the actual theory that underpins these discussions. Oh well.

Yeah, I'm a finance executive and don't understand finance. Hmmm...

Your problem, and IJ's too, is that you've have been indoctrinated to take a quantitative-only approach, so that all you see are the ratios, formulae, and sums, that's the only theoretical underpinnings your view of the discussion has. Heretic Jon and I obviously share extremely similar viewpoints on this. There is a whole qualitative side to the world of business and finance that you are either completely blind and oblivious to, or are purposely ignoring to justify your position to yourself.

So we can roll our eyes at each other for the next few pages on this thread (looking at you, Mr. IJ Reilly), and you can keep telling me I just don't understand finance, but that's a waste of both of our time. We have fundamentally different philosophical views about why businesses exist in the first place and what their role in society should be, and how close their current actual role in society compares to that.

 

[PinkyMacGodess]

iWatch will be huge. Right now no teenager wants to wear a wristwatch - so they say. This will soon change when all the media super stars show them that they love it. I'm voting by buying options (calls).

I'm bearish on the Apple Watch. I don't think that kids are just going to go out and plunk big bucks on a 'watch'. It sounds like a pebble on steroids, and the pebble hasn't exactly blown the doors off the market, yet.

In other words, this is not the Newton that helped birth a whole industry, this is a 'smart watch' in the low tide era of people wanting a new 'watch'.

Maybe marketing it as a 'fashion statement' is the only way they can get it out on peoples wrists. The reported cost, and the apparent size will be the two things that stop it cold.

 

[Keirasplace]

The Harvard Business School made 'Shareholder value' an absolute imperative, substituting it for all other values that a company could have. This is the Zeitgeist of business right now and many people who've never heard of it are quoting it as if it were a moral imperative.
.

Actually, what should be maximized is stakeholder value : employees, shareholders, customers, community, country, world. If you run a function that improved all those long term, you'd get one hell of a good place to live in and people would still make plenty of money. Of course, nobody would get the maximum money they could get if they screwed somebody else...

Right now firms are maximized for C level execs, highly sought professionals and some large shareholders' profits and little else. Everybody loses but the few and no, their money is not trickling down to the masses below! (GOP mantra for 35 years)

 

[IJ Reilly]

Apple's not going to continue to have a 20 to 30% earning growth rate. Look at the last 3 years, they went down and they are just trying to catch up to 2012 numbers.

Obviously Apple won't "continue" to grow earnings at 20-30% if only because during the lull of the last two years they have not performed anywhere close to those numbers. Companies "max out" when they don't develop new products and new markets. If the Apple Watch is a hit, I can see it driving earnings growth by 20% or more as it will be an entirely new category and every new dollar of earnings is additive to the bottom line. No catching up is required, only growth from this point forward. Either they will have the products to drive earnings or they will not.

----------

Yeah, I'm a finance executive and don't understand finance. Hmmm...

Your problem, and IJ's too, is that you've have been indoctrinated to take a quantitative-only approach, so that all you see are the ratios, formulae, and sums, that's the only theoretical underpinnings your view of the discussion has. Heretic Jon and I obviously share extremely similar viewpoints on this. There is a whole qualitative side to the world of business and finance that you are either completely blind and oblivious to, or are purposely ignoring to justify your position to yourself.

So we can roll our eyes at each other for the next few pages on this thread (looking at you, Mr. IJ Reilly), and you can keep telling me I just don't understand finance, but that's a waste of both of our time. We have fundamentally different philosophical views about why businesses exist in the first place and what their role in society should be, and how close their current actual role in society compares to that.

"Nope."

(That would be on every point, incidentally.)

 

[UpperQuadrant]

Obviously Apple won't "continue" to grow earnings at 20-30% if only because during the lull of the last two years they have not performed anywhere close to those numbers. Companies "max out" when they don't develop new products and new markets. If the Apple Watch is a hit, I can see it driving earnings growth by 20% or more as it will be an entirely new category and every new dollar of earnings is additive to the bottom line. No catching up is required, only growth from this point forward. Either they will have the products to drive earnings or they will not.

----------



"Nope."

Please quantify a HIT for the AppleWatch in terms of yearly sustainable Gross and Net Profits and unit sales? I'm just trying to see what you mean by a "HIT".

The reason why i don't think it's going to make that much difference is because Apple needs to make up the difference in the lost sales of iPods, OS X updates, iWork and iLife sales as well as a drop in iTunes. Beats Music hasn't done squat. Beats headphones may be a lost cause because we don't know what they are going to do in yearly sales, they hit $1.5 Billion after several years on the market, but we need to figure out what's sustainable.

If Apple sold the watches at an average price of $500 a piece and sold 50 to 100 Million units, then I'd see your point, but they aren't. They are going to sell mostly the $350 model and they are probably LUCKY if they sell more than 15 Million units in the first few years. As cool as they are, as many iPhone users as they have, I just don't see this as a HUGE enough HIT for Apple to add that much to their Gross sales and Net Profits to make a big deal about it.

Let's say they sold 15 Million units at an average price of $400. That's $6 Billion in Gross sales, and if you figure at a 20% Net Profit to Sales, that adds about $1.2 Billion in Net Profits.

How much revenue did Apple do in 2013, as an example? $180 Billion in Gross Revenue and about $40 Billion in Net Profits? IF Apple sells 15 Million $400 watches in the first year, that's a lot of money, no doubt, but not in terms of compared to how much Apple does in a year of everything else they currently make. Remember, iPods, iTunes and other things are going down or going away completely, so the Apple Watches, from my perspective will only take up some slack other product segments are leaving a void.

Seriously, no matter how cool these Apple Watches are, the majority of iPhone users will not be buying a smart watch. I consider myself a pretty hardcore Apple fan because I have an iPad, iPhone, MBPR, and iMac and I'm still up in the air on the Watch, at least for the first product release and I simply don't see much room for improvement on a year to year basis other than MAYBE getting them thinner, longer battery life, maybe some additional storage, but they don't accelerate those aspects that fast. I don't see Apple adding a lot more sensors internally, I do see Apple releasing external sensors like glucose monitoring, etc. But I simply don't see this product adding that much to the bottom line that will impact the companies financials. The AppleWatch is going to be a small factor in the total financial aspect of what Apple sells.

Here's another potential problem. I see Iovine and Dre as scumbags, regardless of what Cook says. It wouldn't surprise me at all, if they dumped a lot of headphones on the market right before they sold to Apple to boost their numbers to get the acquisition price up. Companies do that and THEY are highly suspect in my book for doing this. Time will tell how sustainable their business is in terms of headphone sales. It took Beats about 6 years to get headphone sales to $1.5 Billion in gross sales, and the Beats subscription service LOST money. I'm STILL on the fence about Beats headphones and Beats Music.

 

[IJ Reilly]

Let's say they sold 15 Million units at an average price of $400. That's $6 Billion in Gross sales, and if you figure at a 20% Net Profit to Sales, that adds about $1.2 Billion in Net Profits.

Here's your first big problem. Even if I accepted your guesses on sales (which I don't), Apple's gross margins are in fact closer to 40%. They have been for... ever. So even with your highly pessimistic predictions, the Apple Watch would add about 10% earnings growth.

And forget about a need to "replace" sales in products that already contribute next to nothing to the company's earnings. That argument is just silly.

 

[UpperQuadrant]

Here's your first big problem. Even if I accepted your guesses on sales (which I don't), Apple's gross margins are in fact closer to 40%. They have been for... ever. So even with your highly pessimistic predictions, the Apple Watch would add about 10% earnings growth.

And forget about a need to "replace" sales in products that already contribute next to nothing to the company's earnings. That argument is just silly.

Gross margin is NOT what I'm looking at. I look at NET PROFITs. That's what pays the bills. Don't look at Gross margin, that doesn't mean spit. Look at NET PROFITS. that's the bottom line.

Now, in terms of how many they are going to sell in the first year, the estimates I've seen from the more reliable analysts is around 10 to 12, and as high as 15 Million units. That's what the analysts are saying. So, I'm using the higher end of the analysts projections. In terms of average unit price, all I know is the cheapest is $350, and that's all I know. We don't know what the different prices are going to be.

Yeah, with the iPhone 6/6+, I can see a 10% growth, but not 20 to 30% growth in terms of Net Profits. I think they need to pay dividends without racking up more debt. I would rather see them do that, then squander all of that cash in Ireland by taking out bonds, and loans against that money. Remember, we also have the currency valuations, is that money in Ireland going to be stable due to currency fluctuations? I haven't been monitoring Ireland's currency. That can many times work against Apple or work for Apple, but if they can manage to get a tax break this year so they can bring in the money, they will, but we have to see how much they are going to lose in that, otherwise, it's still worth 30% less than what's over in Ireland.

I'm also looking at what's sustainable over the course of 5 years. What can Apple do on a yearly basis over the next 5 years. My crystal ball says around 10% on average, but not much more than that and I'm talking AVERAGE growth rate for the next 5 years. I think some years will be better or worse depending on mfg availability of the hot products.

----------

Here's your first big problem. Even if I accepted your guesses on sales (which I don't), Apple's gross margins are in fact closer to 40%. They have been for... ever. So even with your highly pessimistic predictions, the Apple Watch would add about 10% earnings growth.

And forget about a need to "replace" sales in products that already contribute next to nothing to the company's earnings. That argument is just silly.

I was actually using higher than what the analysts were projecting in terms of AppleWatch sales, not the lower predictions. Most of them were projecting 10 to 12 Million Apple Watches in the first year, but we still don't know the actual pricing other than the cheapest model at $350.


I tell you what, go into a busy Apple Store and ask 100 people that seem like average people and ask them if they are planning on buying an Apple Watch. See what you get.

 

[IJ Reilly]

You are in the habit of quoting back my posts twice, with different responses. This is annoying and tedious.

I don't give a flying flip what people in Apple stores say, and not especially about a product that none of them have ever seen. If you'd have asked them about whether they wanted an iPad before they'd seen one, the responses would be effectively the same. I'd think the naysayers would become conscious of, if not embarrassed by, being so consistently wrong with their dire predictions of the imminent failure of a new Apple product.

Or so I'd think.

 

[UpperQuadrant]

Here's your first big problem. Even if I accepted your guesses on sales (which I don't), Apple's gross margins are in fact closer to 40%. They have been for... ever. So even with your highly pessimistic predictions, the Apple Watch would add about 10% earnings growth.

And forget about a need to "replace" sales in products that already contribute next to nothing to the company's earnings. That argument is just silly.

What do you THINK the average yearly unit sales are going to be and the average unit sales price is going to be. remember, when they sell these things through the reseller community, they don't get full retail, they get a discount from full retail. I hope you are considering that when you factor in the average selling price that Apple sells these things at. Typical stores like Nordstrom, Jewelry stores, etc. don't sell that much product with only 25% gross margin like the retail computer stores do. Jewelry usually has VERY high markup and I doubt Apple is going to sell a $350 watch to some of these retail stores for $175.

Again, you have not quantified your opinion on the subject. Please quantify what you think they are going to sell in terms of units sold and average selling price.


To address your iPad mini retort. The iPad mini was going into an already established market because they were already selling the larger screen units and other companies like Kindle and such had smaller 7inch tablets. These smart watches are a much tougher sell. Look at Samsung, their first gen Gear watches didn't sell, so they had to end up giving them away. Most of these smart watches don't sell that well.

I think the AppleWatch is a cool product, but when you get right down to it, the majority of people that even wear a watch wear them more as fashion items.

The smart watch industry is predominately the $99 Fuels, Jawbone and things like that. Pebble sold 400,000 units last year. Samsung sold 800,000, so Apple selling 10 to 15 Million is HUGE numbers and I'm being VERY generous with my predictions, but I have to see what reality is. I know there will always be a hardcore group of Apple iPhone users that will buy these things, but I honestly don't see much more than 10 Million units sold and that to me would consider this type of product a major hit at 10 Million units. But again, I don't even see that many. So me predicting 15 Million unit is NOT pessimistic, it's OVERLY generous. Maybe you'll be right in assuming that that number is low, but from my point of view I don't think it is. We still don't know the battery life, we still don't know all of the different price points, and we still haven't seen them in person, so we can only judge and make predictions based on what little information we do know about.