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

[IJ Reilly]

Why does Icahn think they care? They've shown that they don't have any interest in doing what he says each time.

Actually, not. Apple has done pretty much everything Icahn recommended, from accelerating stock buybacks to increasing dividends. Probably they were going to do this anyway, but it is wrong to assume that he is simply being ignored when the truth is far from it.

 

[yaxomoxay]

Hey, did you see that letter? It was long. It probably took a few days to write.

True... but...
Ichann to Secretary: "Write a letter saying that Apple should do better."
Secretary to Minions: "Boss said to write a letter saying that Apple should do better."
Minions on letter: "[Add Padding] Apple should do Better [Add Padding]"

Return letter two days later.
Ichann to Secretary: "Send letter. Oh, my workday is so hard."

 

[Plutonius]

Count Dooku, we will never fall for your mind tricks and follow the dark side .

 

[WRX-SRQ]

This guy is a leech on Apple's backside. All he wants is Tim Cook to make moves that will ultimately make him more money.

Does he not have enough already. Hell, he's going to be dead in less than 3 years anyway, why does he need more.

 

[IJ Reilly]

Let me rephrase that for you:

"Accelerate the repurchasing of your stock to drive the price up faster so I can sell my shares faster and make my $ faster. I really don't care about the company's long term prospects"

There you go.

And for anyone else who owns the stock, "longterm prospects" having nothing whatsoever to do with any of this.

Icahn is a lot better at making money than just about anyone on the planet. It's a mystery to me why he is so completely reviled, presumably by stockholders who should be thrilled by his saying that their shares could be selling for twice the current price.

 

[Jon the Heretic]

Buy backs blow

Buy backs are for companies that want to manufacture fake profitability. Financial engineering only.

Another terrible idea from the Harvard Business School that spiritually begat creeps like Jack Welch and his downright evil minions.

It is for people like him that Death was Invented. It is almost worth having everyone else die just to see people like him and his ilk suffer eternal darkness.

 

[ChrisCW11]

Wouldn't touch Apple right now

Tim Cook needs to formally address the quality control issues. I know Apple is held up to higher standards, but the iPhone 6 and iOS 8 roll out was a fiasco by all standards, this following a new tradition of product release fiasco's. Putting out a phone that bends, even in only limited cases, is a product flaw, period. iOS crippling phone performance, cellular service, or hands free bluetooth connection, or downright nuking your cloud files, are pretty serious flaws.

This is followed by the poor roll out of Maps, and other hardware issues that have plagued most iPhone rollouts since iPhone 4 antennagate. Also there have been a SLEW of security issues, everything from gaining access from the Control Center on lockout screens to the iCloud celebrity nudes, which Apple still has not adequately resolved.

Not saying Apple is going to hell in a handbasket, but Apple can't just ignore these issues and sweep them under the table. There are some serious quality issues from Apple and if I were to invest any more into Apple stock, as a stockholder I want to know the CEO is both aware of these issues, admits there is an issue, and has a plan to improve these quality issues. The biggest message coming out of Apple is NOT about some new product but should be about how Apple is working to fix their development and quality process to avoid these headaches for future releases.

 

[IJ Reilly]

I have to say I agree with Icahn. Apple seems undervalued to me. The iPhone is the best in class and I agree that the smartphone market is the most important piece of technology. I also think that Apple is dominating that market and will continue to do and its dominance is on the the assent.

Icahn has been right about these stock buy backs for years now. Apple and their shareholders would have gotten a fantastic return if Apple had followed his advice more whole heartedly over the last few years. Now Apple has a continuing growing stockpile. The supper successful iPhone launch (one in which people are not recognizing will include sales at a much higher price point and probably higher margins (more people will buy the 64 GB 6 and the 6+, then in the 5s launch where the most common phone sold was probably the 16gb version)) is going to add tens of billions to this cash pile over the next two quarters.

Agreed. The problem with Carl Icahn isn't that he's wrong, but that he's right. Go figure why this makes so many people angry.

 

[MyopicPaideia]

Did you guys read his letter?

He praises Apple

He is totally right, Apple has been held back. Bendgate and all this nonsense for years.

Apple is way undervalued.

Interest rates are so low, Apple's best investment is to buy it's own stock. And they are doing that.

Why so negative on Carl Icahn?

Because read Oatman's post right above yours.

 

[koban4max]

perfect example of GREED>

 

[yaxomoxay]

Putting out a phone that bends

everything bends given the right amount of applied force. Including your car. iOS8 rollout was a disaster, but the bend thing is just for selling newspapers.

 

[jayisblessed]

He is very disgusting. I thought he was dead.

Icahn is a parasite...

He is very disgusting. I thought he was dead. Here he comes, again. I really hope he is out of the picture.

 

[unplugme71]

I wish I owned 53 million dollars of apple stock, nevermind shares.

 

[Jon the Heretic]

Shareholder "value" is a living, thriving company

This isn't a popular opinion around here, but shareholders own the company.

If you've ever worked for a company that is governed by this Harvard Business School self-serving crap, then you know what the outer ring of hell is like. Once great companies that embrace start to embrace this false "ethic" are only good for one thing: maximizing executive compensation. Inevitably, they destroy the company itself in the process. This is the business ethic of the parasite, of organisms that devour their young and begat nothing of value.

Shareholder values creates zombies when once there was vitality and life. It's a false value.

 

[londoner33]

Not in Apple's interest

He's a bully who wants to exit quickly for speculative reasons.
Other shareholders who have invested for the long term should become a bit more vocal than this guy.

 

[MyopicPaideia]

And for anyone else who owns the stock, "longterm prospects" having nothing whatsoever to do with any of this.

Icahn is a lot better at making money than just about anyone on the planet. It's a mystery to me why he is so completely reviled, presumably by stockholders who should be thrilled by his saying that their shares could be selling for twice the current price.

Why? So that they can all sell them at the same time and have the stock plummet like a lode stone?? Putting you back to square one or worse for all the "average joe" investors?

Buying back the stock over time IS a good idea - it give Apple more control over their own position. Buying it back all at once or at a highly accelerated rate is a BAD idea - all it will do is create a short term window for all the big holders to unload their positions and all the rest will be left no better off or worse than before the buyback. The only thing this will do is give Mr. Icahn a nice quick ROI, which, as you say, is what he is extremely good at.

But its not good for Apple and its not good for small investors, which own the majority of Apple shares.

 

[IJ Reilly]

Then again, I've always been a huge advocate of AAPL buying its own shares because it gives them the management a larger control of the company's position.

This doesn't happen. Repurchased shares aren't owned by the company, they are effectively retired.

 

[TallManNY]

Agreed. The problem with Carl Icahn isn't that he's wrong, but that he's right. Go figure why this makes so many people angry.

What do you think the price mix of the iPhone 6 sales will be compared to the 5s launch last year? I'm thinking last year a greater percentage of folks bought the 16gb phone. That was a $649 phone last year. This year we have: some percentage buying 6+ which starts at $749. But it is inconceivable to me that folks buying that huge phone are buying the 16gb version. So really that phone is going to be a 64gb at $849 phone. Also the the jump from 16gb to 64gb is not only more compelling but more necessary than last year with the bigger Apps coming. Not to mention the lessons of the difficulty of OTA update for iOS 8. So more folks will spend the extra hundred bucks to get more storage. It is a better value proposition than the 32gb jump was last year.

So if iPhone 6 heavily skews to sale prices in the $749 to $849 range compared to last years launch (which included 5c sales at $549), then what is going to happen to Apple's margins this quarter?

 

[IJ Reilly]

Did you guys read his letter?

He praises Apple

He is totally right, Apple has been held back. Bendgate and all this nonsense for years.

Apple is way undervalued.

Interest rates are so low, Apple's best investment is to buy it's own stock. And they are doing that.

Why so negative on Carl Icahn?

Exactly. He says Apple is a great company with great products and great future prospects. He says the shares could be double in value. He backs up his opinion with his own money. So many reasons to hate that.

----------

So if iPhone 6 heavily skews to sale prices in the $749 to $849 range compared to last years launch (which included 5c sales at $549), then what is going to happen to Apple's margins this quarter?

It goes up? For the iPhone, at least.

 

[JeffyTheQuik]

Did you guys read his letter?

He praises Apple

He is totally right, Apple has been held back. Bendgate and all this nonsense for years.

Apple is way undervalued.

Interest rates are so low, Apple's best investment is to buy it's own stock. And they are doing that.

Why so negative on Carl Icahn?

I just read it, and I have a few observations:

1. You're right. He does give justifications for why he thinks it should be $203.
2. Carl: Paragraphs. This was like reading my 3rd grader's reports in terms of paragraph formatting.
3. I'm pretty excited about what he says. In an earlier post, I put that P/E of 16, and that is correct for today. He cites 8:1 for FY 2016-7, and he expects it to be 19:1, justifying the share price of $203. That makes sense to me now.

 

[PJWilkin]

Let me rephrase that for you:

"Accelerate the repurchasing of your stock to drive the price up faster so I can sell my shares faster and make my $ faster. I really don't care about the company's long term prospects"

There you go.

Perhaps if he's so interested in Apple Stock Buy Back he'll sell his stock to Apple

That way they meet his wishes, and Apple can say bye bye to him

 

[JeffyTheQuik]

Why? So that they can all sell them at the same time and have the stock plummet like a lode stone?? Putting you back to square one or worse for all the "average joe" investors?

Buying back the stock over time IS a good idea - it give Apple more control over their own position. Buying it back all at once or at a highly accelerated rate is a BAD idea - all it will do is create a short term window for all the big holders to unload their positions and all the rest will be left no better off or worse than before the buyback. The only thing this will do is give Mr. Icahn a nice quick ROI, which, as you say, is what he is extremely good at.

But its not good for Apple and its not good for small investors, which own the majority of Apple shares.

Shareholder Equity

Shares Outstanding 6.0 B
Institutional Ownership 58.36%
Number of Floating Shares 6.0 B
Short Interest as % of Float 2.31%

(Source: E*Trade)

Carl's amount: 53M, or 0.83% of the shares. Is he a small investor?

 

[IJ Reilly]

If Apple buys back shares for one billion dollars, then the value of the company is reduced by one billion dollars. That's compensated for by the fact that there are now fewer shares, so the value of the company is divided by fewer shares.

If Apple buys shares at exactly what they are worth, that's pointless. If Apple buys shares at a higher price than they are worth (because the share price is too high), that's bad because it reduces the value for the remaining share holders, and I don't think you can make an argument that Apple owes anything to share holders selling their shares. If Apple buys shares at a lower price than they are worth, that's a good thing because the value for the remaining share holders goes up.

Apple is quite high at the moment, so buying shares is not that good an idea. If Apple dropped to $90 or $80, then they should buy shares.

This is not how shares are repurchased, nor is it the affect of repurchases. A company repurchases shares on the open market, so the price is never more or less than they are worth. The reduced number of shares concentrates earnings on fewer shares, resulting in an increase in EPS.

 

[Vertigo50]

Dear Carl Icahn,

Do something about those nails and get someone to mow your eyebrows. Then maybe we can talk.

Sincerely,

Tim Cook

 

[JeffyTheQuik]

Buy backs are for companies that want to manufacture fake profitability. Financial engineering only.

Another terrible idea from the Harvard Business School that spiritually begat creeps like Jack Welch and his downright evil minions.

It is for people like him that Death was Invented. It is almost worth having everyone else die just to see people like him and his ilk suffer eternal darkness.

Wow! Just wow!

Do you have one of those "Visualize World Peace" stickers on your car?