Carl Icahn Presses for Apple Shareholder Vote on Increased Stock Buyback

[mrxak]

so... apple has too much money. but he does not? if you are a billionaire- ****. if you cannot be bothered to part with money- do not expect others to.

But Icahn is parting with his money. He's using it to buy shares of Apple. Apple is just holding onto a bunch of cash and not spending it or investing it. Icahn is trying to make his money work for him. Apple is leaving a bunch of money lying around not working at all and losing value to inflation.

 

[IJ Reilly]

Every investor is expecting a return. If you think that late investors should not expect a return, you're against corporations as a whole because the entire system depends on just that very concept. It doesn't matter when you bought shares or at what price, your shares have an equal voice and equal expectation that there will be some return for your investment.

Now you're right, it's possible that certain corporate actions to give returns to shareholders today might hamper shareholder returns tomorrow. Corporations should not do that, and Apple won't. The debate now is over what will best ensure returns to shareholders, now, and in the future.

What Icahn is proposing to do will give shareholders higher returns today, and tomorrow too. Just because he might be inclined to sell his stock after higher returns today, doesn't mean those are the only returns anyone will ever get again. Quite the opposite. A buyback of stock will permanently raise the value of each share left in the world, earnings remaining equal. Since Apple has demonstrated for years now that they are earning more than they can spend to create earnings growth, hence the cash pile, spending that cash pile on the buyback will not negatively affect earnings one bit. Earnings will remain constant or grow no slower than they have previously, and each share will be earning more.

Is Icahn's proposal the best proposal? That's what's being debated. But it's not a bad proposal, and it will not ruin the company forever and ever, sucking all the other shareholders dry. The outcome Icahn gets will be the same outcome everyone else gets. He's merely a loud investor, throwing ideas out there for all to hear. Apple can ignore them or follow them as they wish. All the hatred of him from what I assume is mostly non-investors (judging by the ignorance displayed about investing, I should hope so for their sakes) is irrational. At least he's putting his money where his mouth is, and if he's wrong about his proposal and convinces most of the other shareholders to go along with it, he'll suffer for it more than most.

QFT.

This thread should end here, but we know it won't.

 

[entatlrg]

Should start a petition on change.org to discourage his greedy ways ... Apple needs to spend on future technologies, innovation and R&D not siphoning more cash to greedy pigs like Icahn...

Wonder what Steve Jobs would say to Icahn's antics?

 

[fredfnord]

If you think taxes should be higher, win some elections and make them higher, then accept the consequences. But don't hold your hand out expecting anybody to pay more than the law says they owe. While you're at it, maybe if the taxes aren't there to bring in enough money to pay for services, stop offering so many services you can't afford?

So, having looked at what you've posted in the past, I know that you know this. But I'll state it for the record, because there are probably plenty of other people who don't.

Tax law is extremely complicated. The reason for this is that simpler tax laws include incredibly easy-to-find and easy-to-exploit loopholes. Imagine a flat tax, 30% on all income in the United States for people and corporations, with no excepts. Well, what if the income is made overseas? Clearly it's not subject to this tax, so every company whose income involves very large lump sum payments just has other companies who are paying it pay with their overseas subsidiaries instead. Tax that? But then it might also be taxed by another country too, and suddenly 30% tax is 60% tax, and that's maybe a little excessive. So you make a provision that prevents double taxation. But then a country decides to charge 1% tax, so everyone flocks to there, so you need to change the law... and so on.

Hence, complicated. Indeed, there is an entire industry of lawyers who spend decades studying these laws, so that they can find loopholes that were accidentally included in them. And then a company suddenly find that, because of this unintended consequence of the complex interaction between five different laws passed at five different times in the past 40 years, the 'law says' that if they mark all their prices on their price list in Yugocroslavian Borogroves, and no executive of the company says the word 'the' in the last three months of the year, their tax burden is reduced from $35 million to $35. This is not an intended effect, but an accidental one. But they can get away with it this year.

And maybe next year, if we have a congress that isn't intent on lowering the tax burden of corporations and the rich to 0 while raising the tax burden of the poorest 50% of the population significantly (in, say, 2022), then we can change the law to get rid of that loophole. And then the company will find another one the next year.

Your proposed solution, then, is an eternal chase between the government and the companies, with the government always losing every year. Oddly, this was not considered to be the patriotic necessity of every corporation back in the 1970s. Indeed, companies that tried ******** like that got pilloried in the papers, and lost a lot of business and public goodwill. But because of attitudes like yours, it now pretty much is considered to be, somehow, a good thing.

Well, it's a good thing if you're rich and hate the government. It's a bad thing if you understand that there are, indeed, reasons that the government exists, and they are not simply to spy on the people and help transfer wealth from the poor to the rich.

 

[IJ Reilly]

not really. When a company buys back stock, that stock is typically retired. If thery were to hold the stock for re-issue, it wouldn't have the effect that Icahn is looking for because the total number of shares would remain the same. It could increase the price just because there are a large number of orders but it would be temporary. The only thing that would permanently increase the value os for Apple to retire the stock, which is essentially throwing away money.

You may argue they are buying 'investor goodwill', but someone needs to quantify that for me before I would believe Apple would get a good ROI for this move.

Public companies cannot own stock in themselves. Repurchased share are erased from the books, it is not an "investment." OTOH, they also routinely create new shares with grants and options paid out to company execs. If they never do the former, then the latter continually dilutes earnings for every shareholder.

 

[Makosuke]

I'm an AAPL shareholder, and if they went through with Icahn's plan, I'm sure my stock would go up and I could sell for a profit if I did it quickly enough (read: at the same time as or slightly before he did).

But you know what I want Apple to do with their money? Whatever they think is a good idea for the company ten or twenty or thirty years down the line.

Because ignoring share price and focusing on products for the past decade or two seems to have done a remarkably good job of taking Apple stock from $12 a share to $500-700, and the company from an also-ran to the most valuable one on the planet. Listening to guys like Icahn did not do that.

At absolute best, he's in it for the next three years, and he has no interest in long-term stockholding, so has no interest at all in any sort of long-term benefit for what the company actually does as a company--only what the stock is worth.

 

[9000]

Oh, and for the record, STEVE JOBS IS DEAD. It is asinine to say 'if Steve were here' or some other statement. He is dead and gone. There is new management in place that in part exemplifies the ideals that Steve held close to his heart but, again. STEVE JOBS IS DEAD and the existing management team will do what ever their collective wisdom tells them to do...not STEVE JOBS. Those days are gone and will never come back...so it is long past due to move on and embrace the future.

Well, I didn't embrace the future. I decided to be asinine and sell my stock, not because of this Icahn scenario but because Tim Cook obviously can't be like Steve Jobs, and when Apple slows down, all the copycats like MS, Google, and Samsung catch up. Less product differentiation means less demand. Didn't sell when Steve Jobs died, sold yesterday. Let's see what happens.

I also feel that Apple's standards of quality have declined without Steve Jobs. The company has lost a some "magic". And he would have whipped whoever presented him with the new iOS 7 design. Apple can't release something like that.

----------

I suspect he will sell in the short term, but not because he thinks Apple is doomed, simply because he thinks AAPL is currently undervalued and he can make a quick buck getting its value to where it should be. Steady but slow growth after that, even rather good growth after that, doesn't interest him. He's looking for large, quick increases in his net worth. Staying with Apple too long, even if it's a good investment that makes lots of money, may have significant opportunity costs to an investor like Icahn.

Again, that doesn't mean Apple is doomed after a big buyback. It just won't offer the sudden increases in price that a buyback offers. He may be back again in a few years after Apple's accumulated another big cash hoard, and do this all again at higher prices.

Icahn's entire strategy actually requires Apple to be left in a good position afterwards. He's not going to be able to sell his stock at the price he wants unless other investors think the stock is worth that price. He's got a lot of stock to sell, which means he's going to need a lot of other investors willing to buy. Apple's a good, profitable company, and I don't expect he'll have any problems selling his shares at a post-buyback price.

I honestly don't know if the size of the buyback he's suggesting is reckless or not. But understanding all of the above, I don't have any reason to think Icahn thinks it's reckless. Apple keeps saying they're doing everything with their money that they can to grow their business, yet the money pile is getting bigger and bigger. If the entire money pile was given back to investors, it stands to reason that Apple would keep growing as fast as they can, and the money pile would keep growing too. It would probably be reckless to give up every single dime in their coffers, but Apple is making, what, a billion dollars a week? Surely their operating expenses are taken care of whether that money pile is there or not, so Apple should get rid of as much of that pile as they believe they can without impacting their growth. People may disagree how much of it they should keep, but then Apple's cash pile has been huge for years now at much, much smaller amounts.

I don't know much about Icahn, but you could definitely be right about him not wanting to hold onto anything that will move too slowly. Still, his strategy would not require Apple to be in a good position for long, just long enough for him to sell. It could do fine for months then encounter problems with the debt or something.

I think Apple could use the money on acquisitions instead and/or do a buyback but not such a huge one. You're right that if they can't use the cash, then they don't need it, but they could use it. They're too stingy about buying other companies if they have cash that they can't find a use for. They should have grabbed Spotify a long time ago!

 

[mrxak]

Icahn essentially wants Apple to use its entire savings to buy its own stock. Moreover, Apple will do it using borrowed money. You seem intelligent, so I should not have to explain the future risk of that. But Icahn will not be in the stock in the future, so he will be fine. It is Apple and long term stock holders that will have increased risk exposure.

Further, I have no problem with Icahn voicing his view. I just want Apple to ignore him. As a long term investor, I would prefer Apple to increase the dividend it pays, or do nothing for now, and be more conservative with buying back its own stock.

Interest rates are incredibly low right now, and if Apple does indeed buy stock with borrowed money, they'll have incurred debt they could pay off in its entirety instantly if they really wanted, since the cash pile is still there.

I see no problem with savings, but here's the thing. You save for the lean times. Apple has done that by several orders of magnitude already, and they're "saving" more every week a half billion dollars at a time. No other company has anything close to Apple's "savings" nor would any company ever need to save so much. It's unfathomable that Apple should ever need this much cash on hand to save themselves from destruction.

So you tell me, how much should Apple save up? Enough to run their business without selling a single product for a whole year? Two years? Five years? We are well past that now. Apple spends only about $21 billion a year on operating expenses. That's spending on everything, from R&D to payroll to electricity to acquisitions. Currently Apple is making about $50 billion a year. In just one year, Apple makes more money as profit than they'll need to spend in the entire next year and a few months beyond that. Even in the leanest of times, Apple's not going to be selling zero products at all, and if that did happen, they probably wouldn't need to pay so many retail employees, I'm guessing. So how much savings does Apple really need?

I would say $25 billion would be really pushing it, myself, but why not start there as a baseline. Okay. If Apple loses 50% of its revenue generation, Apple still wouldn't need to touch that savings. If Apple lost 75% of its revenue generation, Apple would still be able to run for about 3 years on $25 billion in savings, without any cutbacks on expenses. If Apple can't get their act together in 3 years with their current operating budget then frankly they deserve to go out of business. I don't know about you, but I wouldn't still be an investor just 1 year after they lost 75% of their revenue generation, much less 3, and I'd be glad that Apple paid out 125 billion to investors back while I still was one.

But even with $25 billion in savings, do we really think Apple is in any financial trouble right now? They keep selling more iPhones and iPads, not less, and Macs too. They're still a dominant force in music and app sales, and their software does pretty well. Other than maybe the (arguably obsolete) iPod, it seems Apple is only doing better and better in every product category. Are you expecting that to change suddenly? If it does change, it'll be slow, not sudden. And meanwhile, while we're talking about Apple keeping a rather huge $25 billion in savings, next year they'll easily double that with new profits.

So why not do as large a buyback as possible? Long before lean times come to Apple, they'd have had plenty of warning and plenty of profits to replace the ones they've spent buying back stock. While I don't think it'd be good to get rid of Apple's entire cash pile no matter how fast it's filling back up, $100 billion is definitely too small in light of Apple's current revenue generation and operating expenses. If Apple is indeed telling the truth that they're doing everything they can to grow the business, then they have no need for that money and can pay it out to the shareholders through larger dividends or a larger buyback. I maybe wouldn't go for $150 billion, but $125 would be very reasonable, combined with larger dividend payouts going forward to keep Apple's cash pile less than $50 billion. If new product categories cause another big explosion in revenue, do another buyback down the line.

 

[mpantone]

Icahn has a long established record in buying up companies in order to break them up into little parts for sale. Carl isn't about building things, he's about destroying them (for his personal profit).

I was most pleased when he tried to take over Yahoo as a renegade investor, and got his butt kicked to the curb. His pocketbook took a beating on that loss, he thankfully shut up for years.

Historically Icahn has been a successful corporate raider, although he may now be aware that he knows zilch about high-tech. That's why he's being particularly polite with his discussions with Apple (Tim Cook). Carl is out of his element now.

As an AAPL stockholder myself, I'd love to see the share value increase. Whether or not Apple should follow all of Icahn's recommendations for a drastic share buyback is questionable. I'm definitely no financial markets guru.

Most likely, Apple will agree to a partial/modest AAPL share buyback, and Icahn will drop his most vocal efforts.

It's always a great day when Carl Icahn folds.

 

[mrxak]

So let me get this straight:

1. he wants Apple to blow over $100b to buy stock, certain to raise the price by the end
2. then he thinks Apple will grow significantly over some period of time, all while not having significant cash reserves for things such as acquisitions
3. Then after growing the stock price, Apple sells all or part of the stock to recoup their initial spend, which could very likely depress the value of the stock

This makes NO sense to anyone buy Icahn, who could sell his stock after step 1 and not give a care in the world as to the success of steps 2 or 3. Apple should not do this, and if they do, it's a bad move.

Apple will still have significant cash reserves. They'll have significant debt as well, but with Apple's revenue what it is, they're already making more than double in revenue a year than their operating expenses, including acquisitions and R&D and all those nice things people think Apple needs money for. How do you think Apple got such a huge cash reserve? They're making money so fast they can't spend it fast enough. There's not enough companies worth acquiring, employees worth hiring, and research worth developing to use up all the money every year. Interest rates are quite low, far lower than Apple's growth rate, so it's basically free money to borrow it and avoid the unnecessary tax burden of bringing overseas-earned money to the US for buybacks.

I don't know where you got #3 from, but Apple would have no need or desire to issue new stock right after a buyback. That would make no sense. Apple has more money than they know what to do with, so why issue stock to generate new cash?

Again, Apple has more cash than they can spend. The cash reserve is useless to them. Their income vastly outstrips their spending by more than 2:1. Unless you think Apple is lying about doing everything they can to grow the company, which would make Apple the bad guys, not investors, then a buyback makes perfect sense.

 

[perealb]

Regardless of his personal interests with this, he is probably right to suggest stock buyback. APPL stock is way lower than it should have been for a long time already. But this will come too late since I predict APPL stock will skyrocket after the deal with China seems to be finalized.

 

[mrxak]

They exist to make money for the benefit of the corporation. That means its staff and customers and investments and future and increasing the odds that it will still be an ongoing concern in the future. If this makes their public common stock attractive to investors, then all the better for it.

Consider an extreme case. Let's say, for some reason, Apple's stock went up to 1million dollars per share tomorrow due to a speculative bubble. Would it still be the CEO of Apple's responsibility to manage the company to maximize those shareholders that purchased at a million? How could they possibly do that? It is not a market they control. Perhaps the only way would be to liquidate a large portion of their assets and buy back stocks so that the investors could still make a handsome return. So, following your theory, this is what they should do, right, since they exist to satisfy the investors. Is this the way you think a corporation is supposed to function? If the shareholders gathered en masse to force this decision, would it be right and proper? After all, they are the owners. Or is it more sensible that a corporation should do what the corporation needs and the investors can do what they need?

The corporations only responsibilities include giving each shareholder a vote, allowing resale rights of the certificate, and providing guidance and financial information to prospective buyers and sellers. Everything else is just economic philosophy, not financial or legal responsibility. If you believe that corporations exist to serve shareholders, then fine, but I'll point out that this is probably why we have so many terribly run corporations. This isn't inherent to the corporation as an entity, but it is a favored economic philosophy of our times.

I'll also point out that Apple has traditionally not operated under this type of philosophy, which I think is a big reason for its success. If it had, then it would have followed Michael Dell's advice and liquidated itself and returned the money to the bond holders (in the 90's). How stupid would that have been? Not just for Apple, but for the shareholders too.

If you say, well, that case is extreme, I would ask, ok, at what level is it unreasonable to ask Apple (or, reasonable to ask, but unreasonable to expect them to do) to orient its business to ensuring speculators profit margins? The only rational answer, imo, is after the first stock resale, because at that point they lose most control of the stock price and maximizing shareholder return starts to become in frequent opposition to having a good company.

Looking at the history of Apple, it seems like by focusing on making good products and investing in their company, they seem to have been doing just fine for themselves and their shareholders.

But, maybe you're right, maybe they need a CEO who is more friendly to the markets and more responsive to shareholder needs and interests. Someone who treats shareholders like owners instead of just speculators. I don't know, maybe someone like John Scully can take over and show everyone how to run a company focused on shareholder returns. That should really work out.

You clearly don't get it. I suppose it's a good thing you don't run a corporation. I suggest not investing in any either, for your own good.

I've never said that it's the responsibility of a corporation to make their stock good for speculating. I've only ever said that a corporation has the responsibility to maximize shareholder value. There are two ways corporations do this. There are other ways for people in the stock market to make money than these two ways, but corporations can only do two things. Either they pay out a dividend, or they raise the earnings value of each share. There are two ways of doing the latter, either by investing money to earn more as a business (earnings go up), or if they are already doing so and they have money to spare, doing a buyback to increase the earnings value of the remaining shares (earnings spread over fewer shares). Should either of these two activities (dividends and increasing earnings by either method) raise the stock price, that's a happy side effect, but it's not the point of a corporation to constantly increase their stock price on the market.

While quite possible that Icahn and other investors who want a larger buyback are looking for that happy side effect, in order to make money quickly through capital gains, there is no less increase to shareholder value to those who remain shareholders through this process. Everybody wins. Yes, even Apple wins, because they're no longer losing money on a cash hoard they're not using, and the money they release to investors will end up coming back to them greater than before. Think of all those capital gains taxes and income taxes on dividends going to infrastructure improvements. Think of all those other start-ups that will be invested in and either provide good competition or a useful acquisition by Apple down the line. Think of all the money put into retail markets creating jobs and new customers for Apple. Value in the economy only grows when money is moving, and everybody, Apple included, benefits from a healthy, growing economy. Apple gains nothing from a stagnant cash pile growing faster than they can spend.

 

[hpe]

you can adjust

Hi,
I actually agree with you but just want to point out one thing.
(lets pretend the stock price is 500$ and the cash half of that to make the calculations easier)
If what you wanted was 500$ tech and not 250$ tech and 250$ cash, just adjust accordingly: borrow 500$ and buy 2 shares. Your net position is: -500$ (the loan), +500$ tech, +500$ cash.
What is the difference? Taxes and interest. Oh, and who pays them (and gets them deductible...)
This is not a problem. What Apple should do, is a 5:1 split. Slicing every share in 5, right now it becomes a bit expensive for the retail guy to hedge his AAPL position.

I really wish people who are completely ignorant about finance wouldn't opine on financial matters before actually reading up on the relevant issues.

I have the decency not to go onto digital camera forums and act like I know anything about photography/cameras so why is the same not expected when it concerns finance? The responses here, for the most part, are a complete embarrassment to this community.

Relevant Facts
-The purpose of an enterprise, at least a public one, is to make money
-Stocks are valueless unless profits eventually accrue to equity holders
-If a company hasn't used the money it has been making for a decade it might be wise to give it to the owners of the company
-If Apple's cash position has been growing while it has been engaging in R&D, buying companies, investing in the supply chain then it is, by definition, NOT using the money.
-A cash position this large is a risk and there is clearly a discount being attached to it

Overall, Apple is not a bank. When I buy a share of Apple I want to buy a technology company that is massively profitable. I do not want pay $565 for 75% of a technology company and 25% of...cash. That is ridiculous and I don't think shareholders who are against Icahn on this realize that fact. Their ROI is being harmed because Apple won't give the owners of the company a healthy return. Apple is not run for the benefit of management; it is run for the benefit of its shareholders. You are being duped on a grand scale and if your populist tendencies weren't coloring your views you'd be able to see it.

 

[mrxak]

So, having looked at what you've posted in the past, I know that you know this. But I'll state it for the record, because there are probably plenty of other people who don't.

Tax law is extremely complicated. The reason for this is that simpler tax laws include incredibly easy-to-find and easy-to-exploit loopholes. Imagine a flat tax, 30% on all income in the United States for people and corporations, with no excepts. Well, what if the income is made overseas? Clearly it's not subject to this tax, so every company whose income involves very large lump sum payments just has other companies who are paying it pay with their overseas subsidiaries instead. Tax that? But then it might also be taxed by another country too, and suddenly 30% tax is 60% tax, and that's maybe a little excessive. So you make a provision that prevents double taxation. But then a country decides to charge 1% tax, so everyone flocks to there, so you need to change the law... and so on.

Hence, complicated. Indeed, there is an entire industry of lawyers who spend decades studying these laws, so that they can find loopholes that were accidentally included in them. And then a company suddenly find that, because of this unintended consequence of the complex interaction between five different laws passed at five different times in the past 40 years, the 'law says' that if they mark all their prices on their price list in Yugocroslavian Borogroves, and no executive of the company says the word 'the' in the last three months of the year, their tax burden is reduced from $35 million to $35. This is not an intended effect, but an accidental one. But they can get away with it this year.

And maybe next year, if we have a congress that isn't intent on lowering the tax burden of corporations and the rich to 0 while raising the tax burden of the poorest 50% of the population significantly (in, say, 2022), then we can change the law to get rid of that loophole. And then the company will find another one the next year.

Your proposed solution, then, is an eternal chase between the government and the companies, with the government always losing every year. Oddly, this was not considered to be the patriotic necessity of every corporation back in the 1970s. Indeed, companies that tried ******** like that got pilloried in the papers, and lost a lot of business and public goodwill. But because of attitudes like yours, it now pretty much is considered to be, somehow, a good thing.

Well, it's a good thing if you're rich and hate the government. It's a bad thing if you understand that there are, indeed, reasons that the government exists, and they are not simply to spy on the people and help transfer wealth from the poor to the rich.

Like I said, if you think tax policy needs to change, win an election and change it. If you think individuals and companies should feel guilty about not paying more taxes than they legally owe, I encourage you to overpay your taxes next April and set a good moral example to the rest of us.

 

[Stephen123]

You're right... nobody thinks that he gives a **** about Apple. He's an investor, he cares about where his money is parked, and what is happening with it. I don't think even he has tried to make people think he "cares" about Apple anymore than he should as an active investor. Icahn buys in big, pushes for improvements, and cashes out. That's his M.O.

"improvements"? Is that what you call it? He's a predator who's M.O. is destroying companies for a quick buck. Taking down Apple would be a real feather in his cap.

 

[Nevaborn]

Im surprised the what I assume is relatively small stake share holders of Apple on here agreeing with this.

This is bad for the companies long term stability. They hold on to such capital to maintain the ability to produce on demand far more prkduct than competitors at any given time and the procurement of other companies.

Do not listen to this snake. He cares nothing for Apple or other investers. Apple stock has slipped and he wants out thats it, taking as much as he can damning the rest of you.

Apple are working on a lot of new tech the last thing they need as a company and we as consumers or shareholders should be worrying about is , is there now enough money to make what we wanted to.

If we start dredging money from Apple then it will effect products and services. We will end up with cheap android crap.

 

[Giuly]

If Apple went ahead and just spend a major part of that money on new technologies or put some billions into a "Steve Jobs Foundation" - would that be considered "corporate trolling"?

Bill Gates opted for the latter. Great for humanity, not so great for humans using Windows.

 

[MacNut]

So people are upset that Apple is not buying back stock. Don't they have the option to just sell some stock and make money?

Hypothetical question, could Apple take the company private? Do they have enough cash on hand for a full buyback. And would that benefit the company to go private?

 

[mrxak]

I'm an AAPL shareholder, and if they went through with Icahn's plan, I'm sure my stock would go up and I could sell for a profit if I did it quickly enough (read: at the same time as or slightly before he did).

But you know what I want Apple to do with their money? Whatever they think is a good idea for the company ten or twenty or thirty years down the line.

Because ignoring share price and focusing on products for the past decade or two seems to have done a remarkably good job of taking Apple stock from $12 a share to $500-700, and the company from an also-ran to the most valuable one on the planet. Listening to guys like Icahn did not do that.

At absolute best, he's in it for the next three years, and he has no interest in long-term stockholding, so has no interest at all in any sort of long-term benefit for what the company actually does as a company--only what the stock is worth.

Apple claims they are spending as much money as they can to grow their business and make great products. The fact is, it doesn't cost that much. If it cost more to do, they wouldn't have such a huge cash pile. They can either become something they're not, and start doing mergers with huge companies and lose their culture or doing crazy things like Google's space program, neither of which sound like good ideas for long-term profitability, or they can give the money to shareholders.

A stock buyback will increase share value long-term, by definition. Just because much of that value increase happens quickly doesn't mean it still won't be there years from now. Every share will be worth a larger piece of the company. Since Apple says they can't increase earnings any faster than they already are, taking money they're unable to use and making every share worth more is going to make every share worth a greater amount of earnings. In the short term there will be a little spike and a correction, but long term the stock will stabilize at a higher price and then continue to grow.

Icahn isn't proposing anything that Apple wasn't already planning to do. The only difference is in how much and how soon. With Apple's revenues and operating expenses, Apple's plan is really too small. They'll still have ridiculous amounts of cash on hand afterwards, and in a few years it'll be right back where it is now. Icahn's plan may be on the large size, but again, considering Apple's profitability, they'll probably have to do another buyback again soon if they don't follow his plan. It's either that or offer a much bigger dividend.

 

[mrxak]

I don't know much about Icahn, but you could definitely be right about him not wanting to hold onto anything that will move too slowly. Still, his strategy would not require Apple to be in a good position for long, just long enough for him to sell. It could do fine for months then encounter problems with the debt or something.

I think Apple could use the money on acquisitions instead and/or do a buyback but not such a huge one. You're right that if they can't use the cash, then they don't need it, but they could use it. They're too stingy about buying other companies if they have cash that they can't find a use for. They should have grabbed Spotify a long time ago!

Well his strategy can't help but to increase shareholder value long-term. By definition, that's what a buyback does. It may not be something he cares about long-term, but nonetheless long-term shareholders will benefit because their shares will be a larger stake in the company. Since Apple's profitability won't be affected by the buyback, that means more earnings per share.

As for acquisitions, Apple has never been big on making big acquisitions. I don't think they want to dilute their company culture, which obviously seems to be working for them. Their strategy with regards to acquisitions seems to be in buying up talent, rather than assets, and there's plenty of talent to be had at small start-ups. Apple can then put these people to work on Apple projects, because Apple thinks they can do anything better than any other company. Apple also buys up useful intellectual property to put to work inside Apple products. Apple doesn't like to buy up a product or service, and then keep running it, as companies like Google do. They buy the people who made that product or service, and then put them to work developing a new very Apple product or service, or integrate aspects into their existing products and services.

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"improvements"? Is that what you call it? He's a predator who's M.O. is destroying companies for a quick buck. Taking down Apple would be a real feather in his cap.

Apple is not going to be taken down by anyone who owns such a tiny fraction of the stock. You can rest at ease.

 

[mrxak]

Im surprised the what I assume is relatively small stake share holders of Apple on here agreeing with this.

This is bad for the companies long term stability. They hold on to such capital to maintain the ability to produce on demand far more prkduct than competitors at any given time and the procurement of other companies.

Do not listen to this snake. He cares nothing for Apple or other investers. Apple stock has slipped and he wants out thats it, taking as much as he can damning the rest of you.

Apple are working on a lot of new tech the last thing they need as a company and we as consumers or shareholders should be worrying about is , is there now enough money to make what we wanted to.

If we start dredging money from Apple then it will effect products and services. We will end up with cheap android crap.

How do you think Apple got its cash hoard? It makes far more money every year than it can possibly spend on R&D, acquisitions, new retail locations, building spaceships and data centers, or just keeping the lights on.

Apple is plenty stable, and it was Apple's idea, long before Icahn became an investor, to reduce its cash hoard through investor payouts. Everyone involved, from shareholders to Apple management, wants a buyout. It's just a matter of how big.

Looking at Apple's revenues and expenses, it's hard to imagine why Apple should need 50 billion on hand, when they're making more than half of that every year in profits. 50 billion dollars would keep them running for years at current expense levels if they had no revenue whatsoever. If Apple's revenues dropped by half, they still would not need to touch that money in the bank at all, and still continue operating as normal.

Now, whether or not Icahn's plan is the ideal number is a matter of debate, but I suspect the best option is somewhere in between Apple and Icahn's plans. Apple is being too conservative, Icahn is suggesting something a little too big. Of course no matter which plan ends up winning out (and to be clear, Icahn's little proposal is non-binding, so Apple will still have the final say here even if other investors support it), Apple still has a problem of too much cash. Whether we'll see another smaller buyback in a year or two, or Apple ups the dividend payouts, this is really just the beginning.

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So people are upset that Apple is not buying back stock. Don't they have the option to just sell some stock and make money?

Hypothetical question, could Apple take the company private? Do they have enough cash on hand for a full buyback. And would that benefit the company to go private?

They do not have enough money to go private. The company is worth far too much. A company like Dell could only do so because they were a terrible company going out of business.

 

[mrxak]

This will be my last post in the topic, because there's really no more to say and I've been repeating myself again and again already.

Maybe the best Apple is the Apple that's hungry? Maybe all that cash, while "stabilizing" and "reassuring" is actually making Apple complacent and satisfied. Maybe they should return this money to shareholders, not for all the reasons it's good for shareholders, but for the fact it will make Apple slightly less comfortable? Maybe Apple will work just a little bit harder without such an insanely large safety net. And to be clear, the safety net they have is insane in magnitude. Their debt to earnings ratio is one of the smallest around. Their cash hoard to market cap is one of the largest. The amount of revenue they take in compared to their R&D budget is nothing short of counter-intuitive. Apple doesn't need much money, but they're saving piles and piles of it.

Apple works well with very little resources. They were founded in a garage, after all. They work hardest when they're the underdog, and when they are, that's when they make the biggest changes to technology as we know it.

I'm certainly not saying that Apple should make themselves broke or that they should have no safety net at all for the lean times. But maybe Apple should feel hungry again, even just a little, to have a bit of fear when they take a leap. Maybe they'd give things just that little bit more thought, a little bit more effort. We all saw what happened when Microsoft rested on their laurels, confident in their dominance in the PC market. The PC market was made irrelevant, and now their CEO is resigning in disgrace after years of failures. They had plenty of cash on hand, once. More than they knew what to do with, and what they did with it was waste it all on pointless R&D that didn't result in any new products, while their old products languished in complacency. Do we want Apple to go the way of Microsoft?

So yes, give the money to the shareholders. Apple isn't using it, and has never needed it. What they need is risk, desire, and talent. It's their talent and culture that will carry them through, not piles of cash waiting in reserve if they make a mistake.

 

[Bug-Creator]

Hypothetical question, could Apple take the company private? Do they have enough cash on hand for a full buyback. And would that benefit the company to go private?

And who would own Apple afterwards ?

If Apple would start buying back stock and never stop, there would be less and less stocks out there representing the whole value of Apple.
Those stocks would get more and more pricey till the point where Apple is buried so much in debt that it implodes.

Kinda like when Porsche tried to buy VW a few years ago.....

 

[Giuly]

And who would own Apple afterwards?

Apple.

 

[Negritude]

"What miserable drones and traitors have I nourished and brought up in my household, who let their CEO be treated with such shameful contempt by a low-born investor?"