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Carl Icahn Presses for Apple Shareholder Vote on Increased Stock Buyback
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I simply made a comment about billionaires in general being out of touch with reality. I've obviously hit a sore nerve with you.
That's nice he's doing something, but it's still a lot easier to give when you're a billionaire than when you're middle class or lower and easier yet to give money away after you're gone (and can't use it). In other words, you only need so much money to live on when you're a millionaire, let alone a billionaire.
Hey, I'm no fan of the Catholic Church in general, particularly given its history and I don't like their patriarchal view at all, but I don't judge individuals based on the action of an organization either and this is the first Pope that has impressed me at all and that gives me at least a little hope where there was little to none before.
Being told to not judge an individual doesn't mean to be brain dead or not come to any conclusions at all in life and I've concluded most ultra-rich 1%'ers are pushing hard to make life more miserable for everyone not in their income bracket and they don't care how many lies they have to tell or how many districts to gerrymander or how many biased judges to appoint to do it.
Oh, they know EXACTLY what to do with it. All that cash puts them in a very comfortable position: To weather market downturns, to purchase technology and other companies whose technology they want, to build factories, to help prop up a critical supplier that is having problems, to build new needed facilities for themselves. It allows them to do what they want, how they like. All that cash puts them in a very strong position that other companies could only envy. It makes them very secure. Everyone who is throwing tantrums and crying about Apple having all this cash needs to *******, and if they don't like it, then they can sell their goddam stock, or don't buy it in the first place. You want to make money off of Apple stock? You sell it. That's what you do.
It might pan out.
You are assuming that "super tight tolerances" and"exotic building materials" have dubious benefit to anyone. Are you saying that you can not think of any reasons why those expenditures benefit AAPL and its shareholders? Who says they are excesses? What do you mean "return"? Did you really mean distribute?
They have not been "sitting on hundred [sic] billions of dollars for years."
Don't lie, you said it in your last paragraph.
Well it's pretty clear it's a can't-win situation with you. Have money but choose to give the vast majority of it away? IT'S SO EASY. Have money and don't give the vast majority away? Selfish!
Really? You actually believe this? You're the one out of touch with reality. The ultra-rich have their fair share of jerks, just like the poor. The poor have their share of upstanding citizens, just like the rich. Quit it with the classism and just admit that you don't have the faintest idea of the ramifications of his proposal and are just interested in turning this into a populist narrative you can parrot to all your pseudo-intellectual friends.
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Technarcy, yes I agree completely. I said as much:
Again, I agree with you. I don't WANT them to blow their load in some billion dollar 90s style, headline grabbing but largely dubious acquisition. I'm responding to people who have suggested that distribution is ruinous because Apple has to keep the cash hoard for acquisitions. I don't think they understand how big $150 billion is!
I think the finer points misses the forest for the trees, so I'll concede everything and return to the main point:
A $150 billion cash hoard is ridiculous by any measure. I suggest that, at $150 billion and growing, there is plenty of room for smart acquisitions, increased dividends and buybacks, and a large pile of savings for a rainy day. (And even exotic campuses.)
There are already dividends and buybacks. I think there is room for more. I think Apple stock is currently undervalued (it's why I'm holding and not selling), and a buyback would essentially be buying the stock on sale.
To put $150 billion in perspective, it is higher than the GDP of most countries. It is 10% of all cash held by non-financial corporations. Last I checked, the cash hoard is still growing. It won't be ruinous to Apple to distribute more.
I'm not saying the cash is bad for Apple. Of course it gives them power, security...etc. But the fact of the matter is that Apple IS NOT spending the cash. The way they currently operate, their cash pile is only going to get bigger. At some point, they are going to have to do something with it. A share buyback seems likely. After all it is a corporation and serious shareholders should not want their company to sit on over $100,000,000,000.00 in cash. Apple doesn't buy big companies. They don't need to, but they also don't need that enormous pile of cash.
First, let's get rid of that $150Bn number for purposes of what's accessible. If fully repatriated and used for buybacks and distributions, more like $115Bn. But yes, still growing.
As a longtime shareholder with an average double digit basis (even with recent additions) I'm certainly not opposed to buybacks and/or distributions. And, while I don't dislike Icahn (how can you dislike someone who's tweaking Ackman at every opportunity) I am opposed to "outsiders" who are "certain" what AAPL should do with what appears to be "excess" cash. Everyone assumes "excess" and serves no valid/valuable present or future purpose. I don't. Looking at how far technology has come in just the last half dozen years, imagine how much further/faster advances may come in the next half dozen. Having a boatload of cash on hand enables AAPL to act quickly if a very special opportunity should arise. For now, I'm more than willing to give AAPL the benefit of the doubt.
Icahn? Isn't he one of those hostile takeover, employee killing, company busting sloths? I believe he is. Typical billionaire investor who has caused immense amounts of grief for millions of people so him and three of his close friends can get richer. Fantastic. How can you not root for a guy like this? 
And, all the bleeding heart capitalists can defend him all they want but everyone knows these guys are parasites to the common man. Like Gordon gecko teaches us: it's a zero sum game. Someone wins, someone loses. So, when Icahn and his posse win..... YOU lose.
At least he's old and won't last too much longer.
And, all the bleeding heart capitalists can defend him all they want but everyone knows these guys are parasites to the common man. Like Gordon gecko teaches us: it's a zero sum game. Someone wins, someone loses. So, when Icahn and his posse win..... YOU lose.
At least he's old and won't last too much longer.
Icahn? Isn't he one of those hostile takeover, employee killing, company busting sloths? I believe he is. Typical billionaire investor who has caused immense amounts of grief for millions of people so him and three of his close friends can get richer. Fantastic. How can you not root for a guy like this?
And, all the bleeding heart capitalists can defend him all they want but everyone knows these guys are parasites to the common man. Like Gordon gecko teaches us: it's a zero sum game. Someone wins, someone loses. So, when Icahn and his posse win..... YOU lose.
At least he's old and won't last too much longer.
Well, investing isn't a zero-sum game, so there's that. He's also donating the vast majority of his wealth to charity (signed The Giving Pledge) and has a long record of benefiting the investors of companies he invests in. Sounds like you don't know what you're talking about.
I generally agree, but it can be bad for Apple to stockpile undue amounts of excess cash, in a couple of ways.
First, it raises the question whether Apple is saving for a "rainy day." So many people bring this up as a rationale that it has to be addressed head-on. What kind of "rainy day" requires $150b in cash? Wouldn't that be less a "rainy day" and more like total armageddon? So if Apple is truly stockpiling cash against Noah's Flood, should investors not be worried about their company's confidence about the future? Are they really thinking they could swing from highly profitable to sinking ship at any moment? If anyone at Apple even hinted at this being the reason why they are accumulating more and more cash, I'd be really worried as an investor. No, I'd be terrified.
Second, large cash holdings tempt CEOs and boards into making large, and almost always unwise, major acquisitions. So far Apple has resisted that temptation, but boards and CEOs change. And if they remain disciplined, and continue to acquire only smaller companies, then this does not required anything like the $150b they have now, the $200b they'd have by the end of next year, let alone the half-trillion they'd probably be banking by the end of the decade. The fact is, even the most lavish capital expenses we could imagine (the new corporate HQ qualifies) can be covered by a few weeks of free cash flow.
It seems the amount of money we are talking about here isn't grasped by most people. It's huge, it's massive, it's unprecedented. It's the elephant in the room, and it won't go away by pretending it doesn't exist.
Thank you! We're in the minority here. Everyone else thinks that because Apple is so successful, they now exactly why they are doing. At the rate they are going, they're going to have 200 billion very soon. This is a lot of money. At that point, they could give each state in the US 4 billion dollars. Of course this is never going to happen - but it's fun to think about how Apple could truly make a difference. At the end of the day, Apple's billions are part of trillions that US corporations are sitting on.
Don't like how Apple is being run, then sell the stock, and relieve yourself of the burden of a company with 1.5 billion in cash reserves.
Oh the horror.
I can think of a good reason to keep that much in the bank...the ability to tell guys like Icahn and Einhorn to drop dead and pound sand.
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I've been talking about this since before they'd accumulated a mere $25b. The argument for hoarding cash was the same then as it is now. Stockholders who asked about Apple's plans for the money back in Steve's day got no answer. While Steve will always be missed, investor relations and corporate governance were definitely not his strong suit. I'm happy to see that they are now being run more like a grown-up corporation. We are being told to wait until the early part of next year for an answer to Icahn's proposal.
Even if it does just the opposite?
Public companies have to listen to their shareholders. This is part of the deal, like it or not.
Oh, and it's $150b in cash reserves. They add another $1.5b to that every ten days or so.
wow. perfect! thanks! crystal clear now.
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A certain celebrity investor named Carl Icahn, like many regular investors, wants a return on his money and believes that Apple is holding on to way too much cash. While this is a matter of opinion, by any normal measure Apple is indeed holding on to way too much cash.
This particular celebrity investor is particularly unlikeable and has been involved in some shady pump and dumps. People are afraid of this and therefore think any suggestion from him is bad. There are even people here who think Icahn will ruin the company. This is ridiculous.
A stock buyback is one way of providing returns to investors. Remember, investors want a return. There are other ways of providing returns (growing the company or dividends for example).
The amount Mr. Icahn originally asked for ($150 or $200 billion I think?) was outrageously high, and in fact that original request might have been ruinous had Apple needed the cash later.
But he's now asking for a $50 billion buyback, which Apple does have plenty of cash for. He's also asking for a nonbinding vote on the buyback, which Apple can ignore, but it will give the chance for shareholders to show what they want. Shareholders SHOULD have that chance, so I am supportive of this.
If the company is very undervalued, a stock buyback is a fairly good way of doing it because Apple would buying the stock "on sale" so to speak, as they could always reissue the stock later when prices are higher. I am also an Apple investor and I personally think the stock is undervalued or I would sell it.
There are some other complicated issues too, like the fact that this cash is mostly held overseas and that leads to some tax debate as well, but this reply is already too long.
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What? As executive of a State, Carl Icahn worked hard to bring universal health care to his people in defiance of his own party and years before Obama?
this explanation is also perfect. thanks!
Since you want to bring religion into it, there was a simple statement that a man named Jesus made a couple of thousand years ago. The woman who gave her last penny was valued more than the rich man who gave large sums that he could easily afford to give (see Mark 12:41-44). Someone who makes $300k a year and gives $50k to a school for a new computer lab might make the newspaper for their good deed and yet they'd still have $250k left to live on and have a nice tax break at the end of the year to boot. Yeah, it'd be rough living on $250k a year. Now imagine having $250 MILLION a year to live on, let alone billionaires. Bill Gates could give away $71 BILLION dollars (98.6% of his net worth) right now and STILL have $1 BILLION (that's $1000 MILLION) left to live on. Yeah, it must be tough to give away money when you have that much on hand.
How ironic the man got his start basically ripping off CPM (while Steve Jobs got his cash to start Apple selling a phone freaking device designed to steal long distance calls from the phone company). One need not look hard to find skeletons in the closets of everyone from Vanderbilt to Carnegie and the lives they destroyed over the pursuit of money. The fact that some of these people became philanthropists says what, exactly? They want their place in history to look better than instigator of a union busting private army that shot and killed people in Pittsburgh as in Carnegie's case? Yeah, OK. Nah, Carnegie was a righteous dude! Someone once said, "It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God." (Mark 10:25 King James Edition). Gee, I wonder why he said that?
In any case, my original point was in response to the claim that people don't know how much risk is involved with what Mr. Icahn is trying to do. And I stick by my original point and that is that Mr. Icahn is in ZERO danger of going hungry any time soon regardless of how much he could stand to lose if Apple's shares fall in value.
Since you want to bring religion into it, there was a simple statement that a man named Jesus made a couple of thousand years ago. The woman who gave her last penny was valued more than the rich man who gave large sums that he could easily afford to give (see Mark 12:41-44). Someone who makes $300k a year and gives $50k to a school for a new computer lab might make the newspaper for their good deed and yet they'd still have $250k left to live on and have a nice tax break at the end of the year to boot. Yeah, it'd be rough living on $250k a year. Now imagine having $250 MILLION a year to live on, let alone billionaires. Bill Gates could give away $71 BILLION dollars (98.6% of his net worth) right now and STILL have $1 BILLION (that's $1000 MILLION) left to live on. Yeah, it must be tough to give away money when you have that much on hand.
Someone once said, "It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God." (Mark 10:25 King James Edition). Gee, I wonder why he said that?
In any case, my original point was in response to the claim that people don't know how much risk is involved with what Mr. Icahn is trying to do. And I stick by my original point and that is that Mr. Icahn is in ZERO danger of going hungry any time soon regardless of how much he could stand to lose if Apple's shares fall in value.
Sure, Carl won't miss any meals if things go south. But, as for your references, don't believe everything you read in old, overly and selectively edited books.
It's not up to you or anyone else to tell Apple "you don't need that much cash". There's no GOOD reason to spend it just for the sake of spending it. Apple will spend it when and how they see fit. They will spend it when it benefits them in some way. Not just because some yahoos are telling them "You have too much cash." There's absolutely nothing wrong with having that much cash - or more. It's not harming the company in any way, shape or form whatsoever. In fact, it's benefitting the company. I've not heard anyone give one good reason yet how having that cash is harming Apple, or is bad. The reason? Because it's not.
Because more and more are buying non-iOS stuff. Sure every quarter is a new sales record, but it is slowing down.
The Android tidal wave is huge, and developers see quantity over quality (think Mac vs PC).
Volume of sales is as much an investing factor as margin.
Sure Apple is making record sales, but the Android competition is making 2 to 3 times that.
That's what he does. He's a parasite, and a psychopath.
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Go die in a hole somewhere, Carl.
They've got these things worked out if their economists are doing their jobs properly. They probably don't predict a big enough increase in quantity sold from decreasing the price to justify it. Cheap isn't Apple's game.
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so instead of doing something good with it and perhaps earning some points for a potential after life, he'd rather prove himself a true greedmonger instead. Carl's a true American Hero!
It's evil to try to make money when you already have a lot? Maybe it's just his goal he wants to follow. I dunno, none of your business. Maybe if you said something about his actions hurting the company or other investors... but no, you didn't. Perhaps you're jealous of him.
Still, his proposal sounds stupid for Apple to accept. I'll bet he doesn't even think it's a good idea himself, but he gets money from it. Tim Cook doesn't have to answer to a 1% shareholder, and he probably won't do it.
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We can't tell for certain, but this is how I see it. It would be a poor decision for Apple to just give it away. To those who think the cash should be spent just because it's been sitting around, I hope you don't spend your money constantly like that.
Sales volume is fundamentally meaningless. "We lose money on every one we sell, but we make it up in volume." So goes the old joke, and not without reason. What matters, all that matters in the end, is profit. Not market share, not volume, but profit. Good, old-fashioned earnings.
All of which begs the question: could Apple use any of its cash hoard to lower product prices? The answer is, no. Any lowering of prices would be reflected in lower margins, and lead very likely to lower profits.
Apple's prior experience with the experiment of sacrificing margins for marketshare did not have a happy ending. Back in the '90s they were bullied into licensing the MacOS to clone manufacturers. The plan was supposed to increase marketshare and ultimately lead to higher profits. What happened instead was pretty much the opposite. Marketshare did not grow, margins collapsed, and profits turned into losses. It was Apple's near-death experience.
Should they run that experiment again, to see if it turns out differently? No thanks.
Right here is the problem. Apple is not a person, it's a business. Unlike you and I, they are not saving for their retirement. Corporations are like sharks (depending on the corporation, possibly in more ways than one). All of them have to be constantly moving forward and growing, or they die. The energy that keeps them growing is capital. They make and spend capital to grow to make and spend more capital. Successful corporations do this in an endless cycle. This is how they increase profits and build shareholder value.
If Apple was in the steel milling business, growth would mean spending profits on building more steel mills, growing some more, and using those profits to build even more steel mills. It happens that Apple is in a business that isn't nearly as capital intensive as milling steel, and also that their return on investment is huge. So this means they throw off far more capital than they need to continue growing.
Some companies with this "problem" often find other companies to take over. Almost always a bad idea. They can also invest in products and projects that are unrelated to their expertise, because, you know, they've got the money. This is Google's modus operandi. Companies that use their cash to pursue every random idea that comes along tend to lose their focus and become management nightmares. At the same time, their customers begin to wonder what they are and what they do. Also not a great idea.
The other option is to stick to core competencies, grow and expand on those, and use the excess capital buy back stock and pay a dividend. This is the other way to build shareholder value. For Apple, this is the best way.
To put it all in perspective: if Apple wanted to simply arrest their massive cash hoard at the present $150b, they'd have to declare an annual dividend of around $55/share, more than four times what it is today. This is the scale of the situation. This is how much money they are generating beyond their needs for reinvesting in growth.
Then all they have to do is find better ways to invest it in growth or save it for when there is an opportunity. Of course they aren't saving for retirement, but they should be saving for something. A buyback is meant to boost investor confidence, but how much does that benefit Apple (especially if they don't expand the company any concrete way)? There could be a better opportunity to spend in the future.
I agree, they don't need that big of a cash hoard saved up. Apple needs to expand. But if a buyback is what they really should do, it should not be one the size of their entire cash sum.