Carl Icahn's Stake in Apple Passes $3 Billion Amid Continued Stock Buyback Pressure

[STEALTH714]

Corporate Raider

They used to label these guys as Corporate Raiders, now they dumb it down as "Activist Investors". Make no mistake about I-CON....he could give a rats butt about Apple. His primary goal is to get in, make a profit and run over as many people as possible without giving a ***** about Apple or their current and future product lines. Lower than the belly of a snake.

 

[IJ Reilly]

But surely a huge pile of cash would have given them a little bit more cushion of time within which to innovate? I’m not saying it would have kept them out of the black abyss they’re in now, but it might have given them another chance or two to figure out how they were going to climb back out.

BlackBerry had lots of cash and burned through it, and they burned through it because they failed to innovate. This wasn't a process that happened overnight. It was a slow-motion train wreck. Remember the PlayBook? It was supposed to be their answer to the iPad. A half-baked product and a massive flop.

So this is exactly the issue. Apple's future success is not predicated on them failing and trying again, but on them continuing to do what they do best: release successful, groundbreaking products -- and remaining highly profitable. Having a big, fat cushion doesn't make companies hungrier to keep pushing forwards. If anything, it makes them lazy and apt to bask in past glories. At best this is a formula for stagnation (Microsoft) or disaster (BlackBerry, et. al.).

It's also important to keep in mind that even if Apple were to implement Icahn's buyback plan, a year later they'd still have more cash on hand than they did before (the current immense sum, plus). All the Chicken Littles who are making dire predictions are just plain wrong. The only thing we are really debating is whether Apple's massive bankroll should become even more massive, or remain closer to what it is today.

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Question:

Why isn't Apple doing more with their money? Wouldn't that be the quickest way to shut this guy up?

Like, say, building colonies on Mars?

Really, it's comments like these that convince me that $150B is just too large a sum for most people to imagine.

 

[Michael Goff]

BlackBerry had lots of cash and burned through it, and they burned through it because they failed to innovate. This wasn't a process that happened overnight. It was a slow-motion train wreck. Remember the PlayBook? It was supposed to be their answer to the iPad. A half-baked product and a massive flop.

So this is exactly the issue. Apple's future success is not predicated on them failing and trying again, but on them continuing to do what they do best: release successful, groundbreaking products -- and remaining highly profitable. Having a big, fat cushion doesn't make companies hungrier to keep pushing forwards. If anything, it makes them lazy and apt to bask in past glories. At best this is a formula for stagnation (Microsoft) or disaster (BlackBerry, et. al.).

It's also important to keep in mind that even if Apple were to implement Icahn's buyback plan, a year later they'd still have more cash on hand than they did before (the current immense sum, plus). All the Chicken Littles who are making dire predictions are just plain wrong. The only thing we are really debating is whether Apple's massive bankroll should become even more massive, or remain closer to what it is today.

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Like, say, building colonies on Mars?

Really, it's comments like these that convince me that $150B is just too large a sum for most people to imagine.

No, there are reasonable things to spend billions and billions on. Samsung makes their own chips (mostly), their own screens, and so forth. Apple makes nothing of their own to my knowledge. I think a portion of the 150 billion could go to fix that. I'm not saying spend all 150billion tomorrow, but they could be doing things.

Hell, be a really giant douche and use it to buy Google stocks. Then vote on ways to screw them over! I jest on that one, that's a horrible idea.

But they could invest some of the money to grow themselves.

 

[IJ Reilly]

I disagree. While we have no idea what AAPL is doing or may be planning to do with it, that doesn't mean they are doing "nothing". Wireless and related peripheral tech industries are exploding. I see a strategic advantage in being able to move quickly so am willing to wait and see. Your mileage may vary.

Actually, we do. Because we see the balance sheet every three months, we can see the cash balance growing, growing, growing. Everything you see in the ballooning cash balance is money that is being used for nothing productive, by definition. If it was being used for something, it would not appear there.

Again, we are talking about $150B, plus about $1B more every week. Just so we're clear.

 

[TsunamiTheClown]

i'm sorry that Icahn photo is so hilarious. I think most of the MR posts are using it.

 

[IJ Reilly]

No, there are reasonable things to spend billions and billions on. Samsung makes their own chips (mostly), their own screens, and so forth. Apple makes nothing of their own to my knowledge. I think a portion of the 150 billion could go to fix that. I'm not saying spend all 150billion tomorrow, but they could be doing things.

Hell, be a really giant douche and use it to buy Google stocks. Then vote on ways to screw them over! I jest on that one, that's a horrible idea.

But they could invest some of the money to grow themselves.

Again, the cash balance represents money not used for growth or anything else productive. By definition.

 

[GeneralChang]

BlackBerry had lots of cash and burned through it, and they burned through it because they failed to innovate. This wasn't a process that happened overnight. It was a slow-motion train wreck. Remember the PlayBook? It was supposed to be their answer to the iPad. A half-baked product and a massive flop.

So this is exactly the issue. Apple's future success is not predicated on them failing and trying again, but on them continuing to do what they do best: release successful, groundbreaking products -- and remaining highly profitable. Having a big, fat cushion doesn't make companies hungrier to keep pushing forwards. If anything, it makes them lazy and apt to bask in past glories. At best this is a formula for stagnation (Microsoft) or disaster (BlackBerry, et. al.).

It's also important to keep in mind that even if Apple were to implement Icahn's buyback plan, a year later they'd still have more cash on hand than they did before (the current immense sum, plus). All the Chicken Littles who are making dire predictions are just plain wrong. The only thing we are really debating is whether Apple's massive bankroll should become even more massive, or remain closer to what it is today.

I don’t disagree with you, I just think that a huge cash pile might have bough Blackberry more time to not bite the dust. And since Apple doesn’t look like becoming an unprofitable company anytime in the near future, it’s probably a moot point anyways.

That being said, I’m all for Apple not hoarding so much money, but I would prefer they did something with it other than a stock buyback. Like building an iJet. Or something like that. Heck, they could build their own aircraft carrier for that kind of money. And still buy back all of their stock. And dump massive amounts of R&D into some new amazing product. So, actually… They should buy back their stock, but only on the condition they do something amazing with the rest of that stash.

 

[Michael Goff]

Again, the cash balance represents money not used for growth or anything else productive. By definition.

Exactly.

I'm saying they should lower that cash balance by USING it and asking why they don't.

 

[Wiesenlooser]

'Icahn: Apple is a culture with a great ecosystem; what bothers me a hell of a lot is that billions of dollars is just sitting there. o $AAPL - CNBC Newsroom (@CNBCnow) January 22, 2014'


Translation: Give me some of that money for no reason whatsoever

 

[TallManNY]

I don’t disagree with you, I just think that a huge cash pile might have bough Blackberry more time to not bite the dust. And since Apple doesn’t look like becoming an unprofitable company anytime in the near future, it’s probably a moot point anyways.

That being said, I’m all for Apple not hoarding so much money, but I would prefer they did something with it other than a stock buyback. Like building an iJet. Or something like that. Heck, they could build their own aircraft carrier for that kind of money. And still buy back all of their stock. And dump massive amounts of R&D into some new amazing product. So, actually… They should buy back their stock, but only on the condition they do something amazing with the rest of that stash.

If they knew of something "amazing" to do with the cash, they would do it. Their R&D goes up each year and at a pretty fast clip, so they are spending money on R&D. But you can't just go to the store and dial up more innovation. If you spend $10 billion on research you don't necessarily get 10 times the innovation than if you spent $1 billion.

Icahn told them a year or so ago, "Buy your stock back, it is cheap and you won't find any other use for the cash hord." The stock is no less cheap (so missed opportunity) and the cash hord is now larger (so Apple did not find a better use for the money)." Icahn can look back and say, "I was right and you should have listened to me."

I believe he is still right and the amount of cash that Apple brought in last quarter (which we will know on Jan 27) will be staggering. Also, the cash pile will be larger or at least way larger than Apple needs to have lying around.

(Oh, and Blackberry is not biting the dust anytime soon. They are failing in the handset market, but doing well in other areas. But that isn't what we are talking about here.)

 

[tlevier]

I wish Apple would buyback Carl's $3B at a 10% discount and call it a day.

 

[Wiesenlooser]

It's always good to have money. You can't have enough of it. Why give that money away ?

Sure they could buy some company - but which? Apple has always been careful about acquisitions. Because you need to integrate the company you've acquired. The larger the company the harder it is.

Apples philosophy has always been staying rather small and quick. It doesn't work out every time but usually it has great benefits. The more people you have the slower your company gets.

I do think though that at some point they will make a big acquisition.

Think about what happened if they bought intel. The whole PC industry would be seriously demolished. There is just nothing that can come close to those intel fabs. That would give them 10 years of severe technological advantage.

 

[osx11]

He's right about Apple sitting on a lot of money: over $120,000,000,000.00 I've read.

However, this guy owns a little over HALF of ONE PERCENT of the company.

That's right! The guy owns less than 1% and he thinks he can dictate what the company does or doesn't do.

I think Steve Jobs's widow owns more of Apple than this annoying investor.

 

[NT1440]

He's right about Apple sitting on a lot of money: over $120,000,000,000.00 I've read.

However, this guy owns a little over HALF of ONE PERCENT of the company.

That's right! The guy owns less than 1% and he thinks he can dictate what the company does or doesn't do.

I think Steve Jobs's widow owns more of Apple than this annoying investor.

I think you misunderstand what someone with that much clout on wall street can do. It has little to do with what ownership he has but rather what he can convince pundits and other shareholders to pressure apple to do.

Take a look at his past, he's made millions by not even owning stake in a company, but forcing his will by threatening to make major purchases. Look up "greenmail" and see how much power this one incredibly connect man has done.

It's amazing how misunderstand the dynamics of big business are in this country.

 

[the8thark]

the headline of this article is fundamentally misleading.

Quoted for truth.
(I can't say anymore on this subject, you can say I'm subject to a gag order of sorts. Unfortunate but true.)

 

[GeneralChang]

If they knew of something "amazing" to do with the cash, they would do it. Their R&D goes up each year and at a pretty fast clip, so they are spending money on R&D. But you can't just go to the store and dial up more innovation. If you spend $10 billion on research you don't necessarily get 10 times the innovation than if you spent $1 billion.

Icahn told them a year or so ago, "Buy your stock back, it is cheap and you won't find any other use for the cash hord." The stock is no less cheap (so missed opportunity) and the cash hord is now larger (so Apple did not find a better use for the money)." Icahn can look back and say, "I was right and you should have listened to me."

I believe he is still right and the amount of cash that Apple brought in last quarter (which we will know on Jan 27) will be staggering. Also, the cash pile will be larger or at least way larger than Apple needs to have lying around.

(Oh, and Blackberry is not biting the dust anytime soon. They are failing in the handset market, but doing well in other areas. But that isn't what we are talking about here.)

Glad we agree.

 

[IJ Reilly]

Exactly.

I'm saying they should lower that cash balance by USING it and asking why they don't.

I will point to the post by TallManNY for a detailed answer, but the shorter version is it's just too freaking much. Again, the scale seems to elude many.

Of course they could pursue any number of fanciful and probably unprofitable projects just because they can afford it, but companies that do things just because they can are at more risk of failure than companies that do less and retain their focus.

 

[the8thark]

Question:

Why isn't Apple doing more with their money? Wouldn't that be the quickest way to shut this guy up?

Being able to pre-pay for parts and Foxconn costs up front with zero debt. And using this to ensure Apple get the supply of parts and machine time they need to make the Apple products.

And being rich enough to tell idiots like Icahn to go away. he is just a greedy snake who puts money over people.

 

[IJ Reilly]

Quoted for truth.
(I can't say anymore on this subject, you can say I'm subject to a gag order of sorts. Unfortunate but true.)

I gag on my own words sometimes.

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Being able to pre-pay for parts and Foxconn costs up front with zero debt. And using this to ensure Apple get the supply of parts and machine time they need to make the Apple products.

And being rich enough to tell idiots like Icahn to piss the **** off. he is just a greedy snake who puts money over people.

I hate to be the one to break this to you, but it's all about making money.

 

[Michael Goff]

I will point to the post by TallManNY for a detailed answer, but the shorter version is it's just too freaking much. Again, the scale seems to elude many.

Of course they could pursue any number of fanciful and probably unprofitable projects just because they can afford it, but companies that do things just because they can are at more risk of failure than companies that do less and retain their focus.

So you don't support them opening any number of their own factories to make their own parts for their own devices?

Being able to pre-pay for parts and Foxconn costs up front with zero debt. And using this to ensure Apple get the supply of parts and machine time they need to make the Apple products.

And being rich enough to tell idiots like Icahn to piss the **** off. he is just a greedy snake who puts money over people.

Yeah, that's great and all ... but I don't think they need 150billion sitting there to have enough to do that.

 

[SuperMatt]

Mr. Icahn may be correct. However, he's clearly not too worried about Apple's board or management, because he keeps buying more stock.

Methinks the lady doth protest too much.

 

[Four oF NINE]

This person is a capitalist buzzard.

 

[Harkinian]

Well, I happily sold my AAPL a few weeks ago and watched it drop after. Sucks to suck

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Let's see ... do I want to agree with the billionaire or everyone here on the forum?

I think I agree with the billionaire and want the stock price to rise. I think that AAPL should buy back their own stock. Especially that they know what products are on the roadmap, this just tells me that AAPL doesn't think the value of the company will rise anymore. If you knew your company was undervalued and had tons of money wouldn't you buy more of your own stock?

Here's the catch: AAPL isn't undervalued. Or at least you can't prove it.

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This person is a capitalist buzzard.

Better than a communist buzzard at least.

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Really, it's comments like these that convince me that $150B is just too large a sum for most people to imagine.

What would your stance on the buyback be if you were invested in S&P500 instead of AAPL? You're making me suspicious of something. Honestly, a few weeks ago, I would have said "hooray" for the buyback, and I wonder if you're agreeing for the same reason.

Assuming that AAPL is not undervalued, it would do the stock better long-term if they did pretty much anything with the money besides giving it to current shareholders. Dividends, selling stuff at a loss, lobbying Congress, giving out freebies, making iCloud actually stable, buying Facebook, improving their weak supply chain for iPhones, opening banks, hiring everyone who comes out of Stanford or MIT... all better than giving some shareholders money for no reason. And if they are undervalued, is it by THAT much?

 

[Four oF NINE]

Better than a communist buzzard at least.

How so? Do you have any particular communists in mind? Which communist nations have you spent time in?
Communism doesn't have capitalist institutions, therefore this sort of behavior is non-existent in a communist country.

I'm curious which specific communist behaviors inform your comment here.

 

[iHamish]

This news reminded me to submit my proxy vote. Needless to say I voted against Icahn's proposal.