Don't do it, Tim. He's going to love you, then leave you.
I'm urging Tim Cook to fend off Carl Icahn. Listen up, Tim. He doesn't love Apple (NASDAQ:AAPL), he's going for the ole' "wham, bam, thank you ma'am".
By now everyone in the world knows that Carl Icahn has taken a position in Apple, one that he added to Tuesday. And, what do people with enormous positions in companies want from the company? They want the company to do everything in its legal power to make the stock go up, right here, right now.
Apple traded up on the news of Icahn first taking his stake in the company. As time progresses, investors will likely be questioning whether or not Icahn sticking with Apple could do more harm than good. Will he distract management more than he already has, or will he prove to be a critical tool in helping Apple unlock its cash hoard for shareholders even more than it already has?
Apple has really been doing its part to battle back since its drop to the $380 level in late June/early July of this year. Investors who were savvy enough to purchase at that bottom have already yielded over 30%.
As you can see, the fall off on the chart in mid-September was a product of the market not really enjoying what Apple had to show at its iOS 7 event, where it announced it would be launching both the iPhone 5C, as well as the iPhone 5S. Apple has since started a climb back up towards the $500 region.
On Tuesday, Seeking Alpha did a great job in its "Market Currents" section of keeping investors up to date with what's new in the matrimony of Icahn and Cook. SA first reported:
- Carl Icahn on (where else?) Twitter: "Had a cordial dinner with Tim last night. We pushed hard for a 150 billion buyback. We decided to continue dialogue in about three weeks."
Seems harmless, right? A nice little chat over dinner and we'll follow up in about three weeks. No harm, no foul. Right? Wrong.
Icahn then basically stated that he intended to be a pain in Tim Cook's ass by making a king-sized pest out of himself.
The sheer fact that Tim Cook is even entertaining this notion bothers me. Just like there was a nod towards Einhorn's requests being taken into account and then acted upon, it's looking like we have had yet another nod towards more buybacks. I understand that Icahn is an investor with a lot of pull, but why is Cook even entertaining this much after the largest buyback in stock market history and a company that has recently taken on debt?
I'd feel a bit more comfortable if these were coming from statements that Cook himself made (like it did during the Einhorn era), but it's likely that Apple will eventually act here, and that shareholders will reap the eventual rewards.
The only good part of the news today, in this investor's opinion, was that Peter Oppenheimer - who I've furiously supported in the past - seemed to have done the "right" thing by possibly sticking up for his company, its cash position, and his CEO. I love this from Oppenheimer, who is the guy I've commended in the past for roping in the great expectations of analysts and just having a good head on his shoulders in general:
- Icahn refused to share Tim Cook's reaction to his proposal, but did say the discussion "got a little testy" due to CFO Peter Oppenheimer's presence. He added his stake in Apple now stands at $2B (still less than 0.5%).
Right from the get-go, I knew that Icahn had devilish intentions with Apple, calling his immediate push for another buyback a big "wrong" in an article I wrote immediately after Icahn disclosed his stake in the company:
Asking for a bigger buyback immediately after Apple announced the biggest stock buyback in market history isn't really a great move right off the bat. It's nice that Carl wants more shareholder value from the company, but with Apple recently taking on its debt position and offering a buyback with increased dividend, the company shouldn't feel pressured to tend to Icahn's requests immediately and shareholders might be disappointed when Apple chooses not to honor Icahn's somewhat greedy request immediately.
The way that Apple deals with this is going to be very telling for investors. It is my analysis that Cook and Oppenheimer should not trust Icahn any further than they can throw him. It's likely that Icahn is not interested in the long term success of the company, but sees it as a target due to its enormous cash position and how it caved to pressure from Einhorn.
A cave here by Apple management again is going to have me seriously question how I feel about Apple as an investment. If they're going to let guys like Carl Icahn push them around and tell them how to do business, they may have really lost their way. I hate to say it but, what would Steve Jobs have said to Icahn in the same circumstances?
Oppenheimer can do well to keep my respect by firmly but politely thanking Icahn for his support, promising to try and deliver him the same shareholder value that they're trying to deliver everyone else, and telling him the same thing he told analysts - that at the end of the day, Oppenheimer and Cook run this company, not analysts or investors.