Seeking Alpha

Icahn confirms dinner with Cook, wants $150B buyback

  • 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."
  • Apple (AAPL +1.7%) has moved higher following Icahn's tweet. The company added $50B to its buyback program in April, and spent $18B on buybacks in the June quarter. The company had $146.6B in cash/investments at the end of the quarter (much of it offshore) to go with $17B in debt.
  • More on Apple/Icahn
  • Update: On CNBC, Icahn says CFO Peter Oppenheimer "got a little testy" during the meeting.
From other sites
Comments (48)
  • vbbv
    , contributor
    Comments (87) | Send Message
     
    $150B buyback - damn!! That's all I can say.
    1 Oct 2013, 10:41 AM Reply Like
  • rrose39
    , contributor
    , AAPL PRO Alerts subscriber
    Comments (781) | Send Message
     
    $150B !

     

    Go Carl !
    1 Oct 2013, 10:52 AM Reply Like
  • cshoxie
    , contributor
    Comments (281) | Send Message
     
    When Carl tweets people listen!
    1 Oct 2013, 10:54 AM Reply Like
  • Ashraf Eassa
    , contributor
    Comments (9092) | Send Message
     
    Ugh. Why bully Apple...?
    1 Oct 2013, 11:00 AM Reply Like
  • User7766461
    , contributor
    Comments (153) | Send Message
     
    Its not bullying if they both win.
    1 Oct 2013, 02:12 PM Reply Like
  • flux8
    , contributor
    Comments (586) | Send Message
     
    I agree with your underlying point that Icahn should shutup. But Apple can't be bullied. Not by Einhorn. And certainly not by Icahn. Icahn with his puny $2 billion worth of shares can't do squat to influence Apple's business decisions.
    1 Oct 2013, 02:32 PM Reply Like
  • Alpha_Hunter_
    , contributor
    Comments (17) | Send Message
     
    Wow. That seems a little excessive. Might have to increase debt to accomplish this.
    1 Oct 2013, 11:03 AM Reply Like
  • Jack Baker
    , contributor
    Comments (895) | Send Message
     
    So what, it's less than 4 years of free cash flow and will save Apple tens of billions in dividend payments. The net cost to Apple will be far less that the cost of the shares. It will take 34% of the shares off the market. It is the right thing to do.
    1 Oct 2013, 03:54 PM Reply Like
  • vandeley
    , contributor
    Comments (119) | Send Message
     
    I agree this is excessive. I like the $50B buyback as a way to return cash to shareholders as what they see as an undervalued share price. Buying back $150B is trying to prop up the share price artificially through financial engineering and not in the best interest of the company.
    1 Oct 2013, 11:05 AM Reply Like
  • dctodd27
    , contributor
    Comments (118) | Send Message
     
    Playing games with the capital structure is the new "value investing". Icahn is a troll...
    1 Oct 2013, 11:06 AM Reply Like
  • vinchainsaw
    , contributor
    Comments (189) | Send Message
     
    Huh? Why would you not tinker with a capital strcuture if its not efficient?
    1 Oct 2013, 11:11 AM Reply Like
  • MrMatt
    , contributor
    Comments (1320) | Send Message
     
    "Value investing" has always involved efficient capital allocation.
    1 Oct 2013, 11:31 AM Reply Like
  • dctodd27
    , contributor
    Comments (118) | Send Message
     
    Efficient for who? Icahn? So he can make a quick buck and then dump his shares? Icahn isnt floating anything Cook and his team haven't already considered.
    1 Oct 2013, 11:39 AM Reply Like
  • MrMatt
    , contributor
    Comments (1320) | Send Message
     
    For everyone.

     

    Effective (efficient, choose your word) capital allocation is important.

     

    I really don't care what Icahn does, why should I? There's a whole chorus of owners asking Cook to do all sorts of wonderful things.

     

    Apple is more than capable of handling this decision.
    1 Oct 2013, 11:49 AM Reply Like
  • Humble Eagles
    , contributor
    Comments (1932) | Send Message
     
    Apple is great at consumer electronics, but they really haven't handled finance as well. Buying back $50Bn/yr makes a ton of sense--$150Bn over 3 years. They can increase the divvy by the amount of share reduction at no extra cost to the company and that would be over 10%/yr. They would still have a ton of cash per share at the end, much higher than now, assuming the same stock price, and more than enough to do just about anything. Obviously, at these prices it would reduce shares by over 100mm per year, taking us down to about 600mm. I would have Braeburn sell long term puts and pre-buy the shares, collecting the premium and laddering purchases. Of course, if the stock went up they could lose it, but then they would keep the premiums. I figure they could do the divvy and 50Bn in buybacks that way for about 50Bn a year total! Easily doable without touching overseas cash. BTW, last year's 41.7 Bn in net profits would be right at $70 a share in earnings with 600mm shares!
    1 Oct 2013, 11:13 AM Reply Like
  • financeminister
    , contributor
    Comments (828) | Send Message
     
    Apple should be renamed to Banana.... Banana republic that is
    1 Oct 2013, 11:15 AM Reply Like
  • MrMatt
    , contributor
    Comments (1320) | Send Message
     
    Assumption
    Assume Apple stock is one of the best available investments.

     

    I have excess cash.
    I should buy Apple stock.

     

    Now if I was Apple.
    Apple has excess cash.
    Apple should buy Apple stock.
    1 Oct 2013, 11:18 AM Reply Like
  • iloewy
    , contributor
    Comments (53) | Send Message
     
    No matter what, buyback or not- AAPL is a great company and its share price us going to climb nicely this year and next. I just added to my holdings.
    1 Oct 2013, 11:23 AM Reply Like
  • micium
    , contributor
    Comments (116) | Send Message
     
    If they do that much buy back, they will have to bring back cash from overseas I would think, and I wonder what that will do to their taxes? I would rather have that cash in dividends. A bird in the hand is worth two in the bush. Buy backs don't always result in a higher stock price, resulting in their Treasury stock being at a higher cost than market price.
    1 Oct 2013, 11:30 AM Reply Like
  • Randal James
    , contributor
    Comments (2819) | Send Message
     
    micium

     

    The same cash used for buybacks would come from the cash you'd prefer to have as a dividend, so the tax comment is moot.

     

    Apple's magnificent growth has come from creating new markets or developing products that are ahead of the competition in rapidly-growing markets.

     

    Dividends and buybacks are simply machinations to alter ownership and assets - they do nothing to enhance the earning capacity of the company. I am sure Mr.Icahn would love a massive buyback and, after draining the company's cash hoard, would happily move on because "sorry, folks, there's nothing to see here..."
    1 Oct 2013, 12:11 PM Reply Like
  • micium
    , contributor
    Comments (116) | Send Message
     
    With money so cheap, maybe Apple should have been out borrowing money. But, if they have no profitable use for all their cash, they should give it to the stockholders. I am against buybacks. Invest it in other growing companies or new technologies such as cyberware.
    1 Oct 2013, 11:33 AM Reply Like
  • MrMatt
    , contributor
    Comments (1320) | Send Message
     
    Good idea, I hope they think of it.

     

    http://bit.ly/171bCUs
    1 Oct 2013, 11:36 AM Reply Like
  • micium
    , contributor
    Comments (116) | Send Message
     
    What is good for Ichan is not necessarily good for the average small stockholder! Ichan has brains but uses it for himself, not others.
    1 Oct 2013, 11:35 AM Reply Like
  • bfmil
    , contributor
    Comments (221) | Send Message
     
    More price manipulation. I'm sure Icahn isn't long on Apple.
    1 Oct 2013, 11:38 AM Reply Like
  • bfmil
    , contributor
    Comments (221) | Send Message
     
    Why doesn't the board fire Tim Cook for gross mismanagement. Then replace him with Icahn?
    1 Oct 2013, 11:38 AM Reply Like
  • MrMatt
    , contributor
    Comments (1320) | Send Message
     
    Because Tim Cook is doing a good job.
    1 Oct 2013, 12:12 PM Reply Like
  • User7766461
    , contributor
    Comments (153) | Send Message
     
    Agreed, he has totally mismanaged apple to the point it has become the top valued Brand in the world and the largest market cap in the S&P...

     

    How embarrassing... Is the Board blind or what?!
    1 Oct 2013, 02:16 PM Reply Like
  • Hope128
    , contributor
    Comments (128) | Send Message
     
    Icahn should focus on his own buying, Let Apple handles its own back buy in its own pace.
    1 Oct 2013, 11:59 AM Reply Like
  • MrMatt
    , contributor
    Comments (1320) | Send Message
     
    There is nothing wrong with owners telling management how to run the company.
    1 Oct 2013, 12:16 PM Reply Like
  • kimboslice
    , contributor
    Comments (1532) | Send Message
     
    Icahn doesn't know how to run Apple. He should vote his proxy like the other shareholders, like me.

     

    His big mouth doesn't make him much different from me: 99%+ of Apple is owned by other people besides me and Icahn.
    1 Oct 2013, 02:14 PM Reply Like
  • Barnski
    , contributor
    Comments (16) | Send Message
     
    Icahn might not know how to run Apple, but he evidently knows how to manage funds, which this whole topic is about.
    1 Oct 2013, 03:18 PM Reply Like
  • Jack Baker
    , contributor
    Comments (895) | Send Message
     
    I suspect it's quite a bit closer to 100% for you.
    1 Oct 2013, 03:58 PM Reply Like
  • keentolearn
    , contributor
    Comments (129) | Send Message
     
    A $150 Billion buyback? I would go crazy.
    1 Oct 2013, 12:00 PM Reply Like
  • bondstevenbond
    , contributor
    Comments (165) | Send Message
     
    Wow, I can hear the Rolling Stones' "Sympathy for the Devil" playing...

     

    Let me please introduce myself
    I'm a man of wealth and taste
    I've been around for a long, long year...

     

    Pleased to meet you
    Hope you guessed my name, oh yeah
    But what's confusing you
    Is just the nature of my game
    (Woo woo, who who)
    1 Oct 2013, 12:27 PM Reply Like
  • ConservativeOutperformer
    , contributor
    Comments (588) | Send Message
     
    So, if in 10 years AAPL is making $20b in profits, which is a very respectable figure, how would buying back $150b in stock at a $400-500b valuation look?

     

    I just want to make sure we're all certain what the electronics industry will look like in 2023. OK, got it. With 100% confidence no less.....

     

    It's amateur hour at Red Lobster titled, 'What do we do now?' starring Carl Icahn. Supporting cast includes Tim Cook, Peter Oppenheimer and that golf fan from Happy Gilmore.

     

    Good luck!
    1 Oct 2013, 12:46 PM Reply Like
  • june1234
    , contributor
    Comments (2701) | Send Message
     
    Tweeting Carl strikes again. I see a candlelight vigil at Jobs memorial in time for the holiday season
    1 Oct 2013, 01:19 PM Reply Like
  • Sir. Monaco
    , contributor
    Comments (367) | Send Message
     
    a few weeks ago I thought Icahn wasn't going to go at them like he has with others, but now it's confirmed,

     

    Icahn wants a fight,

     

    the problem is Icahn looks for what makes the stock higher immediately, even if it means strapping the company with debt,

     

    but if you want to build a century company you avoid debt at all costs, (Icahn doesn't get that)

     

    If I was Cook and/or the CFO I would be pissed, and really would stop all communication with Icahn,

     

    It's a no win situation, -the more you listen to him or have these dinners the more you encourage him,

     

    stuff like this could tarnish the Apple brand, (not a good thing for anybody)
    1 Oct 2013, 01:54 PM Reply Like
  • Andreas Hopf
    , contributor
    Comments (8900) | Send Message
     
    I want to know: What did Carl "Tweety" iCahn and Tim "Abacus" Cook eat?
    1 Oct 2013, 02:04 PM Reply Like
  • Sir. Monaco
    , contributor
    Comments (367) | Send Message
     
    Carl ate the CFO and Cook brought cookies for everyone else
    1 Oct 2013, 02:13 PM Reply Like
  • Financehulligan
    , contributor
    Comments (1079) | Send Message
     
    Pump and dump Ichan
    1 Oct 2013, 02:16 PM Reply Like
  • kimboslice
    , contributor
    Comments (1532) | Send Message
     
    Cook must be careful. Being seen talking too much to Icahn can tarnish Apple's shine.
    I predict from now on Cook won't take Icahn's calls and will pass him off to speak to Oppenheimer.
    It's a sideshow however, the important thing is how well the products are selling in Apple stores.
    1 Oct 2013, 02:18 PM Reply Like
  • wigit5
    , contributor
    Comments (4120) | Send Message
     
    actually how well products are selling in stores matters very little as evidence record breaking sales weekend caused the stock to go down...

     

    I suspect margins, future guidance, market share, will have a greater effect... hopefully to the upside.
    1 Oct 2013, 02:20 PM Reply Like
  • Hope128
    , contributor
    Comments (128) | Send Message
     
    Apple's fat cash becomes target of all those greedy money chasers, they won't stop until they transfer all $150 B to their own pockets. I suspect they intentionally to push stock down on even record breaking sales to put more pressure on Apple's buy back, they want to tell apple fundamental doesn't matter, the only way to save apple's share price is buy back. However buy back is only temp way to push stocks up, can apple stay at higher share price without continued growth/innovation? In the end revenue growth/healthy margins/future guidance are the major factors to higher share price, at least for Apple ( not counting Amazon, NFLX etc). I am wondering what's apple's current share price if they never had buyback/dividend in the first place and never give WS a chance to attack their cash pile, their price might drop to low 300 early this year, then by next year they will have close to $200 B cash, they are still selling record-breaking products, do you think their price will stay at $300 forever?
    1 Oct 2013, 06:48 PM Reply Like
  • Hope128
    , contributor
    Comments (128) | Send Message
     
    On one hand I am glad that apple bought back a lot of shares at low $400 last quarter, this is a good investment, but on the other hand, I think apple should be more diversified with their investment, why should they put all their money in one basket?
    1 Oct 2013, 06:53 PM Reply Like
  • flux8
    , contributor
    Comments (586) | Send Message
     
    If I were Tim Cook, I'd tell Icahn, "Sure Carl, I'll agree to a $150 billion buyback if agree to purchase $5 billion worth of shares tomorrow and can't sell them for the next 10 years. We'll have the lawyers draw up the contract right now."

     

    Icahn talks too much. Apple should blacklist him. He only has $2 billion worth, but he can do much more damage than that with his loose lips. If not talking to him gets him to sell, let him. But DON'T let him influence the business. AT ALL.
    1 Oct 2013, 02:27 PM Reply Like
  • brilliantblue99
    , contributor
    Comments (78) | Send Message
     
    Ichan shoots for 150bn so he can get 100bn buyback....
    Same as apple pricing the 5c high, so they can lower it later
    1 Oct 2013, 03:15 PM Reply Like
  • Arius
    , contributor
    Comment (1) | Send Message
     
    Isn't the point of issuing stock to exchange shares of your company for cash. Buying back you stock with money owned overseas lets you repatriat that money and avoid taxes.
    But buying back your stock just because some one is telling you to only helps them.
    1 Oct 2013, 06:43 PM Reply Like
  • Randal James
    , contributor
    Comments (2819) | Send Message
     
    Arius,

     

    To finance the $50B buyback that was approved last time, Apple borrowed cheaply because rates were low and frankly, the old thing about getting "all the money you need if you don't need it" is true. IF they'd brought in $50B, they would have to pay the tax which was much higher than the financing cost less whatever is earned on foreign deposits.

     

    Icahn's plan would mean either paying the tax to bring it home or much more debt.
    1 Oct 2013, 06:52 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector