Icahn: Cook still studying buyback proposal


Carl Icahn tells CNBC he recently had a "good conversation" with Tim Cook, and that the Apple (AAPL -0.6%) CEO is still studying Icahn's $150B buyback proposal.

Apple has moved higher on the report, but still remains down on the day.

Three weeks ago, Icahn disclosed his Apple stake had risen to 4.7M shares (worth $2.4B), and said he would "test the waters" regarding a proxy fight  if his calls for a bigger buyback were ignored. The following week, Cook stated any changes to Apple's capital allocation plan would be announced early next year.

Apple currently has $146.8B in cash/investments on its balance sheet, but only $35.5B of that is in the U.S. Thanks to a debt offering made earlier this year to help finance its existing back efforts, long-term debt stands at $16.9B.

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Comments (43)
  • Paul S from Chicago
    , contributor
    Comments (12) | Send Message
     
    All I can say is "very unlikely" — going into $150B worth of debt to keep activist shareholders happy is not in the long term interests of AAPL.
    11 Nov 2013, 12:19 PM Reply Like
  • aardvark3
    , contributor
    Comments (632) | Send Message
     
    Hmmmm, "still studying...". Tim is very polite.
    11 Nov 2013, 12:21 PM Reply Like
  • Michael Blair
    , contributor
    Comments (5079) | Send Message
     
    Cook should take the initiative and call a shareholders' meeting to vote on Icahn's proposal. It would very likely suffer a resounding defeat and he can get on with dealing with the real issues Apple faces instead of the distraction of a short term trader who tries to gain a trading advantage through threats.
    11 Nov 2013, 12:24 PM Reply Like
  • gensearch2
    , contributor
    Comments (1556) | Send Message
     
    I'm not sure it would suffer a resounding defeat.

     

    Icahn does have a point that sitting on all the cash isn't doing anything for the company or the share price. Whether his "solution" to that problem is what shareholders would want to do is separate question.

     

    I was looking at instiutional holdings of AAPL recently and it is down to around 56%. That's not good and institutional investors tend to have a longer outlook.

     

    You can't argue that Apple is opposed to a buy back of shares, since they are buying back shares.

     

    What is the "right" amount? There is no correct answer to that question. Apple is taking a stab at it and so is Icahn.
    11 Nov 2013, 12:45 PM Reply Like
  • MJ Badagliacco
    , contributor
    Comments (403) | Send Message
     
    In a rare instance I find myself agreeing with you here.
    11 Nov 2013, 01:25 PM Reply Like
  • Skippy09
    , contributor
    Comments (1875) | Send Message
     
    Beware of Apple shorts offering advice to Tim Cook.
    Besides, Mr. Blair, would that not be caving in to Icahn? Think what that would do to the stock price. Oh, that's right, you're short!
    11 Nov 2013, 09:20 PM Reply Like
  • behaving
    , contributor
    Comments (3) | Send Message
     
    Some institutions have restrictions on how much can be in one stock.When the price goes up and the value exceeds they have no choice but sell.it is ironic but picking the right stock works against them.I would think that 56% is measured in shares not dollars?
    11 Nov 2013, 10:22 PM Reply Like
  • gensearch2
    , contributor
    Comments (1556) | Send Message
     
    Yes, 56% is a measure of shares. When Apple was $700/share the institutional holdings were around 63%.

     

    Recall also when Apple first started paying dividend, the conventional wisdow was that Apple would attract a new set of institutional investors.
    12 Nov 2013, 08:17 AM Reply Like
  • Rollo Tomasi
    , contributor
    Comments (268) | Send Message
     
    I don't view it as a threat, but much the same position most apple investors feel and it goes like this " do something really meaningful with your cash" the 60 billion buy back has taken us from 920 million outstanding shares to 899 and will likely exhaust itself at 810 million existing by the end of 2015. This is viewed as only a modest positive.
    So the question is what does the apple investor really want? What is really big?
    In terms of going big on the buy back, throw enough money to drive the total shares down to 500 million. That's a double drop to P/E and would be huge..
    If no buy back, then buy something really big like DISH Networks for 40 billion and establish la carte Tv where every goes for TV and it changes TV forever, sell 200 million TV sets, so what if it drives margins down.
    This is what the apple investor is after and is why we like Icahn.
    12 Nov 2013, 02:45 PM Reply Like
  • financeminister
    , contributor
    Comments (1177) | Send Message
     
    Looks like the Icahn effect is wearing down.
    11 Nov 2013, 12:25 PM Reply Like
  • cshoxie
    , contributor
    Comments (358) | Send Message
     
    I wouldn't say that. It's the only thing that seems to move the stock.
    11 Nov 2013, 12:36 PM Reply Like
  • kimboslice
    , contributor
    Comments (1765) | Send Message
     
    iCahn should go drop dead.
    11 Nov 2013, 12:27 PM Reply Like
  • User7766461
    , contributor
    Comments (158) | Send Message
     
    #harshbrowns
    11 Nov 2013, 12:35 PM Reply Like
  • Malph
    , contributor
    Comments (41) | Send Message
     
    Who is Carl Icahn?
    11 Nov 2013, 12:28 PM Reply Like
  • James McRitchie
    , contributor
    Comments (104) | Send Message
     
    Malph

     

    Ichan developed a reputation as a corporate raider and has been trying to morph into an investor concerned about corporate governance. See http://bit.ly/1dYGUAO
    11 Nov 2013, 12:41 PM Reply Like
  • Skippy09
    , contributor
    Comments (1875) | Send Message
     
    I thought Malph meant it sarcastically. That's why I "liked" it.
    11 Nov 2013, 09:23 PM Reply Like
  • Malph
    , contributor
    Comments (41) | Send Message
     
    Yes, of course it was meant that way, but thanks for the explanation James.
    14 Nov 2013, 11:13 AM Reply Like
  • GDATL
    , contributor
    Comments (8) | Send Message
     
    I've written Tim Cook to offer my support for not pandering to Icahn and other Wall Street parasites who only want to maximize their personal gains as quickly as possible at the expense of the company's future and the hundreds of thousands of people who depend on Apple directly and indirectly for their livelihood. When Apple moves its focus off of customer satisfaction to maximizing share price, I'll sell.
    11 Nov 2013, 12:46 PM Reply Like
  • bfmil
    , contributor
    Comments (211) | Send Message
     
    I'll quit.
    11 Nov 2013, 04:53 PM Reply Like
  • mhanley
    , contributor
    Comments (60) | Send Message
     
    For those of you who are antagonistic toward Icahn: why do you think it makes sense to keep $145 billion of cash on the balance sheet earning nothing? Don't get me wrong, I am not advocating that they willy nilly repatriate those earnings and give Obama his share, but the concept Icahn is working toward is absolutely correct.
    11 Nov 2013, 12:48 PM Reply Like
  • Skeptic84
    , contributor
    Comments (1213) | Send Message
     
    There is nothing wrong with a large war chest to survive a downturn or better yet, make opportunistic acquisitions when competitors need to raise cash in a downturn. Also, a big strategic move is possible without raising financing. The cash is there and isn't going to evaporate, why is it a disservice to shareholders not to use or return it, especially, considering the repatriation penalty? The cash is rolled into the stock price already. Reducing cash on hand to reduce dilution will not increase value, regardless of what Icahn believes.
    11 Nov 2013, 01:10 PM Reply Like
  • chicagomary
    , contributor
    Comments (357) | Send Message
     
    I think the reason for so much cash is that much of it is overseas;if the congress would pass some kind of a bill to facilate repatrating company cash,it would help.
    11 Nov 2013, 04:29 PM Reply Like
  • gensearch2
    , contributor
    Comments (1556) | Send Message
     
    Apple wouldn't reduce their cash on hand, they would issue bonds paying a low rate and keep the cash.
    11 Nov 2013, 05:49 PM Reply Like
  • JG2000
    , contributor
    Comments (492) | Send Message
     
    The argument for using the cash for financial engineering supposes that the cash will sit idle indefinitely and waste shareholder value.

     

    The argument for holding the cash centers on the possible use for technology plays, patents, manufacturing, major content acquisitions such as for a TV product, etc.

     

    Which argument is correct? I doubt whether anyone knows with absolute certainty (even Apple) at this point. The question is who is in a better position to make that decision. I'd say it's Apple/Cook although I don't completely discount the argument that there could be excessive procrastination -- no way to know unless you can mind meld with Tim Cook.
    11 Nov 2013, 09:02 PM Reply Like
  • vbbv
    , contributor
    Comments (134) | Send Message
     
    Anyone know the answer to this - Why can't Apple create an European entity that just buys back its shares using the cash in Europe? That way shares can be bought back with the money stashed in Europe without anything having to come back to the US?
    11 Nov 2013, 12:51 PM Reply Like
  • Mike305
    , contributor
    Comments (30) | Send Message
     
    A 150b buy back would benefit shareholders greatly. Right now a great time to sell debt. Interest rates stupid cheap. It would give the stock a durable competitive advantage. Don't you want your company buying back a ton of shares during a sell off? Besides, this is debt that can easily be paid back within next 5 years. The kind of debt Buffett likes #Buffettology
    11 Nov 2013, 12:52 PM Reply Like
  • rubber duck
    , contributor
    Comments (194) | Send Message
     
    It's still a good time for AAPL for offer more bonds. At the very least accelerate the current $60 billion buyback program.
    11 Nov 2013, 01:38 PM Reply Like
  • harrykutcher
    , contributor
    Comments (83) | Send Message
     
    the faster the pace of the buyback is more important then the size.....a board of directors meeting and increase authorization would take no time of the clock......just keep on buying and increase the buy orders
    11 Nov 2013, 02:20 PM Reply Like
  • Jack Baker
    , contributor
    Comments (1268) | Send Message
     
    I think Icahn is right. I am a long time Apple shareholder and Apple bull. I do not think that given Apples financial position that 150 billion buy-back is too large. This opportunity may never come again with interest rates so low and Apple stock simultaneously so inexpensive. If either of those things change it doesn't work. Now is the time. Apple is selling at a ridiculous discount to its intrinsic value due to the markets very poor understanding of Apples true potential. This has happened due to innumerable feckless business journalists that even today don't have the slightest modicum of an idea as to what makes Apple Apple. Look, Apple has 40 billion of free cash flow and 147 billion in the bank. They could pay off the debt with less than 4 years of free cash flow alone. The carry cost on the debt is .6% when you eliminate the dividend on the retired shares. So, .6% to rally your shares back over 700 where they belong without even touching the 147 billion war chest. As a shareholder, I struggle to understand why so many are against this idea. Forget about whether you like Carl Icahn or his ilk. Just look at the numbers on paper. It makes perfect sense. In fact, I am more pissed at Apple's useless board for allowing Apple's stock to be hijacked by ill-informed bears.

     

    I challenge anyone to give me one good reason why this should't be done. And don't tell me they need a war chest this size. They would do it with a bond offering so they would still have 147 billion in the bank which is a ridiculous, unnecessary war chest unless they wanted to start buying countries in which to do business.
    11 Nov 2013, 04:03 PM Reply Like
  • bfmil
    , contributor
    Comments (211) | Send Message
     
    Challenge ? What is this an ego war? I these this well known lyrics hit the nail on the head..

     

    Have you seen the little piggies
    Crawling in the dirt?
    And for all the little piggies
    Life is getting worse
    Always having dirt to play around in

     

    Have you seen the bigger piggies
    In their starched white shirts?
    You will find the bigger piggies
    Stirring up the dirt
    Always have clean shirts to play around in

     

    In their styes with all their backing
    They don't care what goes on around
    In their eyes there's something lacking
    What they need's a damn good whacking

     

    Everywhere there's lots of piggies
    Living piggy lives
    You can see them out for dinner
    With their piggy wives
    Clutching forks and knives to eat their bacon
    11 Nov 2013, 04:59 PM Reply Like
  • Jack Baker
    , contributor
    Comments (1268) | Send Message
     
    It's not piggish at all to to this buy-back. It's a prudent capital structure move. Timing is everything in life.
    11 Nov 2013, 06:23 PM Reply Like
  • bfmil
    , contributor
    Comments (211) | Send Message
     
    How much is Icahn worth ? How many zeroes ? 15 ? How much does one man need ? I call that piggish, in fact, drop the ish.
    13 Nov 2013, 10:07 AM Reply Like
  • NJ shadow
    , contributor
    Comments (9) | Send Message
     
    Apple should vertically integrate. It should acquire chip manufacturing and processor capability preferably in the US.
    11 Nov 2013, 05:36 PM Reply Like
  • Jack Baker
    , contributor
    Comments (1268) | Send Message
     
    Agreed. And they can do all than easily WITH 150 billion buy-back.
    11 Nov 2013, 06:21 PM Reply Like
  • NJ shadow
    , contributor
    Comments (9) | Send Message
     
    A dividend hike would be appreciated. Apple could easily double its dividend and still accumulate cash for strategic acquisitions.
    11 Nov 2013, 05:36 PM Reply Like
  • Jack Baker
    , contributor
    Comments (1268) | Send Message
     
    Why pay taxes on an increased dividend when a massive buy-back will put more money in your pocket and you can realize the capital gains whenever you wish?
    11 Nov 2013, 06:24 PM Reply Like
  • Riverrun
    , contributor
    Comments (263) | Send Message
     
    I think that all of us on Seeking Alpha who know they can do a better job than Cook, should form a committee to address the board. The first business would be of course to elect a speaker to address the board. Two years from now we will hold the next meeting and proceed...
    11 Nov 2013, 06:05 PM Reply Like
  • flabingo
    , contributor
    Comments (90) | Send Message
     
    Pundits and analysts have opinions, but often do not own a share of stock. Carl Icahn has put up money to buy the stock, not options, and a I have no problem with him having an opinion, and he has been given a microphone to be heard, by the press.
    Apple is very secretive, and Tim Cook has taken it to a new level. It could be related to his private life. When he was COO he was accused to doing an excellent job with supply chains. Now we constantly read about supply problems. He may be in the wrong position. Maybe a visionary like Elon Musk, may be more suitable.
    I also do not understand how Al Gore, who invented the Internet, has 29 million dollars of Apple stock as a director. But getting back to the question that Icahn has raised, would it be any different, if Warren Buffet was the investor, asking the same question?
    When you compare the PE's of Google, Tesla, Amazon to Apple, it suggests that Apple is not considered a growth company
    11 Nov 2013, 08:29 PM Reply Like
  • flabingo
    , contributor
    Comments (90) | Send Message
     
    Does anybody think that Carl Icahn has a smaller moral compass than Jamie Diamond?
    11 Nov 2013, 08:57 PM Reply Like
  • Hlog160
    , contributor
    Comments (14) | Send Message
     
    I own Apple stock for growth as it is in my Revocable Trust for my Children & Grandchildren not to help multi-billionare like Icahn to make another fortune not for the betterment of Apple or it's other stockholders.
    11 Nov 2013, 09:04 PM Reply Like
  • Pavel Gavriluk
    , contributor
    Comments (11) | Send Message
     
    Why many of you so negative about Carl Icahn?
    He just does what he thinks good for shareholders. Of course, he wants to profit from his investments, just like every one here.
    His proposal does not going to destroy the company. So what wrong with this?
    In addition, I think he's targeted too high with 150B buyback proposal, with a view to reach agreement lower.
    12 Nov 2013, 06:20 AM Reply Like
  • Jack Baker
    , contributor
    Comments (1268) | Send Message
     
    Pavel,

     

    I am also puzzled why so many shareholders are anti-Icahn. His one goal is to RETURN shareholder value. As a shareholder, it is counterintuitive to be against shareholder value. 150 billion could be done quite easily without disrupting the Apple war chest.
    12 Nov 2013, 12:06 PM Reply Like
  • flabingo
    , contributor
    Comments (90) | Send Message
     
    Everybody talks about the large amount of cash that is overseas. What if Apple used the cash to subsidize phones, instead to the carriers? It could be better than Iwallet which would not involve Apple products. Carriers could lower their monthly charges and everybody wins, including the consumer. The car companies were built on financing cars. They could also finance the improvements of the carrier signal strength and reach, and WIFI
    13 Nov 2013, 01:31 PM Reply Like
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