Seeking Alpha

Icahn discloses fresh Apple purchases, makes renewed buyback call

  • Carl Icahn declares on Twitter he has bought $500M worth of additional Apple (AAPL +1%) shares over the last two weeks, raising the total value of his stake above $3B (still less than 1%).
  • He also makes a renewed call for a larger Apple buyback, stating the company's board "is doing great disservice to shareholders" by not signing off on one. Never scared to self-promote, Icahn promises to publish a new "in-depth letter" on the subject shortly.
  • Apple shares have ticked higher on the remarks. Last month, the company urged shareholders to vote against Icahn's Prop. 10, a non-binding resolution calling for at least $50B in FY14 buybacks. Apple's annual meeting is on Feb. 28.
  • More on Apple/Icahn
Comments (58)
  • DON'T PUSH FOR BUYBACKS! DON'T YOU SEE WHAT'S HAPPENING TO IBM BECAUSE OF BUYBACKS?

     

    (sarcasm)
    22 Jan, 10:55 AM Reply Like
  • Agreed. One of the main reasons I am in IBM is because of their share buyback policy from the past several years.
    Buybacks don't kill a company.
    They are a benefit and reward from profits of a well run company.
    22 Jan, 11:32 AM Reply Like
  • We don't know what Apple may have in mind for their cash pile. They most likely have a strategy to do things we can't begin to imagine. I tend to trust their direction, given how well they have done so far.
    22 Jan, 11:42 AM Reply Like
  • Given the fact that Jobs called Buffett to ask him what to do with the money... no they do not have anything in mind with the cash.
    They are great at making products.
    They are great at making profits.
    They are terrible about redeploying those profits.

     

    They did not need $150 billion to make the iPod that started their growth. They certainly don't need it to make the next iProduct.
    Keep enough money for R&D
    Keep enough money for a realistic M&A.
    Give the rest to shareholders.
    22 Jan, 12:06 PM Reply Like
  • elcid16,

     

    Apples and Oranges. IBM's business has been in decline for years and they have been trying to mask the decline in their business through financial engineering. It actually worked for IBM in the first few years as the stock flew on earnings and no one focused on the quality of earnings.

     

    Apple is a cash machine and the fundamental story is great. Apple will grow organic earning by double digits this year. IBM hasn't done that in many years.
    22 Jan, 12:12 PM Reply Like
  • Jack Baker,

     

    IBM's business has grown revenues 8% per year over the past decade and has grown operating cash flows 13%. This growth has NOTHING to do with "financial engineering." The growth in EPS is attributed to share repurchases. NOT revenue and cash flow growth.

     

    IBM has been in existence for over 100 years now, yet after a simple 2 years of ever-so-slight revenue and operating earnings declines, you have the knowledge to label them a "business in decline." I feel that you may have fallen prey to the US media's attempts to focus on the "now" rather than focus on the larger picture.
    22 Jan, 02:58 PM Reply Like
  • 1) How is it that you are still using Job's question to Buffet , when Jobs is already gone for a while? There is new management there now.
    And yet you are saying they make good products and make great profits. If they do not have anything in mind as you say and terrible at redeploying the profits, then, you should sell your stock. It seems you are just doing the same thing Icahn is doing, park the money, take the money and leave the carcass behind.
    Unfortunately, you may destroy the American ingenuity and its business.
    22 Jan, 03:28 PM Reply Like
  • In the past buybacks were used to boost a company down on its luck like the Washington Post did , message by the co its stepping up when needed, not like why you see today borrowing huge amounts and using that cash to buy back your own shares trading at all time highs. Last I checked corporate debt stood at $12.5 trillion and counting
    22 Jan, 03:47 PM Reply Like
  • Buybacks are an advantage, but the company has to stay on sound footing. If it does, keep up th buybacks.
    22 Jan, 04:28 PM Reply Like
  • elcid16,

     

    I said that IBM's business has been in decline for years. You have confirmed that that is correct for the past two years with declines in revenues and operating earnings. My comment was more directed towards earnings growth. IBM has had a buy-back program in place for many years that gooses eps by reducing the shares outstanding. That is financial engineering. I believe IBM does in because it's the only way they can get eps growth as their attempted transition into services is not getting any traction. In Apples case, they need to do it because they are a cash machine and they are irresponsibly sitting on a massive amount of cash.
    22 Jan, 04:48 PM Reply Like
  • Jack Baker,

     

    I'm glad that you were able to [barely] confirm that your statement "IBM's business has been in decline for years". I guess 2 years counts as "years" :)

     

    I'm still stuck on this "financial engineering" concept you speak of. IBM has been conducting share buybacks, or as you like to call it "financial engineering" for decades now. Since 1993, these buybacks have helped facilitated EPS growth of nearly 15% per year by reducing the share count roughly 4% per year. EPS have increased from about $1 per share to about $15 per share over that same span. If these are the results that buybacks can help facilitate, I don't care what you want to call it. You can count me in.
    22 Jan, 06:30 PM Reply Like
  • elcid16,

     

    Don't get me wrong, I am not opposed to buy-backs. All I am saying is that it is important to understand the "quality-of-earnings" by understanding how much of the earnings growth is coming from business operations and how much is coming from share reduction or some other kind of inorganic growth methodology. The market is clearly starting to make this distinction with IBM's earnings.
    23 Jan, 04:50 PM Reply Like
  • Don't think activist shareholders like iCahn are good for companies
    22 Jan, 10:55 AM Reply Like
  • Critics can say what they will, but when Cook talks or tweets, Apple invariably drops. When Icahn talks or tweets, it goes up. Wall Street listens to Carl, not Tim!
    22 Jan, 12:58 PM Reply Like
  • Crooks flock together.
    22 Jan, 02:49 PM Reply Like
  • do love an icahn tweet. always gives the stock a nice boost!
    22 Jan, 11:12 AM Reply Like
  • Apple now has iPod, iPad, iPhone, iBond, iEinhorn, and now iCahn.

     

    With this vast product portfolio, who care about iWatch or iTV.
    22 Jan, 11:17 AM Reply Like
  • Problem is the ibond isn't getting much I interest or paying much iinterest....
    22 Jan, 11:26 AM Reply Like
  • The stock is moving 50% due to GS comments and price target raise...not just Icahn.
    22 Jan, 11:28 AM Reply Like
  • The stock is moving higher, building into earnings.
    22 Jan, 11:36 AM Reply Like
  • Yes - and the other 50% is due to Mr Icahn
    22 Jan, 01:10 PM Reply Like
  • I just voted against Icahn's proposal yesterday. Although I am just a tiny investor in Apple, I still don't think it is a good idea to use all you cash to do the buyback thing, especially most of the company's cash stays offshore. Apple needs to keep some safe money for rainy days as the competition is getting fiercely.
    22 Jan, 11:37 AM Reply Like
  • I voted my several thousand shares for Icahn's proposal. Apple had 45 billion in free cash flow in 2013 and will probably have over 50 billion in free cash flow in 2014. Taking on debt against the massive war chest to retire shares that Apple would otherwise be required to pay a dividend on is very smart. Especially when they can borrow money for the same amount of interest or less than the dividend yield they are required to pay on the shares.

     

    Apple has more than enough for a rainy day and if they do an increased buy-back with debt, they could pay a 150B buy-back off with 3 YEARS of free cash flow, still have 150 billion in the bank, and have 1/3 less shares on the market -- thus boosting earnings by 33%. It's a no brainer at this point.
    22 Jan, 12:05 PM Reply Like
  • AAPL is in trouble if it needs $150 billion to be safe.
    22 Jan, 12:08 PM Reply Like
  • I agree, with you, Jack. The exact parameters of the buy back won't pass with the Board, but I like the idea of keeping pressure on them. There's plenty of FCF to support increases. I'd lover to see something like 10-15B more added to the current buyback plan through 2015, 20B more in 2016, and 15% dividend hike.
    22 Jan, 12:28 PM Reply Like
  • lots of $ = trouble? LOL
    22 Jan, 12:38 PM Reply Like
  • ".... my several thousand shares...." thinking what many others are thinking. Anyway, Jack is it about size or telling everyone?
    22 Jan, 04:06 PM Reply Like
  • Always love me some iCahn buy ins.
    22 Jan, 11:46 AM Reply Like
  • This news just put a skip in my run. I have FULL confidence in this management team and the products. Ibeacon is coming and has signed up hundreds of companies. Iwatch is coming. I already use my fingerprint to make purchases with my phone. I buy it, I use it proudly and I will wear it proudly. And the stock is CHEAP right now for the value. Loooonnnngggggg APPL.
    22 Jan, 11:47 AM Reply Like
  • Do they really have iBond? I can't believe I didn't know this. Wowza
    22 Jan, 11:49 AM Reply Like
  • Thank god there is at least one guy advocating for a higher stock price. God knows Apple's PR department and board have been asleep at the switch for a while.
    22 Jan, 12:02 PM Reply Like
  • They need the cash to set up a bitcoin-like payments system, using the iphone fingerprint, iWallet and bitcoin technology to undermine the credit card business. If they are smart, Visa, Mastercard, Citibank & JPM will join them in a cartel.
    22 Jan, 12:09 PM Reply Like
  • They need $150 billion to do that? Nobody, not even Icahn, is calling for them to spend all of their money on repurchases. He is calling for $50b in buybacks and $100b left over for the company. If they needed more than that then they should be fired. Obviously given their track record they do not and thusly the money is sitting there wasted.
    22 Jan, 12:20 PM Reply Like
  • Buy-back and the prudent use of debt is a good way to optimize the WACC (weighted average cost of capital) whereas a company with little to no debt is actually misusing its financial resource.

     

    The "threat" of a buy-back should keep the bears and short-sellers on the side-line and if the PE multiple does not expand over time then buy-back will reduce enough float to force an expansion.

     

    Apple should first open a credit line to ready itself for additional debts to buy-back shares, lobby the US government for a tax reprieve on foreign fund repatriation, then repatriate to pay down debts later.
    22 Jan, 12:20 PM Reply Like
  • Very much like your comment. It is exactly how they should approach and people should understand this.
    22 Jan, 12:54 PM Reply Like
  • Is there a precedent for corporate tax reprieves of this sort? Are there any marquee examples? Obviously your suggestion would be an ideal situation, but I cannot imagine the government giving just Apple a tax reprieve when MSFT, CSCO, PFE, and GOOG all have piles of money offshore. This is something I know little about, but clearly Apple is going to have to figure out something to do with it. They can spend it overseas and pay it to foreign-held companies, but that doesn't really fix the situation, and TC has said he will not bring repatriate the money if it means 35% taxation. I'd be intrigued by any possibilities that might fundamentally eliminate the issue.
    22 Jan, 01:32 PM Reply Like
  • Yes, under Bush in 2004. It was a one time tax holiday for bringing cash from overseas into the US. Certainly could happen again, but the recent build up in overseas wealth by US corporations is also a testament to the perverse incentives of the first holiday--firms are now incentivized to wait on their foreign cash in the hopes of another holiday instead of bringing it over and being taxed on it. This is almost surely what Apple is thinking in holding the cash overseas at present. And given the rise of these overseas funds (not just for Apple), the lobbying for another holiday is only going to intensify.

     

    Pretty clear the tax holidays are a boon for shareholders but after that it is pretty contentious terrain. If it happens again it will be a tax holiday for all US corps, not just Apple.
    22 Jan, 11:30 PM Reply Like
  • to: Pocohonta don't forget about iGore! Which invites the question, why the hell is he on the board? He should go back to wearing a hump and oogling Frau Blucher.
    22 Jan, 01:11 PM Reply Like
  • It is nice to have him on our side. Activist investors ROCK!!!!!
    22 Jan, 01:29 PM Reply Like
  • Cook knows what he's doing. Thankfully he makes the decision, not those looking for the quick buck.
    22 Jan, 01:39 PM Reply Like
  • I voted my shares with carl apple has way to much cash on hand i dont think 50 Billion will hurt them in any way,and will be good for the share holder
    22 Jan, 01:53 PM Reply Like
  • Now we know where Icahn has invested some of the profits from the sale of half his investment in Netflix. An excellent move on his part, with or without an increased stock buyback.
    22 Jan, 02:09 PM Reply Like
  • Leave it to WSJ & MSNBC, to turn a very bullish interview with Icahn on CNBC to another AAPL bashing session with headlines like: " Icahn blasts Apple, Inc. again!!!"
    If I wanted headlines like that, I'd get my newspapers in the grocery checkout lane.
    That's one of several reasons I now only read IBD.
    22 Jan, 02:17 PM Reply Like
  • david Einhorn of Greenlight Financial also pledged his love to AAPL in a letter to his partners.
    22 Jan, 02:37 PM Reply Like
  • I think the best thing for Apple the stock is to let Cook run the company and let Icahn run his mouth!! If Cook and the overpaid BODs would listen to Carl, Apple could be in the 800s on current fundamentals!!
    22 Jan, 02:49 PM Reply Like
  • Crooks!!!
    22 Jan, 02:51 PM Reply Like
  • LMAO!!!!!!!!!!! I laugh so hard at all schumacks shorting APPL

     

    Thanks Ichan, although you were wrong when you left TTWO, now the sense comes back to you.
    Stay with me, and we all hit $600 this year, that's too small, $750 this year!!!!!!!!!!!!!!!!!!!

     

    LONG APPL from $450ish
    22 Jan, 04:23 PM Reply Like
  • "LONG APPL from $450ish"

     

    And your bragging? let us know when you retired early after 2 digits on a stock like this.
    22 Jan, 06:37 PM Reply Like
  • He needs investors to hold up the stock so he is using the media to get investors in. He holds less then 0.5% in this stock. With a Mkt Cap of 500B why the heck would someone want to put the money on this stock beyond me. Apple is good company but a bad stock to hold, see no value for investors. Big funds have been steadily selling APPL most of buys have come from individual investors and index finds as individual buy the index.

     

    Mkts over valued so move to cash/money mkt finds and wait this cannot be good as most large companies saw drlp in revns and profits, looks like this not going to improve this year. Also companies are liited in terms of borrowing more as the corp debt is now doubled from 2007. So support for stocks from corporation is going to limited this year.
    22 Jan, 06:26 PM Reply Like
  • I like your comments but your lack of punctuation makes reading them difficult. It only takes a couple seconds longer.
    22 Jan, 10:04 PM Reply Like
  • Unless Cook has definite plans this fiscal year for at least 50 billion of that 150 billion, he has absolutely no justifiable reason for not retuning it to Apple stock holders ...absolutely none.
    22 Jan, 08:16 PM Reply Like
  • Apple is spending or going to spend nearly $6 billion in new San Jose brain center and other building improvements in the states. This could be borrowed money, but doubtful. This also will provide thousands of construction jobs in the Bay area. And, what happened to Icahn's $525 buy back, if he just bought this past two weeks? A benefit to the stockholders I think. Up, up and away! Not bad to be in the same investment group as Icahn.
    22 Jan, 08:23 PM Reply Like
  • And plans on buying more relatively soon.....
    22 Jan, 10:20 PM Reply Like
  • Real soon as in today puts his wallet where his mouth is..
    23 Jan, 06:07 PM Reply Like
  • Icahn, return to the hole from whence thou comest from. Keep your pie hole shut and let the management do their thing. If u really think otherwise, then get all your billionaire friends together and just buy out the coy in hostile takeover
    23 Jan, 02:41 AM Reply Like
  • This calls for another dinner with Cook.
    23 Jan, 02:10 PM Reply Like
  • That has a certain ring to it.
    23 Jan, 02:34 PM Reply Like
  • Carl Icahn bought addtitonal $1B just ahead of earnings on Jan 27th. I am long with him on this one.
    23 Jan, 03:25 PM Reply Like
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