“I had to see it to believe it, but it looks as though Carl Icahn, one of the world’s most respected investors, is actually going through with pushing Apple into a $150B buyback program,” Ashraf Eassa writes for Seeking Alpha.
“While the excess cash on Apple’s balance sheet is likely excessive (and negatively impacts return on equity), such a large buyback – particularly if Apple heavily levers up to do it – is not likely to end well for the long term shareholders of Apple,” Eassa writes. “While a gigantic $150B buyback would certainly create near-term buying pressure, it does nothing from a longer term viewpoint. If Apple’s business improves, then the share price will trend upwards, and if the business gets worse, then the share price will ultimately collapse – with, or without, a buyback.”
Eassa writes, “The push for a buyback seems to me an attempt on Carl Icahn’s part to drive upside to the shares in a fairly short timeframe… Such a buyback is great for short term trader/speculators, but for long term investors, not so much. Is Apple’s cash hoard huge? Yes. But who knows what the company could use it for? While buying back Apple stock is not the worst way to spend that cash, making sure that the company has enough dry powder in order to do what’s necessary to fund the next leg of growth is more important.”
Read more in the full article here.
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Apple will not, of course. Because “cash” is needed for safety and for long-term stability (in case of crisis).
I hope Tim bitch slapped Carl in the face
Spend $150 billion on a buy back then you find you need a few billion for the next big thing.
What do you do?
You sell some more stock.
Duh!
Carl Icahn is not a respected investor.
respected day trader perhaps!!
I agree, not a respected investor and only a legend in his own mind and by others who respect parasites. But other than that misstep, the article as a whole is spot on!
iCahn is a proven vulture and greedy troublemaker, Tim Cook knows this and “likes to keep his powder dry”…
Hey Icahn, turn around so I can stick my old iPhone up your ass. Better yet, let me get my old MacBook.
Lisa
Why would you waste a perfectly good iPhone (even a smashed one) or MacBook or Even a Lisa when there are perfectly worthwhile Windows PC towers cheaply available.
Hey look I found something Windows PCs are good for 🙂
I would FIRE Tim Cook.
I would name a bullet “Tim Cook” and then fire it into your skull.
Moron
Carl Ichan is a known corporate raider for over 30 years. He he well known for buying corporations and then selling off their parts to other corporations. He is not to be trusted.
Just like Romney
Prove it.
Can you imagine Apple after Ichan got ahold of it? Icahn can’t understand normal thinking. His community and corporate spirit begins with: “What’s in it for me?” and ends there, too.
He doesn’t give a fat rats arse about anyone else. RG you are so spot on. The only people who think differently than what you have stated are looking for a way to suck up to him.
As I have said before, I hope Tim Cook grows some and gets rid of this PIA.
If anyone wants to know the difference between Jobs and Cook this is it. Icahn is a leech, he doesn’t create anything but demands to be paid because he bought a stock. I truly believe that Cook will resist Icahn’s demand but likely, in the end, he will throw him a bone so Icahn can claim victory as the saviour for the poor shareholder (while pocketing a hefty sum for himself) and then go away. If Jobs was still in charge however, Icahn wouldn’t have even tried. Jobs’ “distortion field” would have made him invulnerable to Ichan and he knows it.
Carl Icahn is a venture capitalist. He’s taken a position in AAPL and had lunch with Tim Cook.
Cook has engineered a massive stock buy back with money borrowed at ridiculously low rates. Buying back more shares, under similarly favorable terms, makes sense. Icahn gets this. Cook is no dummy.
Use all the brains you have and all you can borrow.
You need to look at the details of those rates. There are many different rates involved for various parts of the financing. Some of them are for many years and are pretty high.
Saying that the rates are “ridiculously low” both is an asinine statement and shows your extreme ignorance of the true facts of the situation.
Icahn does not care if Apple loses money on a leveraged but back. All he cares about is that such an announced buy back (if Cook were stupid enough to do it) would cause a short term rise in the stock price so that Icahn can dump it at a higher short term profit. Then after he does the headlines will read “Icahn dumps Apple.” And the stock drops like a rock.
Then Apple will still be stuck paying off the stock repurchase after the stock has fallen. AND all of Apple’s long term investors are just where they were before — only worse because the stock won’t be higher than it is now AND Apple’s balance sheet will be significantly worse.
This is a losing proposition for EVERYONE except Icahn.
Say what you will, w/o iCahn, Apple shares would still be stuck in the mud. $150 B will buy back 1/3 of shares at $500. which would increase EPS by about 50% m, which would require about 30-40% revenue increase, which is really hard to achieve for a company that has $170 B in revenue. Dividends payout reduction would be about $4 B per yeas which is about the carrying cost of $150 B in debt.
Icahn is like an elephant poacher. He kills his targets and moves on, with no consideration of the long-term consequences. He is amoral.
He also wants to tell Dell Computer how to run their business. He should stick with that, they deserve each other.
GIVE ICAHN NOTHING.
He could tank the stock in a second. This is extortion, this should be illegal, he should be locked up. This is one bad man! I have to get out of the stock. Breaks my heart. He could ruin me. I hope Tim Cook is clever enough to outfox him, make him broke like he’s done with so many others. Icahn is a horrible man.
His hold record is bad, he owns the kind of company that destroys companies for profit.
All this people should go to jail, Mitt Romney does the same type of work.
You have no idea what Mitt Romney does. Rikerd you need to go back to your political website and spread this kind of crap.
Money talks. The old dude sounds sharp as a wip. Sadly the name of the game in Wall St is money, not products, and this old dude has the money, and the ball it looks, to play the game to win.
Icahn is a prime example of all that is wrong with modern day investors, in it for the quick buck with no interest in the company instead of the long term investor who has a real interest in the company. If Icahn won’t leave apple alone apple should start screwing with Icahn other investments
Foreign companies like Samsung love Carl Icahn!!
He takes control of the most innovative American companies and then breaks them apart for his own profit. He did it to Motorola and some others before that. Now its Apple’s turn….
Thanks Carl for your contribution to unemployment and American dream….
Yeah, “some others”. Remember TWA? They don’t exist any more. Icahn got controlling interest, broke up the company, sold its assets, and left them with a pile of debt. They went belly up, and Icahn made a killing. And there are others. He wants to do something similar with Apple.
iCohn is like the result of the stock market. Solely interested in making money.
Now Apple is a slam dunk. It has money. Oddles of it. So much it could buy multiple competitors and still have cash left over.
What the market hates is that money is not in their hands. So what is the best way to get that money. Make Apple buy their own shares to put equity back into the market.
I don’t really have a problem with Apple buying back shares. I disagree that they should borrow money to achieve that. That money will have to be paid back and Apple may need that cash for a strategic acquisition or investment.
The stock market has become incredibly greedy over the last 30 years. First it was the shift of retirement pensions into stocks or mutual funds. How many people have lost everything due to unscrupulous activities in the market? Second, the dotcom boom was hyped to extremes only to fall precipitously just as it was predicted never to end. Third, the credit crisis trapped millions in upside down mortgages because the market greed drove house prices out of control.
When greed gets out of control, businesses and industries collapse. I hope Apple is smart enough to stick to its guns.
Apple should borrow money, Carl? What have you smoked?
The reasoning for borrowing money is that the interest rates currently available are far lower than the current cost of repatriating Apple’s offshore funds. By buying back shares, Apple does not have to pay dividends on those shares. As the dividend is higher than the interest rate, Apple ends up better off both in the short term and the long term.
Having said that, I think that Apple should only go so far with a share buy back and should always be wary of Icahn’s suggestions. His agenda is entirely different to Apple’s agenda, but there are very small areas of overlap.
150b buyback is too much .
Icahn is just trying to make a quick buck for himself at the expense of flexibility for Apple’s future planning. He’s a scoundrel like so many of Wall Street’s financial manipulators. I prefer to see my share price in Apple increase as a result of solid business practices and real growth in company profits.