“Carl Icahn continues to press Apple Inc. to use its $133 billion in cash to buy back its shares,” @4/7 Wall Street writes.
“Apple’s board could cast around to buy a company that would eat up most of its cash balance. Some of the best fits are too expensive. Google Inc.’s market cap is $390 billion. Facebook Inc.’s is $201 billion. Amazon.com Inc.’s is $149 billion,” 24/7 Wall Street writes. “Further down the table of American public corporations are several that have market values of about $100 billion. These include Goldman Sachs Group Inc. at $86 billion… Boeing Co. has a market cap of $91 billion. It is a hardware company of sorts, but the price points of its products are much larger than Apple’s. With most of the companies with market caps of $100 billion or so are excluded, the one that remains is McDonald’s Corp. with a market cap of $92 billion.”
“After combing through the list of public corporations that Apple could buy and dispose of its $133 billion via one M&A event, it looks like Icahn may be right,” 24/7 Wall Street writes. “The most appropriate thing for Apple to do is return its cash to shareholders.”
Read more in the full article here.
Related articles:
Icahn gazes beyond known world, sees $1.2 trillion Apple – October 9, 2014
Icahn’s Apple assumptions met with skepticism on Wall Street – October 9, 2014
Jim Cramer: Carl Icahn is ‘assaulting’ Apple – October 9, 2014
Icahn: iPhone 6/Plus to hurt Android, Apple severely undervalued, increased buybacks urged – October 9, 2014
NO! Netflix!
Netflix doesn’t own anything Apple wants. Apple could build that technology in a month, and they’d have a larger user-base overnight.
The one thing Netflix has is their licence agreements with content owners. And that likely wouldn’t be renewed with Apple after a purchase.
Agreed that Apple doesn’t need Netflix. Netflix shouldn’t even be close to what it’s worth to Wall Street. It’s an online video store that’s been pumped up by the hedge funds as being some sort of invincible company that can’t be replaced. Apple could have easily built its own Netflix with a larger user-base with just a few licensing agreements. Netflix users are only tied in for a month. Hardly an invincible company to be worth $450 a share. Insane valuation yet people claim Apple is overvalued.
buy adobe, discontinue windows photoshop
Yes! And Disney.
They can’t buy McDonalds. Because how would they know which iMac I ordered?
Boom, tish!
Yeah, Apple should buy McFrankenfood’s…….er, I mean McDonald’s, shut me down and stop poisoning the world!
Kidding. Not only is it the stupidest suggestion I’ve ever heard anyone come up with for Apples cash , but Tim cook is a health nut and wouldn’t even consider it if it were a good idea. 🙂
Shut em down! (Not me)
Why would Apple waste that money on a business clearly not in their domain? Same for just about all the other businesses. The only one that would make ANY sense at all would be Amazon. Apple has millions of customers one click away from a purchase already with iTunes, but so far the only thing they buy is songs, apps, and movies. The physical plants and warehouses of Amazon could quickly be transformed into retail outlets for Apple while at the same time, the Amazon phones could be spun off into a separate company at terms in Apples favor. The problem with this deal is that in spite of some good terms, the clash of corporate cultures would not make it a happy marriage. In the end, pumping the money back into Apple might be the best bet.
Apple could, possibly, buy Amazon, blend the whole Kindle, ebook, and eMusic licences into iTunes and iBooks, then just sell off the rest to venture capitalists and hedge funds.
If Cook had the stomach to take on such an acquisition — which is unlikely given how low margins Amazon takes — he’d be spending the majority of his time fixing the toxic & corrupt work culture at Amazon.
Jobs created Apple to change the world, giving users the digital tools to create and share amazing things.
Bezos left his cushy Wall Street job and founded Amazon to undercut and destroy all small retailers in the nation.
It is unclear what Cook’s mission is, but it seems his biggest focus is to manage the iOS franchise so Apple can continue to take 30% of all independent developer revenues.
Then again, perhaps Cook is interested in turning Apple into another Amazon. The Mac and practically all non-iOS devices have stagnated under his management. Mac software, too, seems to be redesigned to drive everyone to iCloud, which is essentially server rental computing. That’s something Amazon excels in — instead of giving users creative tools, it’s first and foremost a media reseller. Just like Apple has become in the last decade.
Only one obvious answer: NO!
As is the appropriate answer for any headline ending with a question mark.
“The most appropriate thing for Apple to do is return its cash to shareholders.”
Let me fix that for you:
[The most appropriate thing for Apple to do is continue to invest in developing ground-breaking products.]
You’re welcome.
They should return cash to shareholders. Like me. I will happily take more dividends.
Good Lord no…..
At what point did it become “smart business” to not retain any cash reserves? No wonder “American business” is an oxymoron. Based upon performance, I think Apple should continue to do EXACTLY what they have been doing.
I have never understood the “return the money” philosophy. The only companies that should “return the money” are “non-profits”, the “for profit” companies should keep their money and do with it what they please. That’s the central idea behind capitalism and “for profit”.
Milton Friedman said that companies exist to maximize shareholder value. Apparently, Carl Ichan agrees. But more and more economists are questioning this assumption.
Corporations exist for a variety of reasons. I quote Steve Jobs when defining the reason for Apple’s existence.
“We are here to make a dent in the universe. Otherwise, why even be here? We’re creating a completely new consciousness, like an artist or a poet. We are rewriting the history of human thought with what we’re doing.”
The duty of the Board of Directors is to advance this mission.
Investors who agree with this buy shares in the company to help further this mission, NOT to give them the right to dictate how the company should be run.
If you don’t agree with how Apple is being run, you should sell your shares and invest in a company more in line with your values.
As for Carl Ichan, @24/7WallSt, Jay Morrison, Joe, and all the other people on MDN who carp about how Apple is being run, you’re certainly entitled to express your opinion, but that’s about it.
And the ridiculousness of Icahn’s assertion is that the majority of Apple’s cash is outside of the U.S., so in order for Apple to “return the cash”, it first would have to repatriate the cash, thus incurring significant taxes it is not required to pay. That does not benefit shareholders at all.
“Investors who agree with this buy shares in the company to help further this mission, NOT to give them the right to dictate how the company should be run.”
It’s a shame then that Apple didn’t make this clear in the articles of incorporation. It’s rather trivial to do; simply have voting class shares which would be owned by those deemed worthy of making decisions on how the company should be run, and then non-voting class shares.
Also, good luck raising funding for a for-profit corporation where executives end up making billions of dollars when you’re asking the investors to trust that their cash is furthering a mission of “creating a completely new consciousness” with complete disregard to receiving a return on their investment.
Apple, like most corporations was set up with a board of directors in place to help protect the interest of the investors. While this can be a bad thing, don’t forget it can also be a good thing as witnessed by the firing of Sculley, Spindler, and replacing Amelio with Jobs.
Apple is sitting on a ton of cash that’s growing rapidly. I was arguing here a couple of years ago that Apple will likely start doing buybacks and dividends because that was the best use of the excess cash, and I was met with foolish counter-arguments about “rainy day funds” and such, but still, nonetheless, Apple released a lot of cash. It’s likely to release a lot more cash. If so much cash wasn’t being held abroad, we’d see a huge rain of cash from Apple, simply because there’s not much else Apple could do with the money.
And as for those running the company, there’s not much the want to do with the money. They don’t (obviously) want to buy McDonalds, but they also don’t want to become a super-mega-corporation. Apple, despite it’s huge market cap, revenue and profits is still run like a much smaller company in terms of product development. The executive team likes it this way and they don’t want to be burdened with running big huge multi-billion dollar divisions that offer thousands of products and services (remember how proud Tim Cook was that Apple’s entire product line could fit on the table with Charlie Rose).
Carl Icahns play here is pretty simple and straightforward. He bought a lot of stock, and is now pressuring Apple to do things that will increase the price of the stock, which he can then sell at a profit. While some may have issue with that, it doesn’t mean that Icahn is wrong, or that Apple isn’t already on the same page as him.
Apple investors all make a lot of money on apple stock…… But this never seems enough!! This company has always run on a higher purpose! It sad to know that you have just figure this out. You need to have this written down in a mission statement? Buy shares in Amazon and see how much your ROI is!
“This company has always run on a higher purpose!”
The company was never sold to investors this way. The first VC funding came in because of the market opportunity for the company. When the IPO occurred, again, market opportunity. The investors provided capital for a return on their investment, not to donate money for some “higher purpose”.
“You need to have this written down in a mission statement?”
No, this has nothing to do with a mission statement. It has to do with articles of incorporation.
You are perfectly free to say that you’re forming a corporation and that the shareholders of the company won’t have voting rights, and dictate how much power, if any, the board of directors has. Look at Facebook. Zuckerberg has full control of the company. He set it up that way. Jobs (and the founders) did not.
You can’t form a company, sell it to investors in a way that provides them with voting power and control of the company, and then later say, “sorry, it wasn’t about ROI for you, it’s a higher purpose, and although we agreed to give you voting rights and allow the board to ultimately control the company, we’re changing our minds on all of that.” It’s no longer their company, it belongs to the shareholders.
Instead, sell the company under the terms you want to sell the company as. Here, you give us $100 a share, and you get no voting rights, and we’re going to run the company to make high salaries, but with disregard to a return on your investment. There’s nothing wrong with that. There is something wrong with a bait and switch.
Where a mission statement comes in is in saying how the company is going to be run in order to maximize return to shareholders. Apple does this quite well with a mission of providing premium product experiences in uniquely qualified areas of expertise.
Nobody is suggesting they do otherwise, but notice that Apple commands a relatively high margin on its products (over 30%) which results in large profits and return to shareholders as opposed to dropping that margin down to a break-even point which would result in no return to shareholders, but further whatever is meant by “a higher purpose”.
Microsoft, why are we even considering anyone else?
Adobe.
Yes!
It is amazing that Apple’s money is burning a hole in so many people’s pockets. Spend your own money and Apple will use their own money where they see the best fit with what their business is about.
It’s not their money. The money belongs to the shareholders.
McDonald’s is not a good fit. Apple likes to hold the lettuce.
This is a tough one. Other than Google, many of those big companies are not that interesting and not that profitable. When given such options, it’s no surprise Icahn recommends that Apple just… ahem… buy itself.
I don’t know much about this technology, but is it feasible for Apple to deploy satellites for worldwide cel coverage?.
How much per satellite ?. 1 billion?.
Launch 30-40, charge 30.00 per month.
Yes, it certainly is feasible and I love the idea. Apple could easily be doing its own trans-Atlantic cables, too. Apple should be building infrastructure to strictly support its own platform.
Cell phone coverage from satellites? Things must work differently where you live.
Others have tried this (think Teledesic) and failed miserably. Others are currently looking into it — the names should be obvious to all.
In order to do true, worldwide cellular type coverage from satellites the satellites would be very expensive and there would have to be LOTS of them. (Teledesic was originally going to have 840 satellites with 84 on orbit spares — and Teledesic’s nominal data rate was only 1.544 Mbps to an antenna the size of a typical laptop [not something you want to carry around with your cell phone], not the 40+ Mbps peak that you can get with LTE now. And, LTE-A being deployed now and available in the next year or two will have a theoretical peak of 1 Gbps.)
For Apple to implement such a system it would take 5-7 years if they started TODAY, and it would likely cost $35-$40 billion or more before true worldwide coverage was reached with even today’s cellular data rates.
Good info.
Thanks
It hasn’t worked too well for the various Iridium companies!
TiVo!
Just let them hold onto the cash until they have enough to buy Google. The chances that would come to Google would be warmly welcomed my many users and many industries. Apple’s about half way there.
Wow lot of typos… Meant changes
When you can buy your enemy is when you have won “thermonuclear war”!
Why should Apple buy Google? If Apple wants to spend money it should build it’s own search engine or acquire DuckDuckGo and suck out Google’s life-blood. Apple could easily challenge Google with far less money than buying Google outright. DuckDuckGo on all iOS devices would knock the air right out of Google search. If Microsoft can afford its own search engine then certainly Apple can afford one.
Yeh. I’ve been hoping for years that Apple would develop its own search engine. Other hope… a professional grade but super easy to use web editor.
Added to list now… That Pages 5 might someday get back to the capabilities of Pages 4… maybe before I retire.
Apparently, the reporters at the Wall Street Journal have taken to smoking crack on Friday mornings.
Apple should invest heavily in the field of advanced artificial intelligence. I’m not talking about Siri, I’m talking about Transcendence.
Huh. It used to only be Monday-Thursday.
MacDonalds!
Dollar menu in Disney World. I can appreciate that …
Buy Disney and get ABC and ESPN. Cut the cable companies off at the knees
Yup!
How about investing in education?
“Steve Jobs University”
Let’s make a few things clear:
1. Apple buy companies that can enhance its products. Even though Beats seemed an odd acquisition the service and the talent they acquired will reap huge benefits. The advantage can take time to become apparent. Several years ago Apple acquired a company in Israel that specialized in chip development. Now Apple have developed multiple specialized chips including the A and M series.
2. 80% of Apple’s cash is overseas. The amount available for dividends and stock buyback is only 20% of the total. That’s why Apple have had to borrow. Probably with borrowing is that you have to pay it back eventually.
Apple stock has grown about 25% YTD. Clearly the stock buyback has helped boost the price and get it back to its historic high. Problem is that stock prices are at the whim of the market and aapl is a great tool for brokers to make money. Therefore buybacks can influence price but a large cost. Dividends offer more consistent returns and generally cost less. Ultimately the combination of both is the best approach since reduce stock base will also reduce dividends cost. I would like to see another increase in dividends but don’t expect this to occur until next year since Apple have raised them in May for the past 2 years.
Oh silly me, buy IBM with its market cap of 185B next year.
If that happens, I’ll have to take the off because I’ll be laughing so hard. Not to mention it might actually make sense.
All you need to do is look at the past of Carl Icahn to understand what “his” motives are.
Getting more money for himself. Company health be dammed.
Buy it to put that meat grinder out of business
McDonald’s Japan just reported its first loss in 12 years.
Probably due to the tainted chicken meat from China incident.. I think KFC Japan was also affected. (McD Japan beef is from Australia).
Apple always stated not to sell bull..t.
If Apple buys McDonalds, they’ll have to change the whole menu of it. Maybe many countries would appreciate it… but some habits of junk-food would cause some significant economic disaster in many places.
Most people love junk and don’t care for their health.
Milton Friedman said that companies exist to maximize shareholder value. Apparently, Carl Ichan agrees. But more and more economists are questioning this assumption.
Corporations exist for a variety of reasons. I quote Steve Jobs when defining the reason for Apple’s existence.
“We are here to make a dent in the universe. Otherwise, why even be here? We’re creating a completely new consciousness, like an artist or a poet. We are rewriting the history of human thought with what we’re doing.”
The duty of the Board of Directors is to advance this mission.
Investors who agree with this buy shares in the company to help further this mission, NOT to give them the right to dictate how the company should be run.
If you don’t agree with how Apple is being run, you should sell your shares and invest in a company more in line with your values.
As for Carl Ichan, @24/7WallSt, Jay Morrison, Joe, and all the other people on MDN who carp about how Apple is being run, you’re certainly entitled to express your opinion, but that’s about it.
Milton Friedman was the father of the 2007 worldwide depression. If I had a rifle and I was standing on his grave, I’d empty the rifle into his coffin just to make certain he was dead.
The suffering that man has caused…
[And no, I won’t be playing flame war games over this post. Just watch the future hate this man’s work. That’s enough for me.]
Sparkles, all I see in your post is a bunch of c’n’p quotes from others in this thread.
Don’t you have any contribution of your own to make, or is that the best you can do?