Einhorn’s Apple lawsuit marks biggest investor challenge in years

“Apple Inc on Thursday confronted its first major challenge from an activist shareholder in years as hedge fund manager David Einhorn’s Greenlight Capital filed suit against the company and demanded it dole out a bigger piece of its $137 billion cash pile to investors,” Jennifer Ablan and Poornima Gupta report for Reuters.

“The unusual move comes as the world’s largest technology company grapples with a tumbling share price, mounting competition in the smartphone and tablet markets and concerns about its ability to produce new breakthrough products,” Ablan and Gupta report.

MacDailyNews Take: Reuters. Again. Let’s take a closer look at this “mounting competition in the smartphone and tablet markets:”

• Apple dominates mobile phone makers with 72% profit share worldwide in Q412 – February 6, 2013
• comScore: Apple #1 smartphone maker in U.S. with 36.3% market share – February 6, 2013
• Canalys: Apple continues reign as #1 PC maker; grabbed over 20% share of market for first time in Q412 – February 6, 2013
• Apple’s iPad dominates tablets with 81% Web usage share; Amazon Kindle Fire distant 2nd with 7.7% – February 6, 2013

Ablan and Gupta report, “Analysts have expected stockholder pressure to increase as Apple’s share price declines and its outlook grows murkier. Stock in the company that once seemingly could do no wrong has fallen 35 percent since its September record high through Wednesday. It ended Thursday 3 percent higher at $468.22. Einhorn, often cited as one of the most committed Apple bulls, remains long on its shares. But the fund manager, whose Greenlight had a sub-par year in large part because of Apple’s late-2012 stock swoon, said the company needs to fix its ‘cash problem.'”

“In an interview with Reuters, Einhorn said he had gone to Apple CEO Tim Cook in recent weeks after the company’s chief financial officer, Peter Oppenheimer, brushed off his entreaties in September. Cook, who is rarely known to engage investors in exclusive conversations, was unaware of the earlier conversations with Oppenheimer, according to Einhorn,” Ablan and Gupta report. “‘When I discussed this with Tim Cook, and actually, the conversation has been going on for the last couple of weeks, he said that he wasn’t familiar with my previous conversations with Peter Oppenheimer and whoever Peter Oppenheimer’s advisers were. I was surprised by that,’ Einhorn told Reuters.”

MacDailyNews Take: If true, Apple needs to improve their internal communications; these are things Cook needs to know about.

Ablan and Gupta report, “Oral arguments between Apple and Einhorn have been set for Feb. 22 in U.S. District Court for the Southern District of New York. Apple has until Feb. 15 to respond to Greenlight’s suit, after which Einhorn has until Feb. 18 to reply.”

“Einhorn has a history of activism, usually directed at struggling companies or those grappling with management issues. In 2011, he urged Microsoft Corp to get rid of Chief Executive Steve Ballmer, accusing him of being “stuck in the past.” Einhorn slashed his stake in the software giant six months later,” Ablan and Gupta report. “‘You could see Einhorn stirring up other activist investors, to twist them. I would certainly applaud their efforts,’ said Tim Lesko, portfolio manager at Granite Investment Advisors, which owns Apple stock.”

Much more – and even if Reuters is confused enough to think that market (unit) share is the end all be all, recommended – in the full article here.

Related articles:
Gamco’s Haverty: Apple’s cash is ‘shareholders’ cash’ (with video) – February 8, 2013
Apple shares surge following company response to Einhorn – February 7, 2013
Greenlight’s Einhorn sues Apple over plan to eliminate preferred stock, wants more cash distributed – February 7, 2013
Greenlight Capital urges Apple shareholders to vote ‘No’ on proposal 2 that would impede Apple’s ability to unlock shareholder value – February 7, 2013
Greenlight’s Einhorn sues Apple, ‘dissatisfied with capital allocation strategy’ – February 7, 2013
Gamco’s Haverty: Apple board can be sued over excessive accumulation of cash (with video) – January 28, 2013
Greenlight’s Einhorn: Apple ‘the best big growth company’; Fed stimulus ‘counterproductive’ – July 10, 2012
David Einhorn says Apple isn’t a below-average company, it’s just priced like one – May 30, 2012

16 Comments

    1. While in general I HATE lawsuits, I’d join that suit against Einhorn. He’s causing Apple to spend money to defend a frivolous suit. He is actively doing the opposite of what he claims he is doing. He’s LOWERING shareholder “value” due to the waste of Apple money to defend against his asinine suit.

  1. Apple could SPEND some of that money on a few things:

    1- Update Pages, Keynote and Numbers on Mac OS X.
    If they wanted to be really aggressive, they could release versions for Windows and LINUX as well. The blood could be in the water for Office.

    2- Clean up the Mac App Store. Discovery is lame.

    3- Clean up iTunes Store. Books, Audiobooks, Music, Newspapers, Magazines, Movies, TV and Podcasts all in one overwhelmed iTunes window?

    4- Where is an Apple Books app for Mac? If Amazon can release a Kindle for Mac and Cloud reader, why can’t Apple?

    5- Where is iTunes U for Mac? With Coursera, edX, Udacity and other Higher Ed online efforts gaining traction, where is Apple? This could be huge money down the road if Apple can make courses online pay.

    6- Logic Pro needs some developer love. It is way past time. Update it ir sell it.

    All listed above should be a drop in the bucket of what Apple has banked. There are also plenty of people looking for a job with the chops to do the SW development.

    7- Apple could drop some coin strategically to roll out xCode and Object C instruction at universities to help develop the next generation of developers. A little money could go a very long way. Lots of Windows oriented courses out there- not so many for iOS and Mac OS X.

    8- Get busy on Telematics. Why hand the market over to Windows Embedded?

    That should still leave truckloads of money for people to bitch and sue about.

    1. “7- Apple could drop some coin strategically to roll out xCode and Object C instruction at universities to help develop the next generation of developers. A little money could go a very long way. Lots of Windows oriented courses out there- not so many for iOS and Mac OS X.”
      Some good ideas but this was my favorite.

  2. “the world’s largest technology company grapples with…mounting competition in the smartphone and tablet markets and concerns about its ability to produce new breakthrough products,”

    An excellent example of lazy, cheap, headline grabbing, yellow journalism.

    The ONLY handset and tablet competition facing Apple is Samsung and it is in a distant #2 position. All others are well positioned to disappear within two years. The only production problem Apple has is satisfying demand.

  3. I suspect this lawsuit is largely a PR stunt to change the media obsession with Apple’s “downfall” to an obsession over Apple’s huge pile of cash. And, it worked like a charm.

    1. If only Apple’s PR department was allowed to really do something. But you are correct CW, atention has shifted from Apple shares dropping like a rock to the huge pile of cash just sitting there gathering dust. And that’s a good thing. Shares have responded a little bit. There’s a Goldman Sachs conference next week which should be interesting. I wouldn’t sell now. Things might pick up a little bit?

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.