Apple should not bow to Carl Icahn

“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.

Related articles:
Carl Icahn says firm now has $2 billion in Apple shares; another meeting with Apple in 3 weeks – October 1, 2013
Carl Icahn demands $150 billion from Apple – October 1, 2013
Will Carl Icahn pick a fight with Apple? – October 1, 2013
Tim Cook to meet with Carl Icahn on Monday in New York City – September 26, 2013
Carl Icahn scoops up Apple stock on post-iPhone event plummet – September 13, 2013
Carl Icahn buys ‘quite a bit more’ Apple shares following unveiling of iPhone 5s and iPhone 5c – September 11, 2013
Carl Icahn’s ulterior motive: To get Apple to buy Nuance – September 3, 2013
Carl Icahn to dine, discuss buybacks with Apple CEO Cook in September – August 22, 2013
Icahn to meet with Apple CEO Tim Cook in September – August 22, 2013

35 Comments

    1. 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!

    1. 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 🙂

  1. 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.

    1. 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.

  2. 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.

  3. 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.

    1. 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.

  4. 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.

  5. 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.

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