Icahn Pushes Apple CEO for $150 Billion Share Buyback
Comment of the Day

October 01 2013

Commentary by David Fuller

Icahn Pushes Apple CEO for $150 Billion Share Buyback

Here is the opening from Bloomberg's report
Carl Icahn, who disclosed a $1 billion stake in Apple Inc. (AAPL) in August, said he had dinner with Chief Executive Officer Tim Cook and "pushed hard" for a $150 billion share buyback

Talks will continue in about three weeks, said Icahn, the billionaire activist investor who has made a career of urging companies to adopt changes to boost the value of shareholdings.

While Cook announced a plan this year for a total of $100 billion in dividends and share repurchases, Icahn wants Apple to allocate $150 billion more for buybacks. The iPhone maker, which had $146.6 billion in cash and investments at the end of June, should also focus on boosting profitability to satisfy investors, according to Alex Gauna, an analyst at JMP Securities LLC in San Francisco.

"To justify the valuation on the stock, it's got to get back to earnings growth," said Gauna, who has a market-perform rating on Apple's stock. "They have to be always innovating and putting in place the mechanisms for growth, or it doesn't matter how much cash they return to shareholders."

David Fuller's view If Steve Jobs knew about this push by Carl Icahn and other short-term opportunists he would be rolling in his grave. Yes, many companies have squandered their cash reserves, usually with misjudged takeovers following management changes. Hopefully, Apple will not be tempted to go down that route but it is in an intensely competitive and fast moving industry. Therefore Apple needs to retain dedicated, smart technocrats to ensure a successful long-term future. That is more likely to occur if it maintains very significant cash reserves for product development. Currently, Apple's share price (weekly & daily) appears to be consolidating gains above this year's period of support building, mostly in the $390 to $460 region, prior to a further medium-term rally.

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