[Apple’s Expansive Cupertino Campus]
Already engaged in a long runningÂ fight to oust Dell’s leadership based on his belief thatÂ CEO Michael Dell’s stock buyback plan amounts to a “theft” from shareholders,Â activist investor Carl Icahn announced via TwitterÂ on Tuesday that he had purchased $1.5 billion in Apple stock. Although, significant due to Mr. Icahn’s stature,Â the investment represent less than 1% of Apple’s overallÂ market capitalization of $450 billion. Apple shares rose 5% on the news indicating many investors agree with Icahn that Apple is both seriously undervaluedÂ and has more than enough cash on hand toÂ perform a substantial buyback using borrowed fundsÂ that the company could acquire at a particularly low interest rate. In other words, when it comes to Apple, at least, a buyback is anything but “theft…”
The Wall Street Journal quoted Mr. Icahn’s explanation: “‘This is a no-brainer to go buy stock in a company that can go borrow’ at a low rate, Mr. Icahn said in an interview. ‘Buy the company here and even without earnings growth, we think it ought to be worth $625,’ he said, referring to the stock price, which closed Tuesday at $489.57 . . .”
I’ll be watching closely for any signsÂ as toÂ how Apple views the situation internally and whether this will end up becoming a Dell-style fight in which Mr. Icahn acquires additional shares (and/or collaborates with like-minded investors) or if the parties end up in agreement. Either way, whether it’s rumors about impending product announcementsÂ or prognostications about the health of the company during its post Steve Jobs era, more or less ANY news about Apple continues to fascinate.
And one additional question: given the increasing competition Apple is currently facing both from Google and Samsung, wouldn’t you think at least a somewhat significantÂ portion of those cash reserves should be going into R&D? That doesn’t mean Icahn isÂ wrong as the company could obviously do both. But so far, the conservatism has been rather striking.