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Apple: David Einhorn Responds to Being Labeled a 'Hustler'

After conversing with Einhorn, it's clear that he has well-thought out and well-informed opinions on Apple. He's convinced that Tim Cook runs a software company; that Apple's hardware sells (and provides a lion's share of the company's revenue and profit) because it runs Apple software and the Apple ecosystem. But this view minimizes the design achievements of Apple devices.

Heck, when Apple Maps flopped, everybody wanted a Google Maps app. But they wanted it on their iPhones. It's not like more than a handful of people, if that, said screw this, I'll just switch to Android. Not at all, you keep the Apple hardware to run all sorts of platforms. Sometimes they're Apple platforms; however, quite often, probably more often than not, they're somebody else's, be it Google's (GOOG - Get Report), Netflix's (NFLX - Get Report) or Pandora's (P).

It's a debate I find fascinating. Einhorn and I agreed to disagree on hardware versus software.

On his preferred stock proposal, Einhorn strongly believes Apple has an obligation to return cash to shareholders/allocate its capital differently. He reminded me that he feels the same way about several other companies he called out at last year's Ira Sohn conference. This helps illustrate another major point of departure between the two of us.

The rules other companies should supposedly play by do not apply to Apple. Or at least they should not. When it comes to capital allocation, Einhorn makes a strong argument (even if I don't agree with it), but he and practically everyone else who is on Apple's case falls limp when they say something to the effect of Apple is not successful because it manages its cash well and It will not become unsuccessful if it gives up some of its cash.

That's not the point.

There's clearly a relationship between all of the seemingly disparate parts that make up Apple's otherworldly whole. Chip away at too may of them because, in isolation, you think you're not making change that will disrupt the company's internal culture and competitive dominance and, lo and behold, you end up disrupting the roots of Apple's success.
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