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David Einhorn Was Right About Apple

NEW YORK (TheStreet) -- It's official, David Einhorn of hedge fund Greenlight Capital Management was right to set off a debate about Apple's growing cash stockpile in late 2012 and early 2013. That may prove helpful as others like Carl Icahn take a more prominent role in challenging Apple's capital planning.

For those who may have forgotten, Einhorn emerged as Apple's most vocal investor in criticizing the company's capital structure after it unveiled a three-year $45 billion plan to return cash to investors by way of dividends and share buybacks.

Less than two years later, the company's total domestic and international cash stockpile has increased by about $48 billion. That comes as the iPhone and iPad maker has also returned $43 billion in cash to shareholders through dividends and share repurchases.

If Apple had stuck with its initial plan to send $45 billion back to shareholders, the program would be nearly complete and an almost unprecedented flood of cash would be poised to gush into the company's bank account over the next few quarters.

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After all, Apple generated $22.7 billion in cash flow from operations and a net profit of $13 billion in the first quarter alone.

Thankfully for Apple shareholders, a year later the company decided to more than double its capital return, upping the three-year capital return plan to $100 billion after a public spat with Einhorn and Greenlight Capital. Einhorn labeled his plan an "iPref" and advised the company to finance its stock buyback and dividend activity.

Still, the pace of Apple's buyback and dividend activity may remain insufficient for shareholders. Apple, for its part, celebrated the amount of cash it has returned to investors on Monday.

"We generated $22.7 billion in cash flow from operations and returned an additional $7.7 billion in cash to shareholders through dividends and share repurchases during the December quarter, bringing cumulative payments under our capital return program to over $43 billion," the company's CFO Peter Oppenheimer said in a statement. 

A filing with the Securities and Exchange Commission indicated that Apple paid out $2.7 billion in dividends and repurchased $5 billion in shares in its fiscal first quarter. The company also maintained its quarterly dividend at $3.05 a share.

While Einhorn applauded Apple's increased shareholder return and particularly the company's willingness to do so through a record $17 billion debt financing, other large investors such as Carl Icahn feel the $100 billion plan may not be enough.

That Apple was able to return its initial three-year plan to investors in about seven quarters indicates that the company's capital planning may remain too cautious.

"Apple's existing capital return program has just $37 billion remaining, and the company has until the end of 2015 to complete it. Without any changes to the program, the largest pile of corporate cash in the world is likely to grow even larger, and if the share price rises, this Board will have missed a great opportunity to use more of that hoarded cash to repurchase shares at an attractive value," Carl Icahn said in a recent letter to Apple shareholders.

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