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Carl Icahn Gets What He Wants From Apple


Activist investor Carl Icahn made headlines over the summer when he announced he had a large stake in Apple, calling the stock "extremely undervalued." Since that time, Icahn has asked for a $150 billion buyback, but recently lowered his demand for the size of the buyback.

Apple has already announced plans to return $100 billion in cash to shareholders over the next three years, through dividends and share repurchases, but the company has hinted in recent months that it would revisit this in the calendar first-quarter of 2014. "As we've said in the past, the Board and the Management team will consider a wide range of issues and be thoughtful and deliberate and we will announce any changes to our current (capital return) program in the first part of the new calendar year," Cook said during Apple's most recent earnings call.

With Icahn initially asking for $150 billion in a buyback, many, including myself, felt he was being short-sighted. At a much smaller amount, say an additional $20 billion or so (must be nice to think of $20 billion as small), then it's feasible that Apple could up its buyback program, appease Icahn, and all parties will be happy.

That may be tough to do without raising additional debt, given CFO Peter Oppenheimer has previously said Apple's domestic cash is likely to decline, and has stopped accumulating.
"Finally, given that our capital return program must be funded from domestic cash, and as a result of our payments to date, the cash that we can net domestically and return to shareholders has stopped accumulating," Oppenheimer said on Apple's most recent earnings call.

Ultimately, I think both parties find a way to get a deal done, but at a much lower number than $150 billion.

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