Icahn published an open letter to Apple CEO Tim Cook on Thursday asking the company to speed up its share buyback program because Apple is “dramatically undervalued,” according to his analysis. If Apple takes advantage of its low stock price (lower than what Icahn expects it to be in the future) to buy back shares, investors who hold on to their stock stand to reap huge benefits when the market decides Apple’s worth more – way more.
“The more shares purchased now, the more each remaining shareholder will benefit from that earnings growth,” he wrote.
Icahn owns about 53 million shares of Apple stock but said in the letter that he would hold on to his shares to “preemptively diffuse any cynical criticism”.
Why this matters: Icahn has strongly encouraged Apple to buy back shares since first revealing his stake in the company last August – and it seems like the company takes notice when he speaks. After Icahn urged the company to buy back shares earlier this year, Apple bought back US$14 billion worth. Icahn’s advice comes from a strong belief in the company and where it’s heading. In his letter, he compared Apple to Secretariat and Google to an also-ran in the race for global domination.
There are some other gems in Icahn’s letter, including his wish for Apple to produce in 4K TV in 2016. He even throws out some expected sales figures: 12 million 55in and 65in TVs in fiscal year 2016 and 25 million in 2017 at the suggested selling price of US$1500. Of course, Apple might not want to get into the TV business, but Icahn thinks television “represents a large opportunity for Apple”.
And while they’re at it, the billionaire suggests that maybe Apple could make a larger iPad with a keyboard/mouse (à la Microsft’s Surface) to tap into the sub-US$1000 laptop market.
So Icahn has a lot of ideas, but he doesn’t think Tim Cook is doing a poor job of running the company.
“To be totally clear, this letter is in no way intended as a criticism of you as CEO, nor is it intended to be critical of anything you or your team are doing from an operational perspective at Apple,” Icahn said. “Quite to the contrary, we could not be more supportive of you and your team, and of the excellent work being done at Apple, a company that continues to change the world through technological innovation.”
Apple already has a response to Icahn’s letter via CBNC. (Unfortunately, Tim Cook didn’t go the open letter route himself.)
“We always appreciate hearing from our shareholders,” the company said in a statement. “Since 2013, we’ve been aggressively executing the largest capital return program in corporate history. As we’ve said before, we will review the program annually and take into account the input from all of our shareholders.”