Bloomberg News

Carl Icahn Discloses ‘Large’ Apple Stake in Buyback Push (3)

August 13, 2013

Billionaire Carl Icahn

Carl Icahn, billionaire investor and chairman of Icahn Enterprises Holdings LP, center, in New York. Photographer: Scott Eells/Bloomberg

Billionaire investor Carl Icahn said he has built up a stake in Apple Inc. (AAPL:US), ramping up the pressure from activist shareholders who want to wring changes out of the world’s most valuable technology company.

“We currently have a large position in Apple. We believe the company to be extremely undervalued,” Icahn wrote in a posting on Twitter Inc.’s website. He added that he spoke to Apple Chief Executive Officer Tim Cook today and discussed his view that a larger stock buyback should be done now. “We plan to speak again shortly,” he said.

Icahn, who has built up positions in other technology companies including Dell Inc. (DELL:US), is making a foray into Apple after the company has already embarked on one of the largest share-buyback programs in history. The move poses a new challenge for CEO Cook, who earlier was forced to respond to investors such as hedge-fund manager David Einhorn who wanted the company to return more cash to shareholders. Apple’s stock has slumped 22 percent over the past year amid investor concerns about slowing growth and whether it can produce new hit products.

The shares (AAPL:US) of the Cupertino, California-based company rose 4.8 percent to $489.57, after earlier jumping as much as 5.8 percent to an intraday high of $494.66, the highest price since Jan. 23.

“We appreciate the interest and investment of all our shareholders,” said Steve Dowling, a spokesman for Apple, in an e-mailed statement. “Tim had a very positive conversation with Mr. Icahn today.”

Icahn’s Stake

The investor’s stake in Apple is more than $1 billion -- or less than a quarter of a percentage point of the company’s $444.8 billion market capitalizaion -- and he accumulated the position over the past month, said a person with knowledge of the purchase who asked not to be named because the investment was made privately. Icahn projects Apple’s stock can rise to more than $600 and considers Cook a good CEO, said the person, adding that the investor prefers a buyback to a dividend.

“They have so much cash and they could borrow money,” Icahn said in an interview. “Even if the earnings and multiple stay the same, the stock value is greatly enhanced by the buyback.”

Apple investors cheered Icahn’s move. With updates to the iPhone and iPad coming this year and other new products expected in 2014, Apple is poised to return to growth, said David Rolfe, chief investment officer at Wedgewood Partners, which manages $5 billion and owns Apple shares.

“Welcome to the undervalued Apple party, Mr. Icahn,” Rolfe said in an interview. “It has been a tough year and a tough time for Apple shareholders.”

New Products

Apple is set to debut a new iPhone on Sept. 10, followed by another unveiling this year of an updated lineup of iPads, according to people with knowledge of the plans.

“We are coming in to the usual Apple product-refresh cycle and there will be rising excitement,” said Michael Obuchowski, an investor with North Shore Asset Management LLC. “He’s getting in close to the low in Apple’s stock price.”

Cook has shown a willingness to meet investor demands. After facing earlier pressure from investors including Einhorn, Apple in April increased its payout and boosted its stock repurchase plan. Last month, the company said it bought back $16 billion from investors last quarter. Apple, which plans to return $100 billion to investors by 2015, had $146.6 billion in cash and investments at the end of June.

Technology Rewards

At Dell, Icahn is opposing founder Michael Dell and Silver Lake Management LLC’s plan to take the computer maker private. He also has stakes in Netflix Inc. (NFLX:US), Nuance Communications Inc. (NUAN:US) and WebMD Health Corp. (WBMD:US), and has previously taken positions and pushed for changes at mobile-phone maker Motorola Inc. and at Web portal Yahoo! Inc. (YHOO:US)

Some of these investments have reaped rewards for Icahn. Netflix stock, which has gained 180 percent so far this year, has given him a profit of more than a $1 billion, he told the Wall Street Journal in May.

In 2011, after Icahn urged Motorola to explore alternatives for its patent portfolio, the company agreed to be acquired by Google Inc. for $12.5 billion, or a 63 percent premium to what the stock was trading at before a deal was announced.

Icahn’s Apple investment shows the increased use of Twitter in the financial world. The billionaire investor said in a recent regulatory filing that he will occasionally use the service to share thoughts. He has previously used Twitter to write about his battle with Dell.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net


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Companies Mentioned

  • AAPL
    (Apple Inc)
    • $524.94 USD
    • 5.93
    • 1.13%
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