Apple Inc. (NASDAQ:AAPL) is once again in the hot seat with a billionaire investor who wants the company to increase its share buyback plan. This time around though, the company is locking horns with Carl Icahn. He’s historically been less nice to some companies than David Einhorn, who started pushing Apple (privately first, then publicly) for a similar program almost a year ago.
Blodget calls for Apple to tell Icahn to “stuff it”
Icahn tweeted earlier this week that he had met with Apple Inc. (NASDAQ:AAPL) CEO Tim Cook to push for a $150 billion share buyback program. On CNBC this week, Business Insider CEO and Editor-in-Chief Henry Blodget said he thinks the company should just tell Icahn to “stuff it.”
Icahn noted that when he met with Cook, the conversation turned “a little testy.” Gee, I wonder why.
Blodget says normally he’s “a big fan of Carl Icahn,” noting that the activist investor has helped turn several loser companies around. He also says Icahn is very entertaining. But he doesn’t think Icahn is right about Apple.
Apple doesn’t need financial engineering
He notes that Icahn’s plan for Apple Inc. (NASDAQ:AAPL) to borrow money and buy back $150 billion in shares is nothing more than financial engineering. He believes that although such a share buyback plan might prop up the company’s stock for a time, it won’t last. He says the company has “much better things to do than waste its time on short-term financial engineering moves just to please a grasshopper-like investor like Carl Icahn.”
Blodget points out that Apple Inc. (NASDAQ:AAPL) has already been returning a lot to shareholders by focusing on making the products which make it great. He believes that the company’s shareholders will be just fine if the company keeps doing what it does best. After all, the result will be some hefty dividends thanks to all of the devices it sells.
What Apple’s “actual investors” would be left with
He believes that once Icahn gets his way, the activist investor will simply dump all of his shares, leaving Apple Inc. (NASDAQ:AAPL) with a mountain of debt, less cash and less flexibility. This is certainly a challenging time for the tech industry, and he doesn’t see such a scenario turning out well. He sees it turning out well only for Icahn and other short-term investors just riding the wave of the company’s stock. For long-term investors like himself, it doesn’t end well.
Blodget does agree that Apple should return more cash to shareholders through dividends and using more cash flow to buy back shares rather than incurring debt. However, he emphasizes that the company should reward long-term shareholders rather than those who, like Icahn, just want to get in for a short while and then dump their shares to turn a profit. Also he notes that Icahn isn’t even in Apple Inc. (NASDAQ:AAPL)’s top 20 shareholders, so why should the company be listening to him in the first place?