Apple Inc. (NASDAQ:AAPL) launched one of the biggest share buyback drives influenced by many factors, one of which was hedge fund manager David Einhorn. So, has the buyback move changed the feeling of Einhorn towards Apple or does the activist investor still feel the same about the capital allocation policies of the iPhone maker? Answers to some of these questions were given recently by Einhorn in an interview to CNBC.
Conservative Cash management strategy
“I think that that moves Apple’s capital management from a D- to a C or something like that,” said Einhorn. He added that Apple can do something more to unlock additional value, but he does not think that the situation bad enough to complain about.
Apple is following the Steve Jobs-instilled conservative cash management strategy, the activist said, adding that in Steve Jobs’ time, Apple followed the strategy of keeping a strong cushion of cash to wither away adverse conditions. He said that the strategy makes sense and Apple should continue to keep cash so that they can continue with innovation even if the market hits a bad cycle.
Apple different from others
Einhorn said that after seeing the struggles of BlackBerry, Apple’s conservative cash management strategy looks wise. Einhorn said that seeing the valuation of Apple Inc. (NASDAQ:AAPL), people ask if will the company is doomed to the same fate as BlackBerry and Motorola, but he thinks that Apple is a bit different from those companies due to its recurring sales and ecosystem. He said that those who have purchased an iPhone look forward to upgrading to the next version.
“They have over a 90 percent renewal rate on that basis, which is something those other companies never had.”
Apple Continues startup acquisitions
To continue with its innovation drive, Apple Inc. (NASDAQ:AAPL) recently acquired PrimeSense Ltd, an Israel-based developer of chips for three dimensional machine visions for around $350 million. The iPhone maker was interested in the startup from July, according to an Israel-based Calacist news website. Company spokeswoman Kristin Huguet told Reuters via email that Apple keeps on purchasing these small startups and generally does not reveal its purpose or plans.
Before PrimeSense, Apple has bought startups like software navigation companies Embark, HopStop.com, Locationary and WiFiSLAM. Chomp was acquired by Apple Inc. (NASDAQ:AAPL) to upgrade its app store, and Authentec was bought to design the touch ID security last year.