By way of Matthew Yglesias, we learn that corporate raider Carl Icahn wants Apple to spend more of its cash reserve on buying back stock.
I’ve been a long-term Apple shareholder and I think this is a dreadful idea. For me, it was always a long term investment–and by long-term, I mean I got in at eight dollars a share back in the Jobs I era. I stuck with it despite people telling me I should sell because I appreciated Apple’s commitment to the user’s experience. For you young’uns, it might be hard to comprehend, but back in the day, Apple’s OS blew away Windows. So I believed that a company that didn’t see a computer simply as a hard-to-use contraption with tech specs would ultimately, in the long run, do well. Not such a bad prediction. (For the record, I don’t own that many shares, but then again I don’t really have to in order to have a nice little sum).
To return to Yglesias (boldface mine):
These buybacks and rumors of larger buybacks are nice for investors who are getting the chance to cash out, but for users of the products and fans of the platform these are signs of a company failing to invest in its future. Obviously in an ideal world the engineers would come up with some amazing new Greatest Thing Ever invention and the money would all be spent on producing it. But even on a realistic view of ongoing innovation there are more exciting things a company could be doing than share buybacks. Why not just do customers a favor and slash prices? A lot of people wrote stories about OMG! APPLE’S PROFIT MARGINS ARE FALLING last quarter, but their margins are still really high—36 or 37 percent. That’s nice profits if you can get it, but if all you’re going to do with it is return cash to Carl Icahn then it seems to me you lack a certain vision.
…Or build a hyperloop. Or relocate the entire company to a brand new Apple Technology City somewhere in Nebraska. Or double wages for factory workers in China. But really if you want to be boring, cut prices. Returning money to shareholders is a business strategy for an electrical utility. Show some vision.
Ignoring the ‘be bold you wimp!’ Big Swinging Cock language, Yglesias has stumbled across a reasonable point. I wouldn’t cut prices, in part, because I think once there is a perception that Apple is competing on price, not design and user experience, that would actually be very damaging to the brand (and it obviously doesn’t need to cut prices to be profitable).
But do you know what would be dumber than just sitting on the money, until a good idea comes along?
Giving it to Carl Fucking Icahn.
The man was a corporate raider, he is a corporate raider, he will always be a corporate raider. He is the Tetragrammaton of Wall Street avarice. The only thing Icahn is concerned about is Icahn, not the long-term viability of Apple. Whatever someone like Icahn says, it’s usually good advice to do the opposite (and keep your hand on your wallet at all times).
Hopefully, Cook et alia at Cupertino will ignore him.