Icahn softened his position? Not so much.

There are several reports that Icahn’s recent precatory proposal has “softened” his position on getting Apple to return more money to investors in the form of buybacks. They claim, following a tweet announcing the proposal, that he’s only asking for a $50B increase in Apple’s existing shareholder remuneration plan which represents backing down from his original demand that Apple return $150B to shareholders.

Did he back down?

Or did someone finally get him to do the math? Icahn has consistently claimed Apple should return $150B to investors in the form of stock buy backs, calling Apple’s ongoing shareholder remuneration plan “too small” and “too slow.” If we can trust the media, Icahn was apparently ignorant of Apple’s announced plans as his target figure pretty much encompassed Apples entire cash horde (estimated at $140B) and then some. I don’t see how even Icahn could call returning $100B in dividends and share buy backs by the end of 2015, “too small and too slow.”

Also, up until now, Icahn has conveniently ignored the fact that the lion’s share of Apple’s liquidity is based on foreign earnings. Apple has about $100B of foreign profits that it can’t repatriate without losing around a quarter of it to US tax law. Which is why it made sense for Apple to float a bond issue secured by those foreign profits, in order to return value to investors. And that’s just what Apple did, and it did so at historically low interest rates. All in all, a smart move by Apple.

But to increase the program to a $150B return to investors would mean Apple would have to either float another bond issue, or use the portion of it’s US earnings, on which it has already paid taxes, for the buyback. Neither option is all that attractive. A second bond issue isn’t likely to be as cheap or as well received by investors. And those profits are probably best reserved for acquisitions, research, and yes, even as a rainy day fund should “the next great thing” turn out to be more “write down” than “great.” Innovation is not without risk.

Icahn keeps saying that Apple isn’t a bank. So why does he keep insisting that this kind of financial engineering is what Apple needs to concern itself with? The combination of avarice and ignorance Icahn is displaying isn’t in Apple’s best interest in the long term, or even in the short term.

Apple Event Predictions

First, let start by saying that I have no pipeline into Apple. I have no idea what Apple will announce tomorrow.

With that said, the rumor mill is churning right along and who am I to not play along? Especially since rumors that pop up the day before an event are unusually likely.

So I’m going to make some predictions:

First, Apple will announce new versions of the iPad and IPad Mini.

Still with me? Ok, not very daring, I know. How about this then?

Apple will announce a new smart cover for the new iPad. (This is pretty much a no brainer considering the invitation hint: “We’ve still got a lot to cover.”) It will, as rumored, have an integrated keyboard similar to the Surface keyboard cover.

Now here’s the real Nostradamus: It will only fit the larger of the two new iPads, causing much wailing an gnashing of teeth among owners of previous versions of the iPad.

Yup. You heard it here first.

Stay tuned until after the tomorrow’s event for even more daring, if belated, predictions.

Update: OK so they didn’t come out with a new smart cover with integrated keyboard. So sue me. :)

Apple said to unveil next iPads on the 22nd

It’s fall and the leaves are turning. There’s a snap in the air, and with it… a bumper crop of rumor and speculation of things Apple.

AllthingsD reports that Apple is set to do the fall iPad promotion on the 22nd of October. They have a pretty good record for calling these events before hand, so we can expect to see reports of colorful Apple invites showing up at various media outlets, likely by or before peak leaf peeping season.

The other thing we can expect to see is the perennial cycle of analyst predictions and prognostications. Barclays is getting a jump on things with a breathtaking extrapolation, namely that the 64-bit processor in the iPhone 5s heralds a completely new class of iPad.

As the thinking goes, a larger iPad, 13 inch or so, with more memory (64-bit, remember?) would be a perfect entry into the enterprise for Apple. And if dreams of selling into the enterprise market were not enough to get the juices flowing, we are reminded that such a device would position Apple to compete with the Surface 2 (of all things.) 

Like most analyst fever dreams, this one has a certain appeal to it, if you squint at it from just the right angle. (Here, stand behind this Microsoft engineer and stare real hard…) The fact that Apple is giving away iWorks with the iPhone 5s would seem to support the notion that the company could be ready to do the same with the iPad in order to position it as more than just a consumer item. And just how hard would it be to add a keyboard, anyway? Voila! Instant PC killer!

But here’s the thing. The iPad is already selling into the enterprise. By the millions. Moreover, it’s doing so precisely because it’s not jimmied up to be some kind of ersatz laptop. It’s already a PC killer. More than just a consumer device, it is a content creation device. So much so, that people are forcing enterprise IT departments to support this new class of mobile device at work. Nor are they asking for some kind of Frankensteinian device brought to life by an IT buyer (or Microsoft engineer) who secretly lusts for a 13 inch MacBook Pro. One only has to look to Surface sales numbers to see that.

I’m not saying that I know what Apple is going to announce. Far from it. But any Apple watcher who knows how the company operates is going to be skeptical that Apple thinks there’s a huge gap in it’s product line up that needs to be filled by a Surface-like, also-ran device.

Sadly, Barclays will likely downgrade the stock the moment it becomes apparent that Apple is, yet again, thinking differently.

Carl Ichan’s recent lunch with Tim Cook

Carl Icahn, known as an “activist shareholder,” said he feels very strongly that Apple should be increasing their already huge stock buyback. He wants Apple to more than double their buyback program.

In a telephone interview with CNBC, he talked about a lunch he had with Tim Cook and Peter Oppenheimer, Apple’s CFO. Icahn, who could also be characterized as an institutional gadfly, takes the position in the interview that Apple’s board needs to listen to it’s shareholders. Presumably, by shareholders, he means himself.

This is what you have to understand about Icahn, he doesn’t hold shares of Apple, the consumer company. No, he holds shares of AAPL, a stock listing. Icahn could care less about the company’s health, prospects, or future plans. He couldn’t be less concerned about how many people Apple employs, or whether it is leading American industry. He just wants to see the value of his shares grow. Period.

Well, Mr. Icahn, I’m an Apple shareholder too. But unlike you, I invested in the company, not the stock. I bought Apple stock as soon as I could afford to and, while I have sold some shares to diversify my portfolio, I have owned a very small piece of Apple for over ten years now, and my returns have been more than adequate. Probably better as a percentage of my original investment than any stock buy back would do for you.

I hope that Tim Cook, and the board of Apple, will feel free to ignore Icahn because Icahn’s not invested in the company, he’s only invested in the stock price, in his own greed. Sure, he might file a lawsuit to try and effect the changes he wants, but ultimately I think the majority of Apple’s shareholders understand the difference between investing in a company with a future and a stock with a price.

PS: At one point In the telephone interview, Icahn mistakenly characterizes the current $60B stock buyback program at $16B, which he says is “nothing.”  I think Tim should follow Henry Blodget’s advice. Apple, and its board, are clearly more on top of things than Icahn could ever hope to be.

Friday Dinner