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Icahn urges ‘undervalued’ Apple to increase buyback

APPLE’S ‘BUDDY’:The activist investor said that Apple should buy back as much as US$100 billion in stock, as he urged other investors to also press for a repurchase

Reuters

Billionaire activist investor Carl Icahn said Apple Inc’s shares could double in value and urged the company’s board to buy back more shares using its US$133 billion cash pile.

“We believe Apple is dramatically undervalued in today’s market, and the more shares repurchased now, the more each remaining shareholder will benefit,” Icahn said in a letter to Apple’s board released on Thursday.

Icahn, who pledged to keep his own stock out of any repurchase, said Apple stock should be trading at US$203.

“At today’s price, Apple is one of the best investments we have ever seen from a risk reward perspective, and the size of our position is a testament to this. This investment represents the largest position in our investment history,” Icahn wrote.

In an interview on Thursday on CNBC, Icahn urged Apple to buy back as much as US$100 billion in stock and said he hoped other investors would also press for a buyback.

In June, the company split its stock seven for one, and in April it raised its share repurchase authorization to US$90 billion from the US$60 billion announced a year earlier.

Apple shares rose 0.2 percent to close at US$101.02 on Thursday. The stock has gained 25 percent since January.

Owning 53 million shares, Icahn ranks as one of the iPhone maker’s top 10 investors and has long urged the company to buy back more shares and raise its dividend.

In his letter he said he expects the Apple Watch, the company’s first new product category since the iPad in 2010, to boost the company’s growth.

He added that television represents a large opportunity for the company.

Icahn, 78, is one of the world’s most vocal and influential investors, and he has successfully pushed for change at auto rental company Hertz and e-commerce company eBay.

Although he has run his fair share of proxy contests and sat on many boards, Icahn told CNBC he has no plans to try to replace board members at Apple. He also said he would never run a proxy contest and will always be Apple’s “buddy.”

Apple has long signaled it will not be pressured into making hasty decisions. On Thursday, spokeswoman Kristin Huguet declined to comment directly on Icahn’s letter, but said: “We always appreciate hearing from our shareholders.”

Stifel analyst Aaron Rakers, who has a buy on Apple, wrote in reaction to Icahn’s letter that “Apple clearly has an excessive cash and investment balance.”

Apple is poised to take market share from Google Inc’s Android platform in the premium device market and Icahn forecast the company’s earnings would grow 44 percent in fiscal year 2015.

“We think a tender offer is simply a good method of conducting a large repurchase in an expedited time frame, but the exact method and the exact size is not the key issue for us,” he said.

Icahn, who has been tweeting his opinions about investment strategy, earlier this week said he planned to publicize investment ideas on Facebook and other social media sites in addition to Twitter. That does not sit well with some investors.

Influential hedge fund manager Leon Cooperman, who owns Apple shares, suggested on CNBC that private discussions might be more appropriate.

However, Icahn said investors can push for change more effectively in public instead of just whispering into a chief executive’s ear.

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