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back to article 'Depression-era grandma' Apple responds to bolshy investor

Apple has taken the unusual step of publicly responding to a complaint from a shareholder who compared the company to his cash-hoarding grandmother. David Einhorn, president of Greenlight Capital, said that Apple Inc had a "depression era" attitude to cash that reminded him of his grandmother who refused to leave voicemail …

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  1. Anonymous Coward
    Paris Hilton

    War chest

    I assume they have a "never again" attitude that means they want to have a very large war chest/reserve of cash. But still no reason to hoard it and not pass some down to the shareholders.

    Paris because although she's minted, she shares it around.

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    1. Anonymous Coward
      Reply Icon
      Anonymous Coward

      Re: War chest

      Depends if people bought shares for the dividends, or bought them because they hoped they would rise in value. Much of the mainstream business press has been attributing the recent fluctuations in Apples share price as being the result of shares moving from one type of investor to another- i.e, some analysts think that Apple's shares can't rise in value much more, but they will continue to make a handsome profit for the next few years at least.

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    2. fandom
      Reply Icon

      Re: War chest

      They are paying a dividend next week.

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  2. Anonymous Coward
    Anonymous Coward

    Apple will want to keep the cash to save face.

    It might be another 20 years before being able to earn such amounts again, and that donut ain't going to be cheap.

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    1. Dave 126 Silver badge
      Reply Icon

      It is inevitable that fortunes rise and fall... but if there is a future technology that Apple can harness for future profits (as they have shown they can in the past), they might have to ride out a few years on their savings to get there. It is akin to what biologists call a small valley in the fitness landscape, before ascending the next peak. It is better to make your moves from a position of strength- Apple waited until screen, battery and CPU tech had advanced to the point that a mass-market tablet was practical, whereas MS had jumped the gun with XP Tablet Edition some years before (though it always had some niche users- my car mechanic has used touch-screen Windows PCs for years, an increasing part of his job is interrogating the car's systems. )

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  3. Dave 126 Silver badge

    From http://www.bbc.co.uk/news/business-21377915

    Mr Einhorn has a history of activism.

    In 2011, he urged Microsoft Corp to get rid of its chief executive Steve Ballmer, accusing him of being "stuck in the past".

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    1. The FunkeyGibbon
      Reply Icon

      That worked well. Maybe it should say "Mr Einhorn has a history of unsuccessful activism."

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      1. Anonymous Coward
        Reply Icon
        Anonymous Coward

        "Mr Einhorn has a history of being right."

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  4. Thomas Wolf

    Einhorn's Ulterior Motif

    I think Mr. Einhorn doesn't care about "unlocking value" for shareholders - he just cares about unlocking value for himself! He/his fund has quite a bit of money invested in Apple since 2010. Although I'm sure his fund still made a handsome profit when looked at over the entire period (there was LOTS OF shareholder value unlocking until October of last year), he's just unhappy that his holdings have tanked since late last year.

    Two things to ask Mr. Einhorn:

    1) if he doesn't think Apple is unlocking enough value, why does he invest in the company? Nobody's forcing him to do so! When you buy stock in a company, you must agree with the way the company is managed - after all, if you didn't, why would you invest in the company? (unless, of course, you're not an investor but a "trader" in it for the short term). Apple's management has been very consistent in the way it treats its cash. They've been "hoarding" it for years!

    2) Why should Apple create a preferred stock that has a 4% yield, vs. declaring a one-time dividend? The answer is that he wants to see a "pop" in the stock that is more probable with a preferred stock than with a dividend declaration. Also, as one analyst rightly explained: Apple is not very likely to declare a preferred stock - it would commit it, essentially forever, to pay the yield on it. Apple, by nature, is a cyclical company - if it hits a rough patch, paying this preferred stock yield may not be desirable.

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    1. Dave 126 Silver badge
      Reply Icon

      Re: Einhorn's Ulterior Motif

      >When you buy stock in a company, you must agree with the way the company is managed

      Unless you are buying stock to influence how the company is managed. Still, Apple, seemed to be okay before he invested in them.

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    2. Anonymous Coward
      Reply Icon
      Anonymous Coward

      Re: Einhorn's Ulterior Motif

      "When you buy stock in a company, you must agree with the way the company is managed"

      WHAT !

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      1. Chemist
        Reply Icon

        Re: Einhorn's Ulterior Motif

        ""When you buy stock in a company, you must agree with the way the company is managed""

        When you own stock you own a share of the company. If you have enough stock or supporters then you are fully entitled to change the way the company is managed. That's why shareholders can vote.

        Indeed if a company can't see any future in what it does it's the duty of the directors to return as much value to the shareholders as they can. One of the reasons for taking a company private is to avoid shareholder involvement, although like Dell you might end-up in regretting that.

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        1. Thomas Wolf
          Reply Icon

          Re: Einhorn's Ulterior Motif

          That is correct - you own shares and you can vote your shares to make your wishes known. However, that's not what Mr. Einhorn is doing: he's trying to influence how other share owners vote by putting out his version of the facts. He is bound to find a bunch of share holders which believe his version of reality and vote his way.

          It's like voting in the US - the two parties spew whatever it takes to convince voters - relying on the huddled, unwashed masses being pretty ignorant and believing whoever has the loudest voice. And it usually works. Same thing with Mr. Einhorn - he has a loud megaphone.

          You say "if a company can't see any future....it's the duty of the directories to return value to shareholders". Well, that's a very subjective statement. How do YOU know (or Mr. Einhorn) that Apple can't see a future? How does Mr. Einhorn know what is good for the long-term prospects of AAPL, given that he - as an outsider - doesn't have access to the same information as AAPLs executive?

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          1. Chemist
            Reply Icon

            Re: Einhorn's Ulterior Motif

            "He is bound to find a bunch of share holders which believe his version of reality and vote his way."

            That's the way companies work. If other shareholders are stupid enough to not check what he's saying then they deserve all they get. Generally large shareholders are NOT stupid and can employ people to check.

            I wasn't thinking specifically of this case when I discussed returning shareholder value but in general it's true with the caveat that the shareholders would have to vote for the dissolution/merger/takeover of the company.

            I've no idea of the motives of Einhorn, I'm just taking exception to the idea that shareholders have to accept what THEIR board of directors says. It isn't so. Remember the directors work for the shareholders. If I own part of a company and the directors either make a mess or merely collect a cash pile that they might be using to grow the business it's MY investment that is affected ( and of course the workers)

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    3. Anonymous Coward
      Reply Icon
      Anonymous Coward

      Re: Einhorn's Ulterior Motif

      > Einhorn's Ulterior Motif

      That would be his hidden tattoo then?

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      1. Thomas Wolf
        Reply Icon
        Happy

        Re: Einhorn's Ulterior Motif

        Hey, cut me some slack - English is my second language :-)

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    4. Keep Refrigerated
      Reply Icon
      Angel

      Re: Einhorn's Ulterior Motif

      "When you buy stock in a company, you must agree with the way that stock is managed"

      TFTFY. Overall though I agree with your sentiment.

      What makes me laugh is that if Apple is the depression-era grandma hoarding her cash, that must make Einhorn a greedy distant relative trying to convince her to change the will, no?

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  5. The FunkeyGibbon
    Joke

    $137 BEEELLION?

    Wow with that kinda dough they could, y'know, develop some new products...

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    1. Armando 123
      Reply Icon
      Coat

      Re: $137 BEEELLION?

      Or fund the US government for a week ...

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      1. Euripides Pants
        Reply Icon
        Thumb Down

        Re: $137 BEEELLION?

        No! Do not fund the US government, it only encourages them.

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    2. Nigel Hamlin
      Reply Icon
      WTF?

      Re: $137 BEEELLION?

      Seems unfortunate to me that there's been so little response to the whole concept of using the cash to develop more of those "insanely great" products - just like the ones that created the current cash hoard!

      I'd go a bit further and suggest that they use some of that cash to get their software developers better trained and enable them to churn out much better quality code. Too much of their software, lately, is showing signs of inadequate testing and compromised functionality. The worst aspect though is the overall design of the GUI aspects of their systems, that of iOS being (IMHO, of course) particularly dire.

      I don't wanna seem churlish here. Apple's software remains up there with the best there is in its market sector. But that's no excuse for them not to do better - which they undoubtedly could, if they put in the effort. As it is today, though, if the hardware design and production quality were to be assigned an arbitrary "10", then the software, overall, wouldn't deserve more than a "5". So, let's have them spend money to bring about some true software excellence - if done right, it would enable them to completely dunk the competition as well as facilitate the creation of more world-changing products!

      The only downside would be that then they'll make EVEN MORE CASH, after which we'll all be back here, having the same discussions all over again........... ;-)

      Oh, and one more thought: why doesn't Apple just concentrate it's buying back of shares on Einhorn's holding? He clearly doesn't really want them!

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      1. Anonymous Coward
        Reply Icon
        Anonymous Coward

        Re: $137 BEEELLION?

        the mythical man month.

        Not all problems can be solved by the application of money. Many would argue that money becomes somewhat irrelevant beyond a certain point.

        There is a maximum amount of a given resource (money being just one) that you can throw at a problem and expect a positive return.

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  6. Steve Davies 3 Silver badge
    Thumb Down

    Typical Americans: Sue first, think later

    Questions like this should have been aired firstly at the AGM. Then and only then should the shareholder even think of legal action.

    Tabling something like this at an AGM would allow the questioner to gauge the general support amongst the other major shareholders of their cause.

    Pah, he must be a lawyer then:)

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    1. Steve Knox
      Reply Icon
      Trollface

      Typical Brits: Preferring Process over Progress

      Questions like this should have been aired firstly at the AGM. Then and only then should the shareholder even think of legal action.

      This presumes that

      a) the shareholder's goal is actually to effect the change he is espousing,

      b) the shareholder believes that said change is for the good of the company and/or shareholders, and

      c) the shareholder believes that he can convince a significant number of other shareholders of the value of the change.

      If any of the 3 above are untrue, then waiting to air this at an AGM is a waste of time. There is ample evidence in the article that at least one of the above is in fact not true.

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  7. Anonymous Coward
    Anonymous Coward

    Would you buy a used car from this man?

    He's just another greedy self serving WS dork who wants money NOW, bitch!

    Move along, nothing to see here ...

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  8. Andrew Moore
    Gimp

    Alternative title:

    Rich Man Demands More Money.

    "Apple haz the money and I wants it"

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    1. Lars Silver badge
      Reply Icon
      Coat

      Re: Alternative title:

      It took Microsoft many many years before they started to pay any dividend (and not much at all). The same seems to apply to Apple. When the value of the shares are down you have to pay some dividends, no matter how disgusting it is.

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      1. Yet Another Anonymous coward Silver badge
        Reply Icon

        Re: Alternative title:

        >When the value of the shares are down you have to pay some dividends, no matter how disgusting it is

        Or you use your cash to buy those shares cheap

        Paying dividends says to the market "we can't think of anything productive to do with this money - so we are giving it back to the shareholders so they can invest it somewhere else"

        If you are a utility or a life insurance company that makes sense - it normally marks the beginning of the end for a tech company.

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    2. Arctic fox
      Reply Icon
      Trollface

      Re: ""Apple haz the money and I wants it""

      Well he is after all a shareholder. In other words a proportion (related to the size of his shareholding) is in fact his. If he does not like the way the company is handling this he is at least entitled to say so. Now, of course he may simply be a greedy bastard who wants his now and fuck everybody else. However, he is as an owner entitled to express his opinion, hmm?

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      1. Thomas Wolf
        Reply Icon

        Re: ""Apple haz the money and I wants it""

        Yes, he's entitled to make his opinion known. He can even vote his shares based on his convictions. Better yet, he can sell his shares (in which he would get "his share" of the cash back - since that's part of the value of each share). What I object to is that he's is high profile and gets to blast out his version of reality - which may or may not reflect the truth (one of the statements he made - that the proposal he's telling people to tell no to - has already been declared by Apple to be false).

        Every share holder - even Mr. Einhorn - can vote with their feet. Suing and making public statements to further ones own goals is not right.

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        1. Oninoshiko
          Reply Icon

          Re: ""Apple haz the money and I wants it""

          "What I object to is that he's is high profile and gets to blast out his version of reality."

          Free speech is a bitch like that.

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        2. Arctic fox
          Reply Icon
          Headmaster

          @Thomas Wolf Re: "What I object to is that he's is high profile and...................

          ..................gets to blast out his version of reality".

          I think that as far as that goes it is a part of society today. Look at how many celebs exploit their fame in one area to mouth off in another (a certain well known comedy actor's love for A Certain Famous Mobile Phone Manufacturer comes to mind) whether they know fuck about what they are talking about or not. As to the issue of suing I have to say that if he believes that the company is failing in its duty to its shareholders then the judicial route is not necessarily illegitimate - although I am no admirer of that approach. If we are saying that if he does not like it then the only legitimate option he has is to sell and fuck off, what sort of "ownership" is that? I make these points on general principle - I take no position on whether his complaints in this instance hold water or not.

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        3. Naughtyhorse
          Reply Icon

          Re: ""Apple haz the money and I wants it""

          Can he really sell, with the shares down 37%from their peak value, and it's a bit hard to see that changing much in the future.

          I daresay HE has shareholders to answer to in turn.

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  9. Anonymous Coward
    Anonymous Coward

    I wonder if Apple will follow Dell?

    Investors seem at best a pain in arse and at worst counter productive to long term, sustainable growth. And then there's the quarterly Wall Street madness where anything but quarter on quarter, unlimited meteoric growth, is absolutely unacceptable and sends the share prices tumbling (for many businesses, meaning a cull).

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    1. Lars Silver badge
      Reply Icon
      Pint

      Re: I wonder if Apple will follow Dell?

      And who would be the guy who would manage to take Apple private now. No body. It's much to big for that.

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  10. Richard Jones 1
    Happy

    Too Many Fools Destroy Cash Values

    A few years back it was all the vogue to prudently manage, i.e. horde cash mountains, it was mainly done by older operators who had built up the company. Then the younger prats came along and blew the lot on stupid special dividends , daft risky purchases of failing or otherwise useless companies. So the once proud company failed, the only growth about town was unemployment.

    Now I hate Apple and think that are a loud mouthed of fashionistas selling over priced rubbish - personal feeling you do not have to agree with me. However, the one thing that I can agree with is for Apple to keep their cash and let Einhorn's mistake ride, up or down. No one forced him to invest, he knew the company so more power to their treasury function.

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    1. Naughtyhorse
      Reply Icon

      Re: Too Many Fools Destroy Cash Values

      now! you leave mitt romney alone! he's already lost.

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  11. Zot
    Trollface

    They're saving up to pay solicitor fees!

    ...and the patent office loves them to bits of course: "You've want a patent for the colour 'mirror-black' and a shop with west facing tables? - sure, just throw some money at us... done.

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  12. Anonymous Coward
    Anonymous Coward

    There is, of course, another possible action

    As far as I know, if Einhorn disagrees with management he can also just sell his shares..

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  13. Anonymous Coward
    Anonymous Coward

    Apple are loathe to pay dividends, because it would mean onshoring their mahoosive offshore pot of money, and thus paying taxes on it.

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    1. gisabsr
      Reply Icon

      Ah, that explains why they began paying dividends in 2012 - twice, in fact. Next round is due on the 11th.

      You know, unlike Google.

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  14. Alan Denman

    Apple struck oil and are simply hanging onto it all for dear life.

    Now is that Vampire policy helping grind the world to a halt?

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  15. J.G.Harston Silver badge

    I grew up in the 1980s. That taught me to horde resources or starve. Future existence is predicated on present actions.

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  16. sugerbear

    Mr Einhorn is correct

    He is spot on.

    Apple are under the impression that they can utilise the 100+ billion they have in reserve better than the investor (who own the company) can. The board of the company work for the investors.

    if Apple need cash to purchase something in the future they can quite easily borrow from either their investors or a bank.

    Mr Einhorn is saying is that he and other investors can better utilise the captial that Apple have sitting in their bank account. They want Apple to return that captial to the shareholders in the form of new shares of dividends.

    He is spot on. Any company that has captial that is just sitting there doing nothing year after year is doing a diservice to their investors.

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  17. Henry Wertz 1 Gold badge

    What can I say?

    What can I say? Apple has not made it a habit to pay dividends, and no matter how much money they have I would not buy their stock in the expectation of dividends. They aren't required to pay them, and you aren't required to buy their stock. You're certainly allowed to complain about lack of dividends, but here I am playing the world's smallest violin as you do so.

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  18. Tex Arcana
    Mushroom

    Rotten Apple

    They have ceased to be relevant. With Dead Steve Jobs only communicating via ouija board, the rest of the company is slowly (or not so slowly, considering the lame iPwn5) sinking back into the mediocrity and borderline fail they were before the iPwns became the smash hits they were.

    They've failed investors and consumers, because Jobs was able to think FORWARD, take bold chances, and was smart enough and driven enough to force the point through. If it weren't for the iPwn (which was a MAJOR risk in and of itself), Apple would be less than nothing these days.

    But it was Jobs that made it happen, because he saw the future, and what he needed to do to make it happen (and to shape that future): convince EVERYONE that was the path they needed, that they needed to become a technology leader, instead of follower.

    And they did. And they blazed a path big, bright, and wide, that created an entire industry of real, workable smartphones. And they are the de facto standard now.

    Jobs dies. Apple starts to rot. iPwn5 is a flop. Apple becomes a chicken little follower. Everyone else takes the lead, the risks, and begin to redefine the genre with their products, instead of the other way around.

    SO now, Apple risks failing, yet again; and this is why they are hoarding their cash: the execs see the writing on the wall, they're too scared to take any risks, they can't see beyond their next bonuses, so they huddle in their little boardrooms, plotting how to swipe all that cash, and put it into their own pockets, and eventually turn Apple into the next Hostess, where they rape the company of all its cash, then break it up and sell it into obscurity.

    The only way that's not going to happen is if they get someone at the helm with vision and foresight, who can be bold and blaze a trail yet again.

    I guess they better start digging, their only hope is Dead Zombie Steve Jobs!!!

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