Icahn to Drop Apple Buyback Proposal After ISS ‘No’ Vote

Feb 10, 2014 4:06 pm ET

(Updates with closing share price in second paragraph.)

Feb. 10 (Bloomberg) -- Activist investor Carl Icahn dropped his campaign urging Apple Inc. to buy back $50 billion of stock this year, after the company stepped up repurchases and a proxy- advisory firm criticized his efforts as micromanagement.

The billionaire as recently as last week publicly urged the company to buy back more stock, after saying in December he would seek a shareholder vote to unlock funds held by Cupertino, California-based Apple, which had $159 billion in cash and marketable securities as of Dec. 28. The stock rose 1.8 percent to $528.99 at today’s close in New York.

While Apple co-founder Steve Jobs resisted calls to return cash to shareholders, Chief Executive Officer Tim Cook has shown a willingness to meet investor demands. The iPhone maker bought $14 billion of its own shares after reporting earnings last month, bringing its repurchases to more than $40 billion in the past year -- approaching Icahn’s demand that Apple repurchase $50 billion in shares in fiscal 2014.

“We see no reason to persist with our nonbinding proposal, especially when the company is already so close to fulfilling our requested repurchase target,” Icahn said in a letter to Apple shareholders today. “We are pleased that Tim and the board have exhibited the ‘opportunistic’ and ‘aggressive’ approach to share repurchases that we hoped to instill with our proposal.”

ISS Recommendation

Yesterday, proxy adviser Institutional Shareholder Services Inc. recommended that investors vote against Icahn’s proposal, saying such a motion would micromanage how the company uses capital. Icahn said last month he increased his Apple stake by $500 million to about $3.6 billion.

Last year, Apple also appeased hedge-fund manager David Einhorn by boosting its dividend and increasing buybacks.

“Their behavior towards the Street has changed,” said Peter Karazeris, a senior analyst at Thrivent Financial for Lutherans, which owns Apple shares. “They seem to be more cognizant of things related to their stock.”

Kristin Huguet, a spokeswoman for Apple, declined to comment on Icahn’s letter.

Icahn, 77, first disclosed his Apple stake in a post on microblogging site Twitter Inc. on Aug. 13, when the stock was trading at about $468. The shares gained 11 percent since the disclosure through the close Feb. 7. Icahn became a billionaire by buying stakes in companies and then publicly pushing management and directors for changes to boost the stock.

‘Keep Buying!’

In a tweet on Feb. 7, Icahn urged Apple CEO Cook to continue with the repurchases.

“Keep buying Tim! You still have $145 billion cash,” Icahn wrote.

The call for a larger payout to shareholders comes as Apple’s profit and sales have stagnated after years of growth, in part because of ebbing demand for the iPhone, its top-selling device. Apple last year posted its first profit decline in more than a decade. Last month, the company said revenue this quarter may fall for the first time since 2003.

Icahn and other investors who argue that Apple’s stock is undervalued point to Cook’s comments that the company has new products on the way.

--With assistance from Adam Satariano in San Francisco. Editors: Elizabeth Wollman, Jillian Ward