Here’s What Not To Say If Carl Icahn Is Breathing Down Your Neck

Ben Reitzes, Analyst, Barclays: “And I guess there’s been a lot of things in the media about your potential to buy back more stock, and shares are around $500 tonight. I was wondering if you thought this was a good level, and whether it was time to accelerate the buyback from current levels. You obviously generated a ton of cash in the quarter, and what are your latest thoughts there?”

Tim Cook, CEO, Apple: “We’ve been buying back stock. As you know, last year we increased the program overall, our cash return, doubling it to $100 billion. And $60 billion of that is buyback, and we’ve been progressing on that. Luca can give you the precise numbers of it. So we’re a big believer in buying back the stock, and that doesn’t change today, whether the stock goes up or down [emphasis added].”

Apple now has $159 billion of cash. That is $177 per share, versus a share price of $510 per share, so more than 1/3 of the value is in the bank, not within its corporate offices, inventory, retail stores, or supply chain. The core operations are trading at around 9 times earnings, nearly a 50% discount to the S&P 500. We know Carl Icahn is begging for an accelerated buyback and is completely justified in asking for one. I’d bet he is buying more stock today. And yet, despite knowing all of this, Tim Cook casually states on the conference call that his willingness to do stock buybacks does not change at all depending on where the stock is trading. I can’t wait to read Carl’s next letter to the board. And you thought the first one was unapologetically critical.

Full Disclosure: Long shares of Apple, but positions may change at any time.