Well, Carl Icahn is at it again. He has now turned his activist-investor energy towards Apple. He is demanding that the company buy back $150 billion in stock, as a sign of strength and balls to investors and to the world. Investors like Icahn claim that such strategies of financial engineering (dividends and buybacks) increase the value of a firm in significant ways. In some cases this might be true, in other cases it is merely an excuse for a lack of corporate imagination.
One only needs to note how Apple’s stock has performed since it began issuing an increased dividend (straight down), to see that the near-private public company that Steve Jobs nourished was virtually immune to the passing whims of activist investors. Not too long ago, David Einhorn of Greenlight Capital went so far as to sue Apple to pressure it to issue a dividend in order to “unlock value.” Apple capitulated, and soon thereafter its share price began to plunge. There were, of course, other issues at play in the share price story, but the simple fact that Apple blinked played a big part in the story as well. Steve Jobs, I am guessing, would have never given in to the pressures from Eihnorn, Icahn, or anyone else for that matter.
Value, sadly, is rarely “unlocked.” Rather, value is derived from providing new and differentiated products and services that customers love. This is the stuff of innovation. Instead of bending over for Carl Icahn or David Einhorn, Apple just needs introduce some new gizmos that we love. That is how to get the share price and investor confidence back!