Even When Carl Icahn Loses, He Still Wins

The Wall Street Journal

Steve Russolillo

Feb 09, 2014

Carl Icahn is still sitting pretty after dropping his fight against Apple Inc.AAPL -0.35%
The billionaire activist investor Monday morning backed off his plea for Apple Inc. to buy back an additional $50 billion of its stock. The move comes one day after proxy-advisory firm Institutional Shareholder Services Inc. recommended that Apple shareholders reject Mr. Icahn’s proposal.
“We see no reason to persist with our non-binding proposal, especially when the company is already so close to fulfilling our requested repurchase target,” Mr. Icahn wrote in the letter.
Let’s be clear: Mr. Icahn isn’t conceding defeat. If anything, he can be classified a winner through this months-long episode. As Matthew Yglesias at Slate wrote, “Icahn is giving up in part because his odds of victory were low but in part because he’s already gotten more than half a loaf.”
The stock is up 11% since mid-August, when Mr. Icahn disclosed he had taken a “large position” in the iPhone and iPad maker, a position that he has added to on multiple occasions and was about $4 billion at the end of January.
Mr. Icahn didn’t get the buyback totals he wanted; he initially said the company should borrow to buy back some $150 billion in stock before lowering that figure to $50 billion. But the company has sped up the pace of its existing buyback program, something for which Mr. Icahn was agitating.
“The company is essentially doing what Icahn wanted,” Don Bilson, head of event-driven research at Gordon Haskett, a research firm, told MoneyBeat. “They’ll get to that $50 billion if they keep chugging along.”
Apple CEO Tim Cook told the Wall Street Journal last week that the company had repurchased $14 billion in stock in recent weeks after being surprised to see shares fall 8% in response to its fourth-quarter earnings report. In response to a question about Mr. Icahn’s proxy proposal, Mr. Cook said: “We’re trying to build a company for the long term, so that’s how we look at these decisions.”
The move was part of a buyback plan announced last April, when Apple said it expected to return $100 billion to shareholders by 2015 , a $55 billion increase from its previous plan announced in March 2012.
In the final paragraph of Mr. Icahn’s five-paragraph letter on Monday, he said he is “extremely excited” about Apple’s future. With respect to Apple management, “we all share a common optimism with respect to the company’s bright long term future,” he added.
That attitude illustrates how Mr. Icahn is backing down for what he deems as positive reasons.
“Not only is [Mr. Icahn] getting his buyback, but management is showing that they are on the same page with him on the issue of buying back shares,” said Ken Squire, the founder of 13D Monitor.