6 ms·

This kind of stuff deeply annoys me. Yes, I understand Apple's fiduciary responsibility and I understand that technically, Einhorn may have a point. But it ann

by nlh 14y ago

This kind of stuff deeply annoys me. Yes, I understand Apple's fiduciary responsibility and I understand that technically, Einhorn may have a point. But it annoys me that this is what companies deal with when they go public. Everyone thinks they're a manager now because they own some shares. Are you not happy with the amount of money Apple is making? Are you not happy with their level of innovation? Their products? Then divest yourself of their shares. We hire management teams to run companies. Let them do their job. I know, I know, again - technically as a shareholder you have a right to have a voice and yadda yadda yadda but lawsuits like this are exactly what public CEOs talk about when they say that they dread running public companies and can't take a long-term view because shareholders only care about quarter-by-quarter performance. Annoying.

jonnathanson 14y ago
Indeed, Apple's massive success story over the last 15 years probably had a lot to do with ignoring Wall Street outright. This is easier said than done, as most CEOs feel enslaved by the quarterly reporting cycle. Apple made long-term bets instead of short-term optimizations on paper. So the interesting question is: why was Apple able to do this, when other major corporations can't seem to shake their Wall Street shackles? I would guess that it had a lot to do with an early chain of big hits. The iPod, followed by the massively successful generations of subsequent iPods and iTunes, gave Jobs a large degree of immunity to criticism (and he still got quite a bit of criticism!). The iPhone had its pre-launch naysayers, in finance and in the press, but Apple's share price didn't take any real damage as a result. And so on with other product launches, up until recently. Prove the analysts hugely wrong for years on end, and eventually their critiques won't hurt you. But getting to that point in the first place is the tricky part.
- Samuel_Michon 14y ago
  "Why was Apple able to [ignore Wall Street outright], when other major corporations can't seem to shake their Wall Street shackles? I would guess that it had a lot to do with an early chain of big hits. The iPod, followed by the massively successful generations of subsequent iPods and iTunes" I agree, but the chain of hits started with the iMac, which quickly became the bestselling personal computer ever. Also, Jobs had already demonstrated his ability to make tough decisions: when he became interim CEO at Apple, he appointed an entirely new board of directors, chose new VPs, slashed many product lines (Performa, Newton, Network Server, QuickTake, LaserWriter, etc etc), and he wouldn't take more than $1 in salary.
logn 14y ago
I find it annoying when companies who don't have a need to invest all profits into themselves and have little chance of being acquired don't pay dividends. Otherwise what's the point of owning a stock? To resell it at a higher price? That's fine I guess but you're offering no value or investment opportunity to long-term investors. Profiting in this case ultimately requires a fool willing to overpay. Edit: or if there's no fool, the company could buy back shares, but at that point you should seriously consider just paying a dividend.
- deleted 14y ago
  [deleted]
- ktsmith 14y ago
  Apple is paying a dividend. I wouldn't worry too much about how much money they are sitting on. Having very large cash reserves allows them to buy companies that have technology they want to integrate into their products and keep it away from competitors. It has allowed them to pre-pay for production of products, manufacturing equipment and other tooling that ensures they meet market demand for new products while keeping that same tooling out of the hands of competitors etc. One of my clients hired fifty new employees in one month last year because Apple pre-paid for a supply of chips and the company needed to ramp up production. They couldn't have moved that fast without the infusion of cash.
- crusso 14y ago
  If you don't agree with the financial management of a company, then don't invest in it. Dividends are only one way to get value out of cash reserves in a company. I'd argue that if the company knows what the hell it's doing, handing away the fuel that helps it to execute on its strategy (cash) is the worst thing to do.
  - TimGebhardt 14y ago
    Except that Tim Cook has said on shareholder calls that they have more cash than they know what to do with. At that point they should distribute more to shareholders.
fleitz 14y ago
Fully agree, the point of shares and exchanges is for the company to raise capital, not for traders to bitch about how the company is run. If Einhorn had a fucking clue about how to run Apple he should start a tech company, since he doesn't he should shut the fuck up. His share price bullshit is a fucking distraction while the biggest turfwar in tech history unfolds, exactly how does a $32 increase in share price benefit Apple? The $100 billion in the bank means they don't need additional capital. That it is underperforming means their management is focused on building a pile of cash, not managing a pile of cash. However, with a pile of cash like that, imagine if Apple decided to create an iBank, now that would be a way to leverage huge returns from that pile of cash while simultaneously disrupting a massive industry weighing our economy down.
- wsc981 14y ago
  Also, Apple had some horrible times in the 90s. They only survived because they had a nice amount of cash when shit started to broke down. IIRC they went from 30 billion to 4 billion in quite a short time and Apple was literally on the brink of bankruptcy (I believe Steve Jobs said in an interview that Apple had about a month left when the Microsoft deal came through). I think it's fine for a company to have a nice amount of cash ready in case of some big setbacks. Especially since Apple seems willing to take huge gambles these days to enter new markets (iPod, iPhone, iPad and soon the Apple-designed TV I'm sure). And I think Apple needs these gambles to succeed, because eventually competitors will eat away profits at the lower ends of the "older" markets, slowly taking a bigger piece of the pie. I don't think most stock holders are that much interested in the company or it's products but would rather make a quick buck. The interests are different. And spending money on stockholders would mean having less money to spend on the company. I don't see what Apple could gain, except perhaps some goodwill from stockholders. I truly believe the Apple designed-TV will come either this year or next year and I also think this TV will revolutionise the market. I can imagine Siri being used instead of a remote control, for example (Steve Jobs had said he had gripes with the remote control). Once Apple enters this market, I think there's a very good chance Apple's stock prices will rise like crazy again. Stockholders will be able to sell the stock with huge gains.
rayiner 14y ago
You're minimizing what share ownership means. The shareholders own the company. The only reason the company exists is for their benefit. The fact that they have a right to voice their opinions isn't some mere technicality. It's rooted in the fact that it's their company--management, etc, just works for them. And I agree that Wall Street is overly concerned about quarterly earnings. But that's the way the game is played. In 1980, Apple went to Morgan Stanley to get help selling its soul to Wall Street (for a cool $100 million). Today, 33 years later, Wall Street still owns it (65% of Apple's shares are held by funds and institutional investors). That was the deal.
- nirvana 14y ago
  True, but that's not what's happening here. If a majority of shareholders wanted this proposal, or some other proposal, they could get it in the proxy statement and then get it passed. What's happening here is a lawsuit to try and do an endrun around the process by which the shareholders exercise their rights. Hell, shareholders vote for the members of the board of directors.... shareholders could choose to nominate and vote for board members that support the idea if they wanted.
  - rayiner 14y ago
    A shareholder lawsuit isn't an "end run" around the process. It's one of the options in the process. Companies incorporate under statutory frameworks that explicitly contemplate shareholder lawsuits in addition to other mechanisms for shareholders to assert their interests. Investors, in turn, buy stock with full knowledge of (and indeed, often because of) the fact that lawsuits are an option shareholders have to assert their rights. In this case, you have to distinguish between "I think Apple should be managed differently" and "hoarding cash amounts to a breach of fiduciary duty." The former is about general corporate strategy, and that is governed by majority consent of the shareholders. The latter is a right specific to each shareholder, and so cannot be waived by majority consent. Why is the process structured this way? For obvious reasons. Say you're buying a 25% stake in Apple, but back in the 1970's before it was Apple (remember, the rules of the arrangement as decided prospectively, before anyone knows how things will turn out, not retrospectively, after everyone knows the company will be a hit). You might be willing to leave general corporate strategy to a majority vote. However, if you think the company's actions actually amount to misuse of your capital investment, you want to be able to sue, not just submit your grievance to the majority vote.
damoncali 14y ago
You have it exactly backwards. If shareholders want more cash, it is theirs to demand. They don't have a "right to a voice", they own the company. And it has nothing to do with being public.
- tomjen3 14y ago
  Stockholders own a part of the company. The only reason he sues is that he doesn't own enough stock to get enough votes.

by nlh 14y ago

jonnathanson 14y ago

Indeed, Apple's massive success story over the last 15 years probably had a lot to do with ignoring Wall Street outright. This is easier said than done, as most CEOs feel enslaved by the quarterly reporting cycle. Apple made long-term bets instead of short-term optimizations on paper. So the interesting question is: why was Apple able to do this, when other major corporations can't seem to shake their Wall Street shackles? I would guess that it had a lot to do with an early chain of big hits. The iPod, followed by the massively successful generations of subsequent iPods and iTunes, gave Jobs a large degree of immunity to criticism (and he still got quite a bit of criticism!). The iPhone had its pre-launch naysayers, in finance and in the press, but Apple's share price didn't take any real damage as a result. And so on with other product launches, up until recently. Prove the analysts hugely wrong for years on end, and eventually their critiques won't hurt you. But getting to that point in the first place is the tricky part.

Samuel_Michon 14y ago
"Why was Apple able to [ignore Wall Street outright], when other major corporations can't seem to shake their Wall Street shackles? I would guess that it had a lot to do with an early chain of big hits. The iPod, followed by the massively successful generations of subsequent iPods and iTunes" I agree, but the chain of hits started with the iMac, which quickly became the bestselling personal computer ever. Also, Jobs had already demonstrated his ability to make tough decisions: when he became interim CEO at Apple, he appointed an entirely new board of directors, chose new VPs, slashed many product lines (Performa, Newton, Network Server, QuickTake, LaserWriter, etc etc), and he wouldn't take more than $1 in salary.

logn 14y ago

I find it annoying when companies who don't have a need to invest all profits into themselves and have little chance of being acquired don't pay dividends. Otherwise what's the point of owning a stock? To resell it at a higher price? That's fine I guess but you're offering no value or investment opportunity to long-term investors. Profiting in this case ultimately requires a fool willing to overpay. Edit: or if there's no fool, the company could buy back shares, but at that point you should seriously consider just paying a dividend.

deleted 14y ago
[deleted]
ktsmith 14y ago
Apple is paying a dividend. I wouldn't worry too much about how much money they are sitting on. Having very large cash reserves allows them to buy companies that have technology they want to integrate into their products and keep it away from competitors. It has allowed them to pre-pay for production of products, manufacturing equipment and other tooling that ensures they meet market demand for new products while keeping that same tooling out of the hands of competitors etc. One of my clients hired fifty new employees in one month last year because Apple pre-paid for a supply of chips and the company needed to ramp up production. They couldn't have moved that fast without the infusion of cash.
crusso 14y ago
If you don't agree with the financial management of a company, then don't invest in it. Dividends are only one way to get value out of cash reserves in a company. I'd argue that if the company knows what the hell it's doing, handing away the fuel that helps it to execute on its strategy (cash) is the worst thing to do.
- TimGebhardt 14y ago
  Except that Tim Cook has said on shareholder calls that they have more cash than they know what to do with. At that point they should distribute more to shareholders.

fleitz 14y ago

Fully agree, the point of shares and exchanges is for the company to raise capital, not for traders to bitch about how the company is run. If Einhorn had a fucking clue about how to run Apple he should start a tech company, since he doesn't he should shut the fuck up. His share price bullshit is a fucking distraction while the biggest turfwar in tech history unfolds, exactly how does a $32 increase in share price benefit Apple? The $100 billion in the bank means they don't need additional capital. That it is underperforming means their management is focused on building a pile of cash, not managing a pile of cash. However, with a pile of cash like that, imagine if Apple decided to create an iBank, now that would be a way to leverage huge returns from that pile of cash while simultaneously disrupting a massive industry weighing our economy down.

wsc981 14y ago
Also, Apple had some horrible times in the 90s. They only survived because they had a nice amount of cash when shit started to broke down. IIRC they went from 30 billion to 4 billion in quite a short time and Apple was literally on the brink of bankruptcy (I believe Steve Jobs said in an interview that Apple had about a month left when the Microsoft deal came through). I think it's fine for a company to have a nice amount of cash ready in case of some big setbacks. Especially since Apple seems willing to take huge gambles these days to enter new markets (iPod, iPhone, iPad and soon the Apple-designed TV I'm sure). And I think Apple needs these gambles to succeed, because eventually competitors will eat away profits at the lower ends of the "older" markets, slowly taking a bigger piece of the pie. I don't think most stock holders are that much interested in the company or it's products but would rather make a quick buck. The interests are different. And spending money on stockholders would mean having less money to spend on the company. I don't see what Apple could gain, except perhaps some goodwill from stockholders. I truly believe the Apple designed-TV will come either this year or next year and I also think this TV will revolutionise the market. I can imagine Siri being used instead of a remote control, for example (Steve Jobs had said he had gripes with the remote control). Once Apple enters this market, I think there's a very good chance Apple's stock prices will rise like crazy again. Stockholders will be able to sell the stock with huge gains.

rayiner 14y ago

You're minimizing what share ownership means. The shareholders own the company. The only reason the company exists is for their benefit. The fact that they have a right to voice their opinions isn't some mere technicality. It's rooted in the fact that it's their company--management, etc, just works for them. And I agree that Wall Street is overly concerned about quarterly earnings. But that's the way the game is played. In 1980, Apple went to Morgan Stanley to get help selling its soul to Wall Street (for a cool $100 million). Today, 33 years later, Wall Street still owns it (65% of Apple's shares are held by funds and institutional investors). That was the deal.

nirvana 14y ago
True, but that's not what's happening here. If a majority of shareholders wanted this proposal, or some other proposal, they could get it in the proxy statement and then get it passed. What's happening here is a lawsuit to try and do an endrun around the process by which the shareholders exercise their rights. Hell, shareholders vote for the members of the board of directors.... shareholders could choose to nominate and vote for board members that support the idea if they wanted.
- rayiner 14y ago
  A shareholder lawsuit isn't an "end run" around the process. It's one of the options in the process. Companies incorporate under statutory frameworks that explicitly contemplate shareholder lawsuits in addition to other mechanisms for shareholders to assert their interests. Investors, in turn, buy stock with full knowledge of (and indeed, often because of) the fact that lawsuits are an option shareholders have to assert their rights. In this case, you have to distinguish between "I think Apple should be managed differently" and "hoarding cash amounts to a breach of fiduciary duty." The former is about general corporate strategy, and that is governed by majority consent of the shareholders. The latter is a right specific to each shareholder, and so cannot be waived by majority consent. Why is the process structured this way? For obvious reasons. Say you're buying a 25% stake in Apple, but back in the 1970's before it was Apple (remember, the rules of the arrangement as decided prospectively, before anyone knows how things will turn out, not retrospectively, after everyone knows the company will be a hit). You might be willing to leave general corporate strategy to a majority vote. However, if you think the company's actions actually amount to misuse of your capital investment, you want to be able to sue, not just submit your grievance to the majority vote.

damoncali 14y ago

You have it exactly backwards. If shareholders want more cash, it is theirs to demand. They don't have a "right to a voice", they own the company. And it has nothing to do with being public.

tomjen3 14y ago
Stockholders own a part of the company. The only reason he sues is that he doesn't own enough stock to get enough votes.