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Unrest boils at annual shareholder meeting, but things remain civil

Apple, Inc. (AAPL) CEO Tim Cook won reelection to Apple's Board of Directors by a 99.1 percent vote.  Apple is enjoying record profitability and is rumored to be working on a new project -- a smart watch.

I. Cook Acknowledges Disappointing Share Prices Amid Lawsuit

And yet share prices have been on a downward slide, dipping as "low" as $435 USD per share in recent weeks.  Some investors are worried that future Apple products won't be as big hits as the iPhone and iPad; others are angry that Apple is sitting on $137B USD in cash and securities, yet is failing to grow share buyback and dividends at an equivalent pace.

At the annual shareholder meeting, Tim Cook tried to placate his critics, arguing he was as mad as the next guy about low share prices.  He comments, "I don't like it either. The board doesn't like it. The management team doesn't like it.  What we are focused on is the long term. This has always been a secret of Apple."

Tim Cook
Tim Cook claims he shares shareholders pain about dropping stock prices.
[Image Source: Bloomberg]

Such a frank acknowledgement still sounds strange coming from Apple.  Mr. Cook's predecessor, the late Steve Jobs typically would refuse to apologize for anything.  By contrast, since taking the reins, Mr. Cook has been "all apologies" as the Nirvana song goes.

In a way that makes sense.  Mr. Cook himself was awarded one million restricted stock units last year (worth around $450M USD at current share prices); that fortune is hurt by low share prices, but could be boosted if share prices go back on the uphill climb.

However, top shareholder David Einhorn, who manages Greenlight Capital Re., Ltd. (GLRE), made a powerful statement by refusing to show up at the meeting.  Last Friday his firm scored an injunction invalidating a shareholder vote to scrap a proposal for Apple to issue preferred stock at its discretion.

Mr. Einhorn is pressuring Apple to "share the love", so to speak, by issuing preferred stock shares that would yield a fixed 4 percent annual dividend.  He claims his so-called "iPref" proposal would reward Apple's investors with more profit sharing, while not diluting the primary pool of shares.

II. Shareholders Stay Civil, But Send a Message to Apple

Shareholders flexed their muscle on other issues as well.  The shareholders ratified a proposal that would force Apple executives to hold more stock, which could push them to share more profit.  They also passed a measure that will force the company to commit a board committee on human rights, which will investigate allegations of abuse at the factories that make Apple products in China.  Apple opposed both proposals.

On the same note, Apple many shareholders voted against a pay raise for top executives, including Tim Cook.

California Public Employees Retirement System (CPERS), a large institutional Apple investor, voiced support for Mr. Einhorn's iPrefs proposal -- also known among shareholders as "Proposal 2".  Senior Portfolio Manager Anne Simpson said it was unfortunate that the issue was not put to a vote at the meeting.  She is quoted as saying, "We know there is hot debate going on with cash.  We are willing and happy to wait."

David Einhorn
Top Apple shareholder David Einhorn (manager of Greenlight Capital) is leading a push to force Apple to open up its treasure chest. [Image Source: Value Walk]

Tim Cook acknowledged the measure was being considered, while arguing that Mr. Einhorn's lawsuit to force the issue was a "silly sideshow".

While the mood was tense during the meeting, it remained mostly civil and there were moments of levity.  One shareholder pointed out that the Santa Clara, California Apple store lacked a bathroom.  Tim Cook agreed that was a problem and promised to look into it.

Sources: Reuters, Forbes



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RE: Low share price????
By laviathan05 on 3/1/2013 9:54:28 AM , Rating: 2
I would say it's a bit of an over-correction. Apple is still one of the healthiest and most profitable companies in the world.

The fact that the price dropped so much tells me that the market is unsure if Apple's leadership can keep pace with the vision set by Jobs. The fact that the only new line of products rumored to come out of Apple since Jobs' passing is a watch is not helping investor confidence to say the least.


RE: Low share price????
By Helbore on 3/1/2013 1:19:27 PM , Rating: 5
Regardless of how successful Apple are, their stock has been wildly overpriced for a long time. Apple ran at the forefront of two market explosions (smartphones and tablets), but those market explosions are slowing down and Apple's crazy growth along with them.

They're not about to go out of business or anything stupid. They're still rolling in money. But the stupid share prices are coming to an end and Apple will fall back to a more reasonable level. The only people getting pissed off by this are the morons who bought into the notion of Apple doubling its worth every year for the rest of time.


RE: Low share price????
By laviathan05 on 3/1/2013 4:44:47 PM , Rating: 2
Wildly overpriced based on what?

If your going to make claims like this you should probably support it with some kind of evidence.

Share price isn't stupid because it's a big number. Do you think Berkshire Hathaway is wildly and stupidly overpriced? Google?


RE: Low share price????
By laviathan05 on 3/1/2013 4:45:16 PM , Rating: 2
*you're


RE: Low share price????
By Helbore on 3/1/2013 7:51:00 PM , Rating: 2
You're right! I'm usually good with that so feel kind of silly now.

At least it wasn't a run-on sentence with no caps or punctuation. ;)


RE: Low share price????
By Helbore on 3/1/2013 7:52:40 PM , Rating: 2
Ok, so you were correcting your own post and not mine! I will blame beer for that slip-up!


RE: Low share price????
By Helbore on 3/1/2013 8:08:06 PM , Rating: 4
Compare Apple's stock price to any other company. Then compare their global impact and their long-term viability.

Apple products could - theoretically - go out of vogue overnight and the company could drop from its current position very quickly. They hold very little that guarantees long-term sustained profitability. Their future profitability is all based on the assumption that they can continue to re-invent niche markets into mainstream markets, or the generally idiotic assumption that the tablet and smartphone markets will never stop growing at exponential rates.

Why does that make them overpriced? They're still very successful and still have ridiculous profits. Its overpriced when compared to every other business that has long-term sustainability in their market.

Apple's market price is based on short-term market assumptions. Great growth in the past has led to their stock going through the roof as idiots assumed it was sustainable. Anyone with any sense knew these markets will eventually hit a saturation point and level off - possibly even decline slightly. Consequently, anyone with any market sense knew Apple's stock was overpriced and would have to come down eventually.

The problem is the amount of ill-informed or uneducated money-grabbers who invested late, in the hope the stock would just continue to climb forever. Now they're ranting because they paid a heck of a lot for stock that is now not going in the direction they - stupidly - predicted.

I'm surprised you are asking for evidence to this fact. Apple profits are still going well. Stock prices are still going down, though. The market is all about gambling and confidence. People gambled Apple was worth more than it appears to be. They're now losing confidence in that initial gamble. Anyone with forethought saw this coming. What more evidence do you need?


RE: Low share price????
By fteoath64 on 3/2/2013 4:50:07 AM , Rating: 2
"Apple products could - theoretically - go out of vogue overnight and the company could drop from its current position very quickly."

Well said. The above is the greatest fear of Apple as their product range is not diversified enough to buffer financially if such a thing happen. The risk gets higher when the competition gets technically better and cheaper over time and Apple's perceived advantages evaporates in front of their eyes.

This is why I feel that Apple needs to diversify and make a big effort to do so. It will be welcomed by the market and shareholders alike. They can see the iPhone sales slowing down and price pressure from competitors left and right. The playing field is rather level now and good execution and PR handling are of utmost importance to ensure continue patronage and user good will.

Having half-heartedly dive into the tablet space, the iPad is making a significant contribution to the bottom lines. If they had not released the Mini, iPad would have eroded much further without possibly of rebounding. Unless they cut prices in light of the competitive market out there.

I also think Cook ought to make a "Makeover" in his approach to the press and to customers in general. Being very tight lip about product direction is not helping any as their competitors rely on carefully crafted "leaks" the spread maximum effort on the market and user expectations. A lot of the purported leaks worked well in positive spin. This is where Apple can learn from instead of acting in a draconian way to potential "leakers".


"There's no chance that the iPhone is going to get any significant market share. No chance." -- Microsoft CEO Steve Ballmer














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