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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: Seriously
By Tony Swash on 3/4/2013 6:18:20 AM , Rating: -1
Right, so declining share price is not a sign of floundering. I guess I've just learnt something new today.

Of course not. I guess you have never run a business. What counts is business success (measured by business performance metrics such as sales, growth, profitability, cash flow, balance sheet etc) and business outlook (measured by the product pipeline, sources of threats and opportunities, competitive environment).

Share prices can rise and fall, and indeed do, for reasons that have no relationship to the business prospects of the business concerned. For example many companies lost a lot of share value when the markets crashed in 2008, almost none of which had anything to do with actual business prospects of the businesses concerned. Similarly share process can and is manipulated sometimes. Share price is especially irrelevant to a business's prospects when a business has low debt and does not have to borrow to finance investment and growth, Apple's cash mountain means it is not beholden to the financial markets in any way.

The real issues with Apple are:

What is it's actual business performance? Apple's actual business performance over the last few years, and in particular in the most recent years, has been spectacular. They made more profits last year than any other business on earth, have simply mountainous cash reserves and continue to show strong growth in all their big products.

Why has the share price declined? That is hard to say, using any usual objective calculation method employed to assess a companies worth Apple is woefully undervalued. It could well continue to be under valued or it could recover, would you bet your pension on either outcome? Mostly I think it is because big portfolio investors simply don't really understand what it is that Apple does, their recent success seemed like a special sort of magic created by Steve Jobs and he is dead. Android has grown a bigger market share and most portfolio managers think, much like many conservative techies, that market share is a key proxy indicator of platform success in the mobile device market: it isn't but it will take several more years before that sinks in.

Apple will continue to grow, possibly at a calmer pace, and will be the dominant tech company of the mobile device age irrespective of how it's share price fluctuates.

RE: Seriously
By 91TTZ on 3/4/13, Rating: 0
"I'm an Internet expert too. It's all right to wire the industrial zone only, but there are many problems if other regions of the North are wired." -- North Korean Supreme Commander Kim Jong-il

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