Greenlight Capital Urges Apple Shareholders to Oppose Company’s Proposal That Would Impede Apple’s Ability to Unlock

  Greenlight Capital Urges Apple Shareholders to Oppose Company’s Proposal
  That Would Impede Apple’s Ability to Unlock Shareholder Value

Recommends Vote AGAINST Proposal 2 Which Eliminates Company’s Ability To Issue
                               Preferred Stock

            Shareholder Since 2010, Greenlight Remains Long Apple

Business Wire

NEW YORK -- February 7, 2013

Greenlight Capital, Inc. (“Greenlight”), a value oriented, research-driven
investment management firm, today announced that it is urging fellow
shareholders of Apple Inc. (NasdaqGS: AAPL) (“Apple” or the “Company”) to
oppose the Company’s attempt to amend its corporate charter. Greenlight is
voting AGAINST Proposal 2 in Apple’s proxy, which would eliminate preferred
stock from Apple’s charter and thus restrict the Board’s ability to unlock the
value on Apple’s balance sheet. Greenlight is asking all shareholders to also
vote AGAINST Proposal 2 at the upcoming Annual Meeting of Shareholders to be
held on February 27, 2013.

A shareholder since 2010, Greenlight believes Apple is a phenomenal company
filled with talented people creating iconic products that consumers around the
world love. However, like many other shareholders, Greenlight is dissatisfied
with Apple’s capital allocation strategy. Greenlight believes that the
amendment to Apple’s charter in Proposal 2 unnecessarily limits the Board’s
flexibility to distribute preferred stock as a means of unlocking shareholder
value. As such, Proposal 2 does not merit shareholder support.

“We believe Apple must examine all of its options to unlock the growing value
of its balance sheet for all shareholders,” said David Einhorn, President of
Greenlight. “Over the past several months, we have had an ongoing dialogue
with Apple regarding one option to do so, namely the creation of a new
security, a perpetual preferred stock that would be distributed at no cost to
Apple’s existing shareholders, and would provide an attractive, sustainable
dividend while preserving Apple’s financial resources to pursue its business

Greenlight first described the concept at a May 2012 investment conference,
where Mr. Einhorn demonstrated that Apple could unlock several hundred billion
dollars of shareholder value by distributing, to existing shareholders, a
perpetual preferred stock. Since May, Greenlight has had discussions with
Apple on this value creation idea, but Apple rejected it outright in September

Greenlight believes that Apple’s proposal to eliminate preferred stock from
its charter is an unprecedented action to curtail the Board’s options.
Greenlight is not aware of any other company that has ever taken this step
voluntarily. Greenlight remains convinced that the issuance of perpetual
preferred stock is a viable option for improving Apple’s unsatisfactory
capital allocation policy.

Yesterday, in response to Greenlight notifying Apple that it intended to
contest Proposal 2, management offered to re-evaluate Greenlight’s idea, but
refused to withdraw the charter amendment to eliminate preferred stock.
Greenlight is hopeful that when Apple and its advisers review the idea afresh,
it will see the merits and act to unlock value for all shareholders.

Nonetheless, Greenlight believes that eliminating preferred stock from the
Company’s charter hinders Apple’s ability to implement value creating options.
Mr. Einhorn continued, “Apple should unlock shareholder value through the
distribution of perpetual preferred stock. We ask shareholders to vote against
Proposal 2, thereby expressing to Apple and its Board their support for
unlocking value and significantly improving Apple’s current capital allocation

Proposal 2 actually contains three distinct corporate governance proposals
that Greenlight believes need to be unbundled and voted on separately as
required by Securities and Exchange Commission rules. Yesterday, the Company
informed Greenlight that Apple would not unbundle the proposals. Accordingly,
Greenlight today initiated a legal action in the U.S. Federal District Court
for the Southern District of New York seeking to have the Company conform
Proposal 2 to the SEC rules.

Greenlight today issued the following letter to Apple shareholders:

February 7, 2013


Oppose Apple’s Effort To Restrict The Company’s Ability To Unlock Substantial
                              Shareholder Value

Dear Fellow Apple Shareholder,

Greenlight Capital, Inc. (and affiliates, “Greenlight”) has been a significant
shareholder of Apple Inc. (“Apple” or the “Company”) since 2010. We believe
Apple is a phenomenal company filled with talented people creating iconic
products that consumers around the world love. We are long-term shareholders
of Apple.

However, like many other shareholders, Greenlight is dissatisfied with Apple’s
capital allocation strategy. The combination of Apple’s low (and shrinking)
price to earnings multiple and $137 billion (and growing) hoard of cash on the
balance sheet supports Greenlight’s contention that Apple has an obligation to
examine all options to create and unlock additional value.

We understand that many of our fellow shareholders share our frustration with
Apple’s capital allocation policies. Apple has $145 per share of cash on its
balance sheet. As a shareholder, this is your money. Though Apple recently
commenced paying a common dividend and initiated a nominal share repurchase
program, we believe that there is much more that the Board should do for
shareholders. We believe that it is important for shareholders to send Apple’s
Board the message that the current capital allocation policy is not
satisfactory, and that after considering all options, Apple’s Board should act
to unlock the latent value of Apple’s balance sheet and franchise. If you
share our frustration, please join us in blocking the Company’s effort to
restrict its value creation options by voting AGAINST Apple’s plan to amend
its corporate charter in Proposal 2 to eliminate preferred stock.

 Send Apple And Its Board A Message That We Want Apple To Change Its Capital
      Policy To Unlock Value For Shareholders – VOTE AGAINST PROPOSAL 2

At a May 2012 investment conference, Greenlight introduced the idea that Apple
could unlock several hundred billion dollars of shareholder value by
distributing to existing shareholders a perpetual preferred stock.

Since then, Greenlight has had discussions with Apple encouraging the Company
to distribute perpetual preferred stock as an innovative method of rewarding
all shareholders for the Company’s strong balance sheet and substantial cash
flows. Put plainly, Greenlight is encouraging Apple to distribute a perpetual,
high-yielding preferred stock directly to shareholders at no cost. This would
enable shareholders to own and separately trade the new preferred shares and
Apple’s existing common shares. Importantly, Greenlight believes these
preferred shares represent a simple, low-risk way to reward shareholders
without compromising the financial and strategic flexibility of the Company,
or forcing the company to incur tax on repatriating its offshore cash

Greenlight suggested an initial preferred share distribution, whereby
dividends could be funded on an ongoing basis by a relatively small percentage
of the Company’s operating cash flow. Apple rejected the idea outright in
September 2012. Yesterday, after Greenlight notified Apple of its intention to
vote against Proposal 2, Apple said it would reconsider the idea, but refused
to withdraw the proxy provision where Apple seeks to eliminate preferred stock
from its charter.

The recent, severe under-performance of Apple’s shares, which are down
approximately 35% from their peak valuation, underscores the need for the
Company to apply the same level of creativity used to develop revolutionary
technology for its consumers to unlock the value of its strong balance sheet
for its shareholders.

We believe our suggestion of distributing perpetual preferred stock, while
innovative, is also quite simple. Apple could distribute high-yielding, tax
efficient preferred stock to existing shareholders at no cost. This new type
of easily tradable preferred security would allow Apple to take advantage of
the market’s appetite for yield while preserving future operating and
strategic flexibility. Importantly, we believe this strategy would require no
immediate use of cash other than the ongoing dividend, and would not pose any
maturity, re-financing, balance sheet, or default risk.

For example, Apple could initially distribute to existing shareholders $50
billion of perpetual preferred stock, with a 4% annual cash dividend paid
quarterly at preferential tax rates. Once a trading market is established and
the market recognizes the attractiveness of a highly liquid, steady yielding
instrument from an issuer backed by Apple’s unmatched balance sheet and
valuable franchise, the Board could evaluate unlocking additional value by
distributing additional perpetual preferred stock to existing shareholders.
With this conservative action, Greenlight believes the Board could unlock
hundreds of billions of dollars of latent shareholder value.

Assuming Apple retains its price to earnings multiple of 10x and the preferred
stock yields 4%, our calculations show that every $50 billion of perpetual
preferred stock that Apple distributes would unlock about $30 billion, or $32
per share in value. Greenlight believes that Apple has the capacity to
ultimately distribute several hundred billion dollars of preferred, which
would unlock hundreds of dollars of value per share. Further, Greenlight
believes additional value may be realized when Apple’s price to earnings
multiple expands, as the market appreciates a more shareholder friendly
capital allocation policy.

        Apple’s Attempt To Remove A Potential Means Of Value Creation
                       Should Concern ALL Shareholders

As holders of more than 1.3 million Apple shares, Greenlight is alarmed that
Apple is attempting to eliminate preferred stock from its corporate charter,
hindering its ability to unlock value for shareholders. This is an
unprecedented action to curtail the Company’s options. We are not aware of any
other company that has ever voluntarily taken this step. Furthermore, over 90%
of the S&P 500 companies have the flexibility to issue similar preferred

Apple is attempting to package this provision with two positive corporate
governance reforms that we would normally support. Apple is asking
shareholders to approve or disapprove of all three changes in a single bundled

We believe that the Securities and Exchange Commission (“SEC”) proxy rules
require that Apple provide for a separate vote on each matter presented to its
shareholders for approval at the shareholder meeting. This ‘unbundling’ rule
is designed to permit shareholders to express their vote on each individual
matter and to not be forced to vote on a combined package of items. This
prevents companies from forcing shareholders to approve matters that they
might not vote for if presented independently.

In our view, Apple’s Proposal No. 2 violates the SEC’s ‘unbundling’ rule
because it ties together three separate matters (majority voting for
directors, elimination of preferred stock, and establishing a par value for
the Company’s common stock) into one proposal. Apple should be required to
unbundle these items into separate proposals to allow the shareholders to make
an independent choice on each matter. Accordingly, Greenlight has initiated a
legal action in the U.S. Federal District Court for the Southern District of
New York seeking to have the Company unbundle the various components of
Proposal 2 so that shareholders can rightfully vote on each individual
provision as mandated by SEC rules.

We cannot support the two desirable governance reforms at the expense of
limiting Apple’s ability to potentially unlock hundreds of billions of dollars
of shareholder value. Importantly, in its current form, voting AGAINST
Proposal 2 does not affect the ‘majority voting’ reform in the short-term, as
Board members have already agreed to resign from the Board if they fail to
receive a majority of votes cast “for” their election. As a result, we will
vote AGAINST Proposal 2 in Apple’s proxy and we urge you to vote AGAINST the
proposal, as well.

      Proposal 2 Is Value Destructive, Impedes The Board’s Flexibility,
                    And Does Not Merit Shareholder Support

Your vote is extremely important, regardless of how many shares you own. Apple
shareholders of record as of January 2, 2013 are entitled to vote at the
annual meeting. Proposal 2 requires the affirmative vote of a majority of the
outstanding shares. If you were an Apple shareholder on the record date, you
can still vote AGAINST Proposal 2, even if you already voted your shares.

Greenlight is not asking for your proxy card, so please do not send us your
proxy card. If your Apple shares are held in your own name, please vote
AGAINST Proposal 2. If you hold your Apple shares in “street name” with a
bank, brokerage firm, dealer, trust company or other nominee, only they can
exercise your right to vote with respect to your shares and only after
receiving your specific instructions. IT IS CRITICAL THAT YOU PROMPTLY GIVE
NOMINEE TO VOTE “AGAINST” PROPOSAL 2. If you have any questions about voting
your Apple shares, please call our proxy solicitor, D.F. King & Co., Inc.,
toll-free at (800) 949-2583 (banks and brokerage firms should call (212)
269-5550), or email

Thank you for your consideration and support.


David Einhorn
Greenlight Capital


Media Contacts:
Sard Verbinnen & Co
Jonathan Gasthalter/Paul Caminiti/Jonathan Doorley
Investor Contacts:
D.F. King & Co., Inc.
Edward McCarthy/Richard Grubaugh/Jordan Kovler
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