Icahn: We're Not Leaving Apple, We're There to Stay

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Oct. 23 (Bloomberg) -- Billionaire Carl Icahn comments on why he thinks Apple should use its cash to buy back stock, his sale of more than half of his stake in Netflix and what he thinks of J.C. Penney. He speaks with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Sent a letter to tim cook, the shareholders of square table, which will be launched tomorrow.

Joining us on the phone, carl icahn himself.

Always good to talk to you.

There has been a lot of criticism about the potential buyback for apple.

What do you say to those?

I think that some of the critics that you listen to are just absurd.

I just heard someone say that apple might need the money for other things.

That is tantamount to saying that bill gates should not fix his house because he might not need -- because he needs the money for charity.

They have so much cash, with no ballroom, how can you possibly have that type of a criticism of a buyback?

They might need the money for other things?

Apple is not a bank and shareholders did not buy the stock to be a bank.

We have no complaints about the management and what they are doing with technology, but there is no one on that board who really has a great knowledge of finance as far as i can see, but maybe i am wrong on that, i do not want to start a new war.

I will say this, to list criticism saying that they need money for other things, it is idiotic.

Or it is a complete lack of reading a balance sheet.

I know that you met with tim cook and you had dinner at his apartment.

You have been pushing for this buyback and one can speculate that your letter will continue to push for it.

Why is this something you think the company needs to be doing right now?

I think a company and its board should do everything they can to enhance value.

This is what you call a no- brainer.

At the risk of being a modest, we have the best record by far over the past 12 to 13 years and it is done because of activism and because we proved over and over that you can go into companies and make management accountable or change them, which the boards are lakhs in doing.

If that were done more and the law allowed for it more, we would not have the problems -- look, the market is up right now, but i believe the market is up not because our companies are doing that well but because interest rates are ridiculously low and as a result is companies are making money, but making it the wrong way.

Jobs?

There are no jobs.

The jobs are very scarce.

Therefore what you need are companies that are better run.

I will say that there are many well-run and great companies.

Apple, i believe, is managed well, but the lord is not doing the job they should be, take this cash that is making them no money, or borrow, which is the same thing, if you get into financial engineering.

If you borrow money at three percent, which they can do, they can buy stock that returns 16%. it is a no-brainer.

To have critics say that you should leave apple alone because they aren't icon and because of this and that, they have no knowledge of how to read a balance sheet.

They have plenty of money to do anything they want, even if they did the buyback.

The interest alone could purchase $150 billion.

It is absurd to make this kind of criticism.

I will obviously not tell you what is the letter, but you can judiciously guess that we are not leaving apple, we are there to stay and our record shows that we have been very successful in the last 12, 13 years going in, cleaning up companies that need to be cleaned up or changed.

I think that apple needs a board that goes in and does a huge buyback.

We are saying that.

I respect tim cook and i expect to talk to him again very shortly and i think he is doing a very fine job.

Perhaps after this letter will you be following up with a phone call?

I would think that tim would not want to talk to me until his earnings come out, and i would respect that.

A lot of people said that technology companies typically do not take on a lot of debt, they would not borrow money to do that stock i back.

But apple has been around for a fair amount of time.

Do you think that that model is going to have to change?

That these tech companies that were averse to debt should be looking at it?

There is a time to borrow and a time not too.

But i do not want to digress from what you are really asking.

If the company has 100 and $50 billion in cash, there is nothing wrong with them borrowing, they are sort of borrowing against the cash in a because they cannot repatriate it.

Borrowing there is not the same as borrowing money and leveraging your balance sheet, in a sense.

It is a completely different equation or dynamic.

We are not talking about it being wrong tomorrow.

That is a different question that you could argue.

Here you are not a bank, sitting on $150 million.

The stock is so low on value related to earnings, related to the $50 billion cash flow, it is patently absurd not to buy it.

I owned a bunch of oil wells in 2000. there was a partner that we had, and the partner wanted to sell for one reason or another at a very cheap price.

Well, he was nice enough to offer them to me.

It is no different with apple.

Apple is selling their stock.

Apple stock is selling at a very low price.

Why should the shareholders not get the benefit of that if they have another buyer?

I get the benefit of buying stock as opposed to apple getting it.

How big of a buyback does apple need?

Excuse me?

How much?

We have recommended several times, $150 billion.

We are making a bunch of pledges in the letter, and i think you will find it very interesting.

I think it will stop any criticism saying i am just looking for a quick trade.

We do have a good profit in apple, but that could not be further from the truth.

To go in and make a quick turn here.

We do not really.

In many cases, look, we held netflix while others sold it.

I am not saying they were wrong.

I am saying we held netflix -- well, it was only 13 months, but it went five times higher before we sold it, so we are not in for the quick turn.

They need money for other things.

They have not bothered to read the balance sheet.

Or maybe does not know how to read a balance sheet.

Some people say, carl, apple is such a large company.

Why is carl e ink active in a stock like this?

Netflix is one thing, and web m.d. is another, but this is a big, big company, which makes it harder to have a voice.

I am not sure of that.

I saw somebody have a pretty big boys with procter & gamble.

I think on this one point, we can have a voice because it is so absurd not to have a buyback, and we are not criticizing tim cook are you we are criticizing doing it.

I am not sure we cannot have a voice there.

A lot of shareholders have called us and have said right on.

Right on.

Get the deal done.

We do not represent a number.

If shareholders say, do not do the buyback, that is one thing, but to listen to the commentators go on about it, it is amazing to me.

I do not mind people criticizing doing it for other reasons, but just to say that apple cannot afford it because they need the money for other things is patently absurd.

It is saying that activism in the right way does not work.

Just look at our record, and look at how many companies we have cleaned up.

It is not that we just trade stocks.

We have held stocks for years and years and years, and the trouble with this company and with the economy is we protect management doing a bad job.

I believe in really enhancing value, but i will say that i think i am not the only one that believes that, and if that is true, hey, let it be, you know?

Do you think tim cook is receptive of this?

You have been critical of the board, that the board is at fault.

Do you get the sense that mr.

Cook is willing to give on this?

I cannot talk to tim.

I have met him.

I have find he is doing a very good job.

This is not a criticism of him.

I think he believes as strongly as i do that the company is undervalued.

Therefore, you can deduce from that, or you should be able to that if the company's stock is very cheap and i have 150 billion, why do i not use some of it to buy the stock?

It makes no sense.

Tim.

He is not going to run ahead of his board.

I know he believes the stock is very cheap, as i do.

You mentioned stockholders.

What type of institutions are coming forward that are saying, yes, this makes sense?

There is a fact that so few institutions speak out, and i think it is a sad fact.

I think institutions should get a lot more active in making their companies more accountable and making managements more accountable.

Hey, tomorrow, when we come up with this, we are going to come up with twitter followers, going on what i am calling the shareholder square table.

There is an interesting thing in the beginning of it, and there will be some interesting things, one of the articles will be the letter, and we hope people join the square table.

You subscribe.

You do not pay money for it.

You sign in for it.

You will see something i think you will find very interesting, which is sort of a depiction of how a lot of our companies are, and it is a sad commentary that these companies do not have accountability and are not really that focused on enhancing shareholder value.

Again, there are many good companies, many good boards, and we are not in any way criticizing tim cook here.

We agree with what he is doing as far as coming out with all of these new iphones and what have you, but that is not what the criticism is about.

Have you talked to -- i am not at all going to discuss what is talked to me about private.

I am not talking about any other institutions by name, but there are a lot of shareholders that have spoken to us and think we are right.

Now, that does not mean that they are going to vote for us or vote for this or what have you, but that is what i do believe.

The shareholder square table, that is the website you are putting forth that is designed -- twitter followers can get on it tomorrow, and, again, it has a few different articles, and it will continue to have articles.

I think the time might have come in our economy where shareholders want to stand up a little bit more to what goes on, and to say that we are just doing this to enhance our own portfolios is another ridiculous thing, because we own things for years and years in certain cases.

Look at how well we have done for the companies over and over that we have been involved with, and look at how they have changed.

One went up 457% in months, and that was half of your state.

Facebook goes up 457% and i sell half of my stay, i do not think that is looking for a quick turn, but you can look at a lot of companies that we have held for years, and chesapeake now is up 50%, 60%, and are we interfering?

Look at the results.

Haynes.

He has a passion for the company, the ceo, and i think he would say we have helped being on the board.

There is another we helped more than a bit, and they will tell you that.

I have been invited back on a number of boards, so to get the criticism, to me, it is a ridiculous criticism.

A can say, look, and then give me the reasons, but do not say i am wrong in this case because apple cannot afford it.

You can go back to the sheet and take a very wealthy man and say he is wrong to give money to a certain group or a certain charity, but do not say he is wrong because he might need money to fix his lawn.

There is a rumor in the marketplace that you purchased a stake in jcpenney.

Can you elaborate on that?

We do not elaborate too much on positions.

That was an example of activism, where you micromanage, and we do not presume to micromanage.

I am not going to say anymore about that except -- we have stayed away for years.

And you continue to stay away.

And we continue.

All right, netflix.

Backing it up for a minute, we know your son has been very involved with that company, and according to the press release yesterday still believes the company is undervalued.

Nonetheless, you sold a significant stake.

How is that playing out, given that your son is a big believer, and you are taking money off of the table here?

I can only say that my son and dave, his partner, have certainly earned a say in what they believe we should hold or not, and i do not think they are wrong with what they said in that press release.

Basically, netflix is a great company, but, you know, as i said, i have been a veteran, and a battle hardened veteran of seven bear markets, and, therefore, there comes a time when you are making 500% on your money that you take your chips off the table.

Some of them, anyway.

And that is really why i did it, that i think netflix -- actually, if i had not had the position, i probably would have kept it.

I think they are right in most of their arguments, but that does not mean -- i mean, there is a different way of looking at life or investing life, and i think for apple to have this huge position, and the position obviously by dent of the investment got much bigger, so it got to be a larger percentage of the portfolio, and i do not know if it is judicious to have one company with that large of a percent in a portfolio, and you also have to worry about just, as i say, i have been through a bunch of bear markets, and when they come, they are not pretty things.

I know you have gotten out of a few things.

Web m.d.. how about hls?

I am not going to go through my whole portfolio, but i will say one last thing.

I think they are still very undervalued, but that is my last one.

I am not going to go through my portfolio except to say that with haines and web md, my young acolytes, right on the same page.

Yes, they were on the same page.

The only difference is netflix, which i say again, i basically agree with their argument, but i still did it, so that is what i think of netflix.

I think netflix has a great model.

So, therefore, but i did take some chips off the table.

We will be looking forward to seeing your letter tomorrow.

I think we will have some sense of what might be in there.

Carl, we know you are continuing to push for that i back, and we appreciate your joining us on the road ran today, and they can check at your twiddle handle for more on that letter.

Good talking to you, tricia create goodbye.

Everyone, we have your first trade for tomorrow, and here is

This text has been automatically generated. It may not be 100% accurate.

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