Cook Cheers Investors While Saying Very Little
In spite of the recent aggressive legal tactics by a major investor who wants to loosen Apple's grip on its cash trove, the company's shareholder meeting on Wednesday did not erupt in heated debate. Of course, David Einhorn wasn't present to make his case. For those who did attend, CEO Tim Cook was the man of the hour, exuding confidence and promising innovation -- and presumably riches to come.
02/28/13 12:17 PM PT
CEO Tim Cook presided over Apple's annual shareholder meeting on Wednesday, where he fielded questions about a lawsuit filed by activist investor David Einhorn.
In his complaint, Einhorn demanded that Apple unbundle scheduled votes that he claimed would require shareholders to consider separate matters in one ballot. Cook called the lawsuit "silly," but the judge ruled in favor of Einhorn, setting what The Wall Street Journal described as a "legal precedent in corporate governance."
Questions were also posed about Einhorn's larger issue with Apple: its firm hold on a huge stash of cash. Cook agreed that was an issue worthy of discussion and said Apple was seriously considering returning some of the cash to shareholders.
Einhorn reportedly did not attend the meeting, and for the most part, Cook faced a friendly crowd. That reception reflects the current attitude of many Apple investors regarding the cash-versus-dividend issue, Andreas Scherer, managing partner of Salto Partners, told MacNewsWorld.
"Tim Cook has a lot of support among shareholders, even on the heels of a drop from (US)$700 a share in September of last year to the mid-four-hundreds of today," Scherer said.
"For example, Anne Simpson of CalPERS expressed regrets over Einhorn's legal move," he continued. "She acknowledged that a discussion about Apple's cash pile needs to be had but stressed that this shouldn't be done under duress."
Apple has a number of options at its disposal, noted Covestor Investment Model Manager Eric Steiman: a one-time $89 dividend; a double dividend; a one time share buyback; or ongoing share buybacks.
Apple does need to do something, Steiman emphasized. "They have too much cash, and are making too much on a quarterly basis to not repay their shareholders," he told MacNewsWorld.
In general, investors are willing to give companies that use their cash in the best interests of their shareholders a premium P/E multiple -- a fact that Apple should note, considering that its growth is slowing, Steiman pointed out.
Apple's Future Direction
This theme of slowing growth was prevalent in shareholders' questions and comments on Wednesday. Cook did his best to soothe concerns, alluding to new product development in the pipeline and assuring investors that Apple was not constraining its R&D budget in the name of stockpiling cash.
He also acknowledged the heated competition with Samsung and Android.
Cook made all the right noises at the hour-long meeting, while revealing very little about the company's plans, observed Scherer.
"The meeting was pretty much a non-event," he said.
New information about the company was never the point of this gathering, said Trip Chowdhry, managing director of equity research at Global Equities Research.
It is rare for a company to unveil news of new products or strategies at shareholder meetings, he told MacNewsWorld. What is more important is that executives project a confident and forward-looking tone, and in that respect, Cook deserves full props.
"Cook did a good job with the shareholder meeting," he said. People came away with the impression that Apple is still all about innovation -- all about creating products that move markets and change lives."
Just one head-turning product is all Apple needs to reverse its stock performance, Chowdhry maintained. "All it would take is one break-through product this year, and the stock would begin to recover immediately."