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Icahn says 'I can't' and stops $50B fight over Apple stock buyback

Icahn says 'I can't' and stops $50B fight over Apple stock buyback

'We see no reason to persist,' says investment agitator after proxy advisor nixes proposal and Cook spends $14B on more stock

Investment agitator and former corporate raider Carl Icahn today tossed in the towel in his fight to get Apple to boost its share buyback program by another $50 billion after an influential proxy advisory service nixed the idea.

The white flag put an end to a months-long campaign by Icahn that some analysts said was at best a distraction to Apple, at worst trouble -- the kind with a capital "T."

"Icahn likes to lean on you to earn more money for himself," said Ezra Gottheil, an industry analyst with Technology Business Research who covers Apple.

Icahn gave up on his bid to convince Apple to increase its already-large buyback fund in a message on Twitter today that pointed to an open letter published on his Shareholders Square Table website.

"While we are disappointed that last night ISS recommended against our proposal, we do not altogether disagree with their assessment and recommendation in light of recent actions taken by the company to aggressively repurchase shares in the market," Icahn wrote.

ISS, or Institutional Shareholder Services, is a Rockville, Md.-based research firm that advises large institutional investors. Over the weekend, ISS issued a report to clients that said Apple's recent efforts were sufficient and that the company and its board should not be handcuffed to a micromanaged plan.

Icahn also noted Apple's recent $14 billion buyback, which CEO Tim Cook announced last week in an interview with the Wall Street Journal ( subscription required) as a reason for withdrawing from the fight.

In that interview, Cook said Apple was "surprised" by the 8% plummet in its stock price the day after its Jan. 27 earnings call for the fourth quarter of 2013. The share price fell an additional 1% before beginning a climb on Jan. 31. Cook told the newspaper that the firm was "opportunistic" in buying back shares at the depressed prices.

"In light of these actions, and ISS's recommendation, we see no reason to persist with our non-binding proposal, especially when the company is already so close to fulfilling our requested repurchase target," Icahn said.

Cook also used the Wall Street Journal interview to make his most public promise yet that Apple would enter new product categories -- which analysts and other observers have interpreted to mean something more than just expansions of its iPhone or iPad lines -- but as always, kept cards close to his vest, revealing nothing about timing.

He had alluded to new product categories in the January conference call with Wall Street, as well.

Icahn had mentioned new product lines -- including televisions and wearable devices -- in a missive he penned last month when he urged Apple stockholders to vote for the non-binding proposal he placed on the agenda for the Feb. 28 shareholders meeting on the company's Cupertino, Calif. campus.

He brought up those expected new products again today. "Furthermore, in light of Tim Cook's confirmed plan to launch new products in new categories this year (in addition to an exciting product roadmap with respect to new products in existing categories), we are extremely excited about Apple's future," said Icahn.

Since he launched his buyback scheme in August, Icahn had purchased more than $4 billion worth of Apple shares.

Apple had urged stockholders to vote against Icahn's proposal, and seems to have won the battle. Or did it?

"I think Cook has been far more willing to talk about stock price than Jobs ever was," said Gottheil of the co-founder and former CEO who died in 2011 and was notorious about resisting calls to return cash to shareholders. "I think it was a mistake, not a terrible mistake, but still a mistake," Gottheil added, referring to a slippery slope Cook has put Apple on.

Cook has been much more willing to bend to investors' demands; he instituted a dividend plan and pledged more than $100 billion to distributing cash in dividends or buying back shares.

Apple retains a huge cash horde, even with the $14 billion spent on buybacks over the last several weeks. That money was part of the $60 billion Apple had previously set aside for the purpose. At the end of the December 2013 quarter, Apple had about $159 billion in cash, securities and other marketable investments, the majority of it overseas where it will likely remain unless the U.S. Congress changes the tax code for repatriated funds.

While Cook made clear he was not opposed in principle to a large acquisition -- something Apple has historically avoided -- its war chest could come in handy, said Gottheil.

"With the piles of cash they have, they could do a very major deal and not put a dent in that pile," Gottheil said. "If they can swing the content deals necessary for a television, they would need a lot of infrastructure and network capacity."

Whatever new product categories Apple enters, Gottheil expects the company to do so this year -- whether it's a smart television, well-rumored wearable devices, or "something no one has thought of yet" -- because to go public with promises, as Cook has done, would be seen as a failure if nothing arrives.

"He's been so explicit, that it would be a real embarrassment if they didn't come up with something," Gottheil said. "I expect they'll do something in the television space, something in the wearable space, and a device with a keyboard that's not a full-fledged personal computer."

Apple's share price was up 1.8% in trading through 3 p.m. ET Monday, but remained about 4% below the pre-earnings call price on Jan. 27.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

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