Waving aside Einhorn’s assertion that Apple is clinging to a “Depression-era” mentality, Cook said on Tuesday the company’s board is in “very active discussions” on how to dole out more of its $137 billion hoard of cash and marketable securities.
Einhorn and his Greenlight Capital are suing Apple as part of a wider effort to get the iPhone maker to share more of its cash pile, one of the largest among technology companies. They are challenging “Proposal 2” in Apple’s proxy statement, which would abolish a system for issuing preferred stock at its discretion.
Einhorn wants Apple to issue perpetual preferred shares that pay dividends to existing shareholders, which he argued would be superior to dividends or buybacks.
Cook gave Einhorn credit for a novel idea, but the usually unflappable chief executive turned slightly impatient when discussing the lawsuit. He was also dismissive of Einhorn’s media and legal blitz – which included the lawsuit as well as multiple television and media interviews.
Einhorn seeks an injunction to block a February 27 shareholders’ vote on Proposal 2, in what amounts to the biggest challenge to Apple from an activist investor in years.
“This is a waste of shareholder money and a distraction, and not a seminal issue for Apple. That said, I support Prop 2. I am personally going to vote for it,” Cook told a packed hall at Goldman Sachs’ annual technology industry conference in San Francisco.
The conflict over Prop 2 “is a silly sideshow,” added Cook, who on Tuesday traded in his usual casual jeans attire for slacks and a dark suit jacket, in a nod to Wall Street. Cook said he thought it “bizarre that we would find ourselves being sued for doing something good for shareholders.”
Einhorn’s clash with Apple centers on a proposed change to its charter that would eliminate the company’s ability to issue “blank check” preferred stock at its discretion. Apple, which said the change would not preclude future issuance of preferred shares, is recommending shareholders vote in favor at its annual meeting on February 27.
The lawsuit, filed in the U.S. district court in Manhattan, objects to the bundling of the charter change with two other corporate governance-related proposals in “Proposal 2.”
The hedge fund manager, a well-known short-seller and Apple gadget fan, counters that striking the preferred-share mechanism from the charter would make it more difficult to issue such securities down the road.
“If Apple thinks the lawsuit is a waste of resources, it could simply end the matter by complying with existing law and filing a new proxy that unbundles the proposed changes to the charter, so that shareholders can express their views on each matter separately,” a Greenlight Capital spokesman said in an emailed statement, responding to Cook’s comments.
On Tuesday, influential advisory firm Glass Lewis recommended shareholders vote in favor of Proposal 2, joining ISS and the California Public Employees Retirement System – the top U.S. pension fund – in voicing support for the measure.
Apple and Greenlight appear for oral arguments in U.S. district court in Manhattan on February 19.
DIMINISHING CLOUT
Investors however were disappointed that Cook – who rarely makes lengthy public-speaking engagements – did not provide a “more substantial” view on returning cash.
Apple’s share price has tumbled in recent months from a high of just over $700 last September. They finished 2.5 percent lower at $467.90 on Tuesday.
“The only thing that would substantially move the stock would be him saying they were returning cash to shareholders or hinting at a new product,” said a manager from a mid-size Dallas hedge fund that owns Apple shares.
“There was a small chance of that happening.”
Article source: http://www.nytimes.com/reuters/2013/02/12/business/12reuters-apple-cook.html?partner=rss&emc=rss
