Just because Icahn is pushing the idea doesn't make it a bad idea. If done over 3 years, Apple will earn after paying dividends $75B. So starting now, if they did a $100B, their $143B cash hoard would only drop to $118B after 3 years while reducing shares by about 170M down to about 730M. If they did $150B, their cash hoard would be a more reasonable $68B and shares would be down to about 650M. If they make $36B in annual income over next 3 years, those lower share counts will earn $50 or $56 EPS. At current 13 PE, the stock is at $650 or $728.
So why are you opposed to this idea if you are a long?
I agree with your logic, completely. However, I don't like the timing of this. Apple runs a cautious company, acting as if every dollar is its last. My guess is that they will raise the dividend and the buyback ... in April. They really like running on set schedules. Any chance of them doing so early has probably completely disappeared, as they would never allow the public to believe that Carl Icahn forced their hand. Carl Icahn had the opportunity to have his say at dinner with Tim Cook and should have graciously closed his mouth after he was allowed to have a night of Tim Cook's time. But he didn't, and I think any opportunity of increasing the buyback has gone out the window. And if Apple does it for no other reason than to maintain their image as a company run by their management and BOD, then so be it. Carl Icahn needs to learn some etiquette. Turning this into a blogging sideshow really spits in the face of Tim Cook and the respect he showed Icahn.
I think there is a fear of the notion of owing a large amount of debt. However, given the current cash stockpile and strong cash flow, I think this should be less of a concern since they actually have the cash, its just held outside the US for tax purposes. This cash would collateralize the debt that would have to be taken on, and the interest expense can be tax deductible, plus the savings on dividends would offset the cost.
$150 is probably a too large a number - but an immediate buy back of $50 to $75 billion should be considered. Like Buffet says, if you can buy $1 with eighty cents, you should do so.
If Cook announces an increased buyback on Tuesday, the stock can only go up as this leverage on earnings will undermine shorts for 3 years and they will have to look elsewhere unless the Apple business as a whole begins declining.