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UPDATE 2-Icahn takes another $500 mln bite out of Apple

Thursday, 23 Jan 2014 | 4:20 PM ET

SAN FRANCISCO, Jan 23 (Reuters) - Activist investor Carl Icahn picked up another $500 million of Apple Inc shares on Thursday to take his investment in the iPhone maker to $3.6 billion, while ratcheting up his months-long campaign to pry open the company's cash hoard.

Icahn, who repeatedly has called Apple a "no brainer" even as he wages a campaign to get it to return more cash to shareholders, tweeted his latest move just a day after revealing a position of over $3 billion in the company.

In a lengthy letter to shareholders filed with the Securities and Exchange Commission on Thursday, Icahn urged shareholders to vote "yea" to his proposal for a new $50 billion buyback, and laid out familiar arguments as to why Apple should share more of its $146 billion cash hoard.

Apple's strong market position in smartphones and tablets does not justify the company's official stance that it needed to maintain reserves to compete in a fast-evolving consumer electronics industry, Icahn said.

He said the stock's price-to-earnings multiple stood 71 percent below the S&P 500's and that the shares could be worth $840 if that gap was closed. An expansion of its capital return program could help bridge that difference, while allowing the company to express confidence in its own stock.

"Even if the story ended with Apple's existing product and software lines, we would still choose to make Apple our largest investment," Icahn said in the letter.

"But there is more to the story! (CEO) Tim Cook keeps saying that he expects to introduce 'new products in new categories' and yet very few people seem to be listening."

Apple was not available for comment. But in its December proxy statement, it urged shareholders to vote down Icahn's proposal, warning that it needed ready access to cash in a fast-evolving and competitive mobile devices industry. Arch-foe Samsung Electronics has grabbed market share from Apple in past years wile a host of smaller rivals like Huawei are aggressively competing in emerging markets.

Shares of Apple were up 0.6 percent at $555 in late trading.

NO BACKING DOWN

Icahn, known for decades of strong-arm tactics including proxy fights against major corporations, on Thursday again railed against an Apple board that he accused of lacking investment management experience.

It was unclear when or how much stock the activist investor, who in August began trying to get Cook to agree to a $150 billion buyback, now holds. In a letter to Cook made public on Oct. 24, Icahn said he had increased his stake to 4.7 million shares.

Apple's stock has surged 17 percent since Icahn first disclosed a significant stake in the company on Aug. 13, when the shares were trading below $500. An additional $500 million investment on Thursday would translate into roughly 900,000 shares at current levels.

Apple is in the midst of returning $100 billion to shareholders, including a total share repurchase program of $60 billion. It said it had already returned $43 billion in dividends and repurchases.

But more could be done, Icahn argued.

"Given this massive net cash position and robust earnings generation, Apple is perhaps the most overcapitalized company in corporate history," Icahn said in his letter.

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