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Carl Icahn, the legendary investor has grabbed a large stake in Apple Inc. (AAPL - Analyst Report) after he fought a long battle with Michael Dell to grab a majority stake in the computer maker Dell Inc. . This move by Icahn has added to the substantial pressure exerted on Apple by some shareholders to repurchase shares.
Icahn is of the opinion that the Apple stock is currently undervalued, and suggested Tim Cook, CEO of Apple, to buy back additional shares. It can be safely inferred that Icahn is building up his position in large technology companies at a time when stock prices are trading low.
We believe that CEO Cook is facing constant pressure from different investor groups and hedge fund managers, like David Einhorn, to return some cash to investors in the form of share buybacks. The 22% fall in Apple’s share price over the past one year has only added to the displeasure of the investors caused by the company’s slow growth.
Apple has not yet confirmed the exact size of Icahn's stake, but as per data available from Bloomberg, it is worth more than $1.0 billion. This is less than a quarter of a percentage point of the company’s market capitalization of $444.8 billion.
Icahn strengthened his position over the last one month as he foresees a good return from his investment in Apple. He expects the stock to move up as high as $600 and is confident of the current management’s capability.
It is to be seen how things shape up in the future for Apple as investors cheered Icahn’s move. The company is expected to resume growth with the release of new iPhone and iPad by the end of this year. As per industry sources, Apple is expected to launch the new version of its iPhone on Sep 10, followed by an iPad.
Earlier, Apple succumbed to the pressure created by David Einhorn to start a buyback program. Apple bought back $16.0 billion worth of shares in the recently concluded third quarter. Moreover, the company plans to repurchase $100.0 billion worth of shares by 2015.
In such a scenario, the involvement of a prominent figure like Carl Icahn will put Apple’s Board under further pressure. Icahn is known for his aggressive investing style and although his current stake is not of a proportion to make any substantial change in Apple, his presence will keep Tim Cook on his toes.
Icahn is trying to buy technology stocks at the best possible price. Previously, he influenced BEA Systems to sell to Oracle (ORCL - Analyst Report) and also made a good attempt to take over Lionsgate. Also, he grabbed 10% stake in Netflix (NFLX - Analyst Report) last year, followed by a purchase of 9% stake in Nuance Communications, earlier this year.
While Icahn is making his intentions clear by grabbing controlling stakes in different technology companies, it remains to be seen how Apple handles this delicate situation.
Currently, Apple has a Zacks Rank #3 (Hold).