SAN FRANCISCO |
SAN FRANCISCO (Reuters) - Apple Inc Chief Executive Tim Cook called David Einhorn's lawsuit against his company a "silly sideshow" but said the board is carefully considering the star hedge fund manager's proposal to issue preferred stock, calling it "creative."
Waving aside Einhorn's assertion that Apple is clinging to a "Depression-era" mentality, Cook said on Tuesday the board is in "very active discussions" on how to share more of its $137 billion hoard of cash and marketable securities.
Einhorn is suing Apple as part of a wider effort to get the iPhone maker to share more of its cash pile, one of the largest in the technology industry. Einhorn wants the company to issue perpetual preferred shares that pay dividends to existing shareholders, arguing that such a vehicle would be superior to dividends or share buybacks.
His 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, challenges the bundling of the charter change with two other corporate governance-related proposals in "Proposal 2," in the proxy document for the annual meeting.
Cook gave Einhorn credit for the idea, but the usually calm chief executive turned slightly impatient when discussing the topic. He was dismissive of Einhorn's media and legal blitz - which included the lawsuit as well as multiple television and media interviews - terming it "bizarre."
Cook, who traded in his usual casual jeans attire for a suit jacket, said the more serious issue here was finding ways to return cash.
"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 investors at Goldman Sachs' annual technology industry conference in San Francisco.
"My preference would be that everyone on both sides of the issue would take the money they are spending on this and donate it to a worthy cause," he said at the start of an hour-long, on-stage interview conducted by the investment bank.
The conflict over Prop 2 "is a silly sideshow," he added. Cook said he thought it "bizarre that we would find ourselves being sued for doing something good for shareholders."
Apple's share price has tumbled in recent months from a high of just over $700 last September. In early afternoon trade on Tuesday, the shares were down around 1.2 percent at $474.24.
DIMINISHING CLOUT
Apple stock is a mainstay of many fund managers' portfolios, with research firm eVestment estimating that 75 percent of U.S. large-cap growth managers had invested more than 5 percent of their portfolios in Apple as of the end of the third quarter of 2012.
But that also increases the pressure on Apple to give away a bigger portion of its cash hoard, which is rising as the share price declines and its outlook grows murkier.
Cook touched on Apple's acquisition strategy, saying that the company has looked at more than one large acquisition but that none passed the company's internal test.
But Apple could do one in the future, if the technology fits, he said.
"We have the management talent and depth to do it," he said. "We don't feel the pressure to go out and acquire revenue."
Cook, introduced briefly by Goldman Sachs CEO Lloyd Blankfein, disputed a popular view that the smartphone market in developed markets may be saturated.
"On a longer-term basis, all phones will be smartphones and there's a lot more people in the world than 1.4 billion, and people love to upgrade their phones very regularly," he said.
The company is also trying to appeal to cost-conscious customers. Apple has moved to make the iPhone more affordable without introducing a specific cheaper phone, by cutting prices of older models.
"We didn't have enough supply of iPhone 4 after we cut the price," he said. "It surprised us, the level of demand for it."
The chief executive, who departed for Washington, D.C after the conference to join U.S. first lady Michelle Obama at the President's State of the Union address later on Tuesday, otherwise stuck pretty much to his regular script - with a sprinkling of lighter, more personal moments.
He grew animated when praising Apple employees or talking about the company's efforts to improve labor conditions across its sprawling supply chain, and touted the Apple store concept for its uplifting ability.
Cook said that when he is down, he just visits an Apple retail store. "It's like Prozac. It's a feeling like no other."
(Additional reporting by Jennifer Saba in New York; Editing by Gerald E. McCormick, Claudia Parsons and Steve Orlofsky)
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