Call it a “quality problem.” Apple, which announced the biggest quarterly profit in history, to the tune (or iTune) of $18 billion, has more cash than it knows what to do with. Of course it could make acquisitions, but these deals need to be carefully planned out and executed. Apple received criticism for its purchase of Iovine and Dr. Dre’s Beats, for $3 billion, when the purchase price was pocket change for Apple. It just seemed like a lot to everyone else.
Hedge fund managers are certainly profiting from Apple’s success, and it is no wonder they feel they should have some say concerning how Apple spends its money. According to iBillionaires.com, Carl Icahn, David Einhorn, Leon Cooperman, David Tepper, George Soros, Julian Robertson, Ray Dalio and Richard Chilton made a total of $550 million on Apple’s recent record-breaking earnings alone.
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Impatient to see Apple sitting on all that cash, which has been a perennial quality problem, Carl Icahn demanded the company return some of it to shareholders. David Einhorn became even more aggressive and actually sued the company two years ago to force it to buy back stock and raise its share price. Einhorn’s Greenlight Capital predicted the move would increase the value by $50 a share or more, and his prediction turned out to be correct.
Now Apple has $142 billion, but a lot of it is stashed overseas to avoid a 35% tax rate. CEO Tim Cook told Congress two years ago that a lot of that cash could come back to the U.S. if there were corporate tax reforms in place so he wouldn’t be penalized. But even if there is tax reform, the question remains what Apple would do with it all.