"(G)iven the persistently excessive liquidity of $133 billion net cash on Apple's balance sheet, we ask you to present to the rest of the board our request for the company to make a tender offer, which would meaningfully accelerate and increase the magnitude of share repurchases," Icahn wrote in a lengthy letter posted on his site.
Icahn added, "We thank you for being receptive to us the last time we requested an increase in share repurchases, and we thank you in advance now for any influence you may choose to have communicating to the rest of the board the degree to which a tender offer would have a positive impact on an EPS basis for all shareholders."
Icahn said his firm, Icahn Capital, will not sell any of its shares if the company expands share buybacks: "We commit to this because we believe Apple remains dramatically undervalued. And we think you and the board agree."
Apple will grow earnings per share by 30% in each of fiscal year 2016 and 2017, per Icahn's estimates. Based on that, "we see Apple's P/E of just 8x our FY 2015 forecast as both irrational and transient in nature, especially since many actively managed mutual funds remain underweight Apple in their portfolios."
Based on Icahn's estimated 19X price-to-earnings ratio for fiscal 2015, Apple is worth $203 per share including net cash. Apple stock closed Wednesday at $100.80 per share; in premarket trading Thursday, shares were up 0.9%.
In the letter, the investor praised Cook and the Apple management team, and said Apple is "poised to take market share from Google (Android) in the premium device market as iPhone 6 becomes Apple's flagship device among a growing collection of products and services that work together to form an increasingly dominant mobile ecosystem."
He added, "To be totally clear, this letter is in no way intended as a criticism of you as CEO, nor is it intended to be critical of anything you or your team are doing from an operational perspective at Apple. Quite to the contrary, we could not be more supportive of you and your team, and of the excellent work being done at Apple, a company that continues to change the world through technological innovation."
© 2014 Variety Media, LLC, a subsidiary of Penske Business Media; Distributed by Tribune Content Agency, LLC
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