David Einhorn went back on the offensive against Apple Thursday, reiterating his call for the tech giant to stop hoarding its cash.
Einhorn claims that preferred shares, or iPrefs, as he calls them, are a better way to reward shareholders than stock buybacks or dividend hikes.
"Apple and its shareholders want a solution," he said, during a conference call Thursday, adding that preferred shares "are the best solution to unlock shareholders without impinging on Apple's plans."
Einhorn said iPrefs would unlock about $150 per share in additional value for shareholders, compared with a maximum of about $85 per share through buybacks or dividends.
"We hope Apple agrees with us that iPrefs are an innovative idea who's time has come," he said.
In a lengthy presentation, Einhorn said that technology companies tend to hoard cash in order to make acquisitions and avoid relying on Wall Street for financing. Many in the tech industry "view their self-importance by the size of bank accounts," he said.
But the crux of Einhorn's argument is that hoarding cash is bad for investors and bad for Apple. He compared stockpiling cash to having an inventory problem, where cash sits unused on companies' balance sheets for years, earning next to nothing.
Einhorn singled out Dell (DELL) as an example of a company that took cash hoarding to an extreme.
"We found their attitude toward cash allocation so unappealing that we sold stock," he said.
Einhorn seemed to suggest that Dell CEO Michael Dell had welcomed the decline in Dell's share price, saying it helped Dell take the company private. Once the buyout of Dell is complete, Michael Dell and his private equity partners will be able to use the company's cash as they sees fit, said Einhorn.
"When it's their money, they don't need so much rainy day cash," he said.
Einhorn also dismissed the idea that returning cash to shareholders is a sign that a company's growth prospects have dimmed.
He said "shareholder friendly" companies, such as IBM (IBM) and Texas Instruments (TXN), tend to be rewarded by the market with higher valuations. Both companies offer healthy dividends and stock buybacks.
For its part, Apple has said that its board will "thoroughly evaluate" Einhorn's proposal and has been in discussions about returning cash to shareholders. The company has already returned $10 billion to shareholders and has plans to return another $35 billion.
Einhorn filed a lawsuit earlier this month in response to a shareholder proposal that would prevent Apple's board from issuing preferred shares.
The case went to court Tuesday, but it's unclear when a ruling will be made. Apple will put the proposal to a vote at the company's annual meeting next week.
Speaking at an investment conference last week, Apple CEO Tim Cook called the lawsuit a "silly sideshow." But he acknowledged that the company would evaluate Einhorn's proposal.
"I have no reason to doubt Tim Cook at his word when he says he's going to evaluate this seriously," Einhorn said Thursday. "And I expect him to do so."
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.
Just call Microsoft the Seattle Not-So SuperSonics.
Microsoft (MSFT) CEO Steve Ballmer is part of a group that may buy the NBA's Sacramento Kings and bring professional basketball back to the Emerald City. But hoops-starved fans MOREPaul R. La Monica - Jan 10, 2013 1:10 PM ET
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.
When your stock is trading at just 4 times earnings estimates for the next year, you'd think that the share price couldn't get much lower -- but Hewlett-Packard (HPQ) is proving to be the ultimate value MOREPaul R. La Monica - Sep 27, 2012 1:01 PM ET
Dell is in a world of hurt.
The PC maker reported sales that missed forecasts and cut its outlook for the current quarter. The fact that Dell (DELL) beat earnings estimates was shrugged off by investors, who want to see the company ramp up its mobile efforts.
When it comes to the hottest mobile gadget, Apple (AAPL) is clearly the dominating force, with the iPad. Dell and its rival Hewlett-Packard (HPQ) need MORECatherine Tymkiw - Aug 22, 2012 11:10 AM ET
Renowned bear investor Jim Chanos called Hewlett Packard (HPQ) "the ultimate value trap."
Chanos outlined his vision of how the inevitable death of the personal computer will affect the broader technology industry, but said Hewlett Packard was the company most precariously perched on the edge of obsolescence.
Hewlett-Packard has been hiding its research and development within its $37 billion worth of spending on acquisitions in the last few years, Chanos, president and MOREMaureen Farrell - Jul 18, 2012 3:14 PM ET
Running the fiscally challenged state of California might have been an easier task for Meg Whitman than trying to turn around Hewlett-Packard.
That's what she would be doing right now if she hadn't lost the Golden State gubernatorial race to Jerry Brown in 2010. Alas, she has to "settle" for the more lucrative but arguably more thankless job as CEO of troubled HP.
Hewlett-Packard (HPQ) shares are down nearly 25% this year, MOREPaul R. La Monica - Jun 27, 2012 1:00 PM ET
@LaMonicaBuzz I nominate $DELL for stupid stock move of the day. After May earnings lost 11%, weak outlook, -50% 5yr rtrn - Div changes NADA
— Jeff Reeves (@JeffReevesIP) June 13, 2012
#StupidStock Move of the Day! @JeffReevesIP convinced me! $DELL up 4%? Dividend is nice. But earnings and sales growth would be much nicer.
— Paul R. La Monica (@LaMonicaBuzz) June 13, 2012
Dell (DELL) is finally parting with some of its cash MOREPaul R. La Monica - Jun 13, 2012 2:47 PM ET
Dell (DELL) is helping lead the market lower. Maybe housing finally has bottomed? And one trader is skeptical of Expedia's (EXPE) ability to buck the bearish trend today.
mojoris1977: just because David Einhorn and Whitney Tilson like $DELL doesn't mean you should just blindly follow them in. $XRX
TrendRida: $DELL takes the meaning of value trap to a new level...
firstadopter: $DELL call: seeing consumers switching IT spend to alternative mobile devices (Can MOREPaul R. La Monica - May 23, 2012 1:39 PM ET
Dell (DELL) is a disaster. Hewlett-Packard (HPQ) is expected to report a massive round of layoffs and more disappointing financial results after the bell. The PC is quickly becoming irrelevant in the eyes of investors as tablet mania rules the land.
So why is Microsoft's (MSFT) stock up nearly 15% year-to-date, making it the fifth best performer in the Dow Jones industrial average? A lot is riding on Microsoft's upcoming MOREPaul R. La Monica - May 23, 2012 8:31 AM ET
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