Carl Icahn continues to press Apple Inc. (NASDAQ: AAPL) to use its $133 billion in cash to buy back its shares. Based on the company’s market cap, it could retire about 20% of the shares into its treasury. Icahn’s theory is that this would drive shares of the huge consumer electronics firm from $100 to over $200. That math does not seem to add up.
Source: Courtesy of Apple Inc.
Among Icahn’s primary arguments is that Apple has no other need for the cash and, based on its history, will not buy another company of substantial size and value.
Apple’s board could cast around to buy a company that would eat up most of its cash balance. Some of the best fits are too expensive. Google Inc.’s (NASDAQ: GOOG) market cap is $390 billion. Facebook Inc.’s (NASDAQ: FB) is $201 billion. Amazon.com Inc.’s (NASDAQ: AMZN) is $149 billion.
Further down the table of American public corporations are several that have market values of about $100 billion. These include Goldman Sachs Group Inc. (NYSE: GS) at $86 billion. A large investment bank does not seem to be a good marriage for Apple. Altria Group Inc. (NYSE: MO) has a market cap of $92 billion. However, the cigarette business carries too many legal risks to be a good candidate. American Express Co. (NYSE: AXP) might be a good fit with Apple’s new Apple Pay online, wireless payment technology, although $100 billion might be too much to offer to get one complimentary system for Pay. Boeing Co. (NYSE: BA) has a market cap of $91 billion. It is a hardware company of sorts, but the price points of its products are much larger than Apple’s.
With most of the companies with market caps of $100 billion or so are excluded, the one that remains is McDonald’s Corp. (NYSE: MCD) with a market cap of $92 billion.
After combing through the list of public corporations that Apple could buy and dispose of its $133 billion via one M&A event, it looks like Icahn may be right. The most appropriate thing for Apple to do is return its cash to shareholders.
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