Hedge fund billionaire David Einhorn, who runs Greenlight Capital has just made an appearance on CNBC’s “Halftime Report”, talking about Apple among other companies he has invested in. He said that Apple’s decision to launch one of the biggest share buybacks in history, moved the company’s capital management “from a D- to a C”. “Obviously more could be done that would probably unlock additional value, but it’s not so bad at this point that I really want to complain about it”, he said (via AllThingsD).
“People look at Apple and ask, ‘Is it the next Motorola or BlackBerry?’” Einhorn said. “People paid fancy multiples for those stocks and got crushed and they don’t want to go through that again. But I think Apple’s a little bit different from those companies, because the ecosystem component [drives] recurring sale[s]. If you have an iPhone, you’re more likely to buy the next iPhone. They have over a 90 percent renewal rate on that basis, which is something those other companies never had.”
Einhorn attributes the rationale for Apple’s conservative cash management to co-founder Steve Jobs. He said that it makes sense for Apple to maintain a good, strong cushion, so they can continue to innovate “even if the market hits a bad cycle”, and given what has happened to BlackBerry in the past few years, it seems wise.
He also said that getting involved in the Cupertino company was a “rare event” for him.