AAPL dips below $400B, Buffett tells Cook to ignore cash complaints, buy back stock

By , Mar 4, 2013

buffett

You can’t get a better financial advisor than Warren Buffett. The so-called ‘Oracle of Omaha’ Monday weighed in on what Apple should do, faced with low stock prices and one investor’s call to use the iPhone maker’s billions in cash. Although Buffett’s appearance Monday morning on CNBC lasted three hours, the short version is this:

Apple CEO Tim Cook should buy his company’s stock while cheap. It’s uncertain whether the financial whiz will have any luck, seeing Cook’s predecessor Steve Jobs supposedly ignored similar advice. Coincidentally or not, Apple’s market capitalization dropped below $400 billion in early trading Monday, the first such drop since January 2012…

The Berkshire Hathaway founder claimed on the network’s Squawk Box show, via Fortune:

“When Steve called me, I said, Is your stock cheap? He said, yes. I said, Do you have more cash than you need? He said, a little. [laughs] I said, then buy back your stock. He didn’t.

Now, when our stock went from $90,000 to $40,000 to $45,000, I wrote about, we wanted to buy the stock. We didn’t quite manage to.

“But if you could buy dollar bills for 80 cents, it’s a very good thing to do,” the famous investor remarked.

In early trading Monday morning, Apple’s market capitalization has dropped below $400 billion. AAPL first passed $400 billion in January 2012, hitting a peak of nearly $700 billion in September 2012.

However, shares have been under lots of pressure and declining in recent months.

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In answering how Apple should respond to depressed stock prices, Buffett said:

The best thing you can do with a business is run it well, and the shares will respond.

The investor – who says he does not now nor has ever owned Apple shares – recommended Apple CEO Tim Cook ignore calls for Apple to issue preferred shares.

Before withdrawing his lawsuit, Greenlight Capital founder David Einhorn had pressed Apple to issue preferred shares that would have given investors a four percent cash dividend.

“I would ignore him,” Buffett said. “I would run the business in such a manner as to create the most value over the next five to 10 years. You can’t run a business to push the stock price up on a daily basis.”

He said Berkshire shares have fallen 50 percent four times.

“When that happens, if you’ve got the money you buy it.” But if you could buy dollar bills for 80 cents, it’s a very good thing to do.”

While acknowledging Apple “may have too much cash,” Buffett noted one reason for the cash horde “is two thirds of it has not yet been taxed.”

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  • http://twitter.com/lgasparjnr laszlo gaspar

    I’m now wondering if apple could be on it’s way down or if it will spring back with the release of a new category of device.

    • TesticularFortitude

      The trouble isn’t Apple’s performance. It’s meeting analyst’s expectations. Compare Apple’s performance in its most recent quarter to that of the industry.

      Like Mr. Buffett says, Apple should just focus on making great products and not worry about Wall Street.

    • http://twitter.com/Chindavon Chindavon

      There is No Way Apple is on it’s way down because some analysts give an unreasonable lofty expectations and Apple barely misses them with record breaking Quarter after Quarter. No freakin’ way.

  • http://twitter.com/AmadhyaJain Amadhya Jain

    Lol apple is gone to dogs. In the past one or two years, their stock has toppled from 700B to 400B ie a drop of 57%. It’s actually astonishing as just a couple of months back analyst were betting that the safest bid for shareholders is to move to Apple. Apple was a revolutionary company and will always be . Its contributions to the Pc and Smart Phone era are great. From the Apple 1 to Macintosh to to iPod iPhone to iPad their contributions are significantly. It is observed that every time there stocks dipped, it was for the good. In the history, there stocks have always dipped and have recovered with a huge margin of profit. But then they had Steve and honestly speaking Tim Cook is useless and just eats money. Steve Jobs was the man and is the man who created Apple. For me no Jobs=No Apple. He has always been the man behind their success. I tried out the iPhone 4S liked it but honestly, I think that if Steve was alive, he would’ve done it differently. And then the iPhone 5 came out. Sure it is the same great product but I never wanted the same 4S with an extra row of icons. I bought the Gslaxy Note 2 and would not turn back. Sure I dont recommend the Note 2 over the 5 or the iPhone 5 over the note 2 but yes there is another world out there. I do at some places feel that yes the iPhone was better here but I still don’t regret my choice. Apple is dead without Steve. Without him a great sector of innovation has stopped. Face it guys, we have seen this happen to many companies. Microsoft has been dead ever since Bill Gates left. BlackBerry’s were the style statement just a few years back. Everybody had a BlackBerry and that made you look cool. Nokia was ruling over almost the whole world. A decade back, everybody went Gaga over Sony but where does it stand today. I’m sure Apple can recover and I hope they do and I am open to switch back but at this point of time No. I want to live with an open mind and I know that by being headstrong everybody goes to trash. I have a completely open mind and do not mind switching to another company if Samsung too does stop innovating. Guys we all have fought too much and I’m pretty damn sure that Apple and Samsung or Apple and HTC would not hate each other as much as their fans hate each other. This was just mine opinion and I don’t expect yours to be the same but I do expect that you guys understand mine.

    • TesticularFortitude

      I think you fail to understand the crux of problem here. It’s not that Apple isn’t performing(they are), it’s that they aren’t satisfying Wall Street.

      Your argument is invalid as blackberry and Microsoft lost their footing due to underperformance, not because their stocks weren’t able to meet Wall Street’s expectations.

      Huge difference.

      Wall Street is oblivious to innovation – they look at numbers. For example, had Apple sold 51 million iPhones instead of 48 million(the Street estimated greater than 50 million), the Street would have been happy – even if those numbers came from the “less innovative” iPhone 4S.

      • felixtaf

        Wall street for crappy analysis and Forbes for shitty rumors… Still they wont accept the fact about Apple’s sales figures.

  • http://twitter.com/T1rell T1rell

    Puts apple in a tight spot, but i guess its best for apple to charge forwards and not try to play it safe. This just may be the wakeup-call the company needs to start getting innovative once again. We’ll see how it plays out

    • http://www.facebook.com/joe.jonsen Joe Jonsen

      yeah they are competing against themselves and losing lol

  • http://twitter.com/Chindavon Chindavon

    I just don’t get all of this ‘Doom & Gloom’ with Apple. I may be naive but I see people with Apple products EVERYWHERE! All of their products are top notch and heads and shoulders above the rest in terms of Quality and user-friendliness. Price is at a premium, but hey, you GET WHAT YOU PAY FOR. They just finished with their most profitable quarter ever and still, Wall Street still thinks they’re sinking. I’m sure all of this will pass once they come out with the next big thing and I think this iWatch could be it. After that, once the 4K televisions become the norm, they can start diving into that.

    • TesticularFortitude

      Wall Street somehow expects Apple to grow at a 50% rate, year over year. Most people realize that this is impossible.

      For example, OS X grows at a faster rate than Windows only because OSX has a much smaller install base. And, per ususal, analyst and bloggers follow with the customary “Windows is failing” nonsense.

      It’s called the law of large numbers.

  • http://www.facebook.com/joe.jonsen Joe Jonsen

    apple is good at ignoring

  • sassa

    well it’s only because of “entitlement” shareholders like Einhorn who want to fleece the company, and play games to stress them into corruption. Apple should stand up to bullies as this. They are more profitable than 80 Amazon.coms. Seriously, the stock will go back up. It’s just a question of when. When Apple sends clear message to carpet baggers like Einhorn it won’t be pushed around, most likely.

  • sassa

    i always smell jealousy on apple haters foul breath