Einhorn has a point: what the hell is Apple doing sitting on that money?

Apple hoards cash, apparently, "like a person who has gone through a trauma".

Apple has had to fend off an attack from one of its share holders who is demanding it fork out more of its $137bn cash pile to investors.

David Einhorn has sued iPhone maker Apple accusing the most valuable company in the world of having a “depression era” mentality.

But for a company with a reputation like Apple, which no amount of third world worker scandals seems able to damage, this should be seen as nothing more than an advertisement, splashing the fact that Apple is sitting on more ready cash than a fair amount of small countries on to headlines around the world.

The billionaire activist, who heads up hedge fund Greenlight Capital, told US TV news channel CNBC that Apple hoards cash like a person who has gone through a trauma, referring to Apples near bankruptcy in the early ‘90s before Steve Jobs turned the firms fortunes around with the introduction of the iPod.

Apple shares have tumbled 35 per cent from their peak in September 2012 as its growth has slowed, despite the successful, if not phenomenal, launch of the iPad mini and iPhone 5.

Einhorn’s opinion may be justified; Apple is planning to eliminate its “preferred” stock, which pays out a fixed dividend over time, at its shareholder meeting later this month. These shares are better than ordinary shares when it comes to paying out a company's assets.

Einhorn, it should be noted, has a history of corporate meddling. In May 2011, Einhorn called for Steve Ballmer, (who is still) CEO of Microsoft, to step down after Microsoft was passed by both IBM and Apple in market value.

While Einhorn may not be the most trustworthy of activists, his point may well stand: What the hell is Apple doing with all that money? 

Apple has never explained its reasons for holding onto the cash other than to say its preserving its options but it certainly isn’t using it to develop new products. Apple's tally for research and development in 2012 was 2 per cent of its annual spend, dwarfed by its tech rivals. IBM’s for example is 6 per cent.

While Einhorn’s motives for demanding Apple make use of their cash maybe entirely about increasing his own fortune, Apple is in danger of stagnation if it doesn’t use its vast hoard wisely. 

Maybe the reason it has yet to spend its money is that, without the guiding light of Jobs at the helm, it doesn’t know what to spend it on.

Photograph: Getty Images

Billy Bambrough writes for Retail Banker International at VRL financial news.
 

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Labour should be able to find a better alternative to Corbyn than Smith

The week in the media, including Cambridge entrance exams, the Brexit tourism boom, and why Owen Smith is a no-hoper.

A woman canvassing for Jeremy Corbyn called me the other day. I explained to her that I would be voting for Owen Smith as Labour leader – as long as he seemed to have no chance of winning. She sounded bemused but, after I explained my reasoning, I think she agreed, although she may simply have decided to humour a feeble-minded eccentric.

I told her that my objection to Corbyn is not so much about his political position as about his competence as leader. If he cannot command the confidence of Labour MPs, he is unlikely to command the confidence of voters that he can run the country. However, Labour needs a more convincing alternative than Owen Smith, a soft-left figure in the mould of Neil Kinnock and Ed Miliband, who lost three general elections between them. As his proposal that we should sit down and talk to Islamic State suggests, his ear for politics, like that of the incumbent leader, appears to be manufactured from tin. Moreover, his past as a lobbyist for a drugs company represents precisely the bundle of connections between politics, media and international capital against which so many voters are in revolt.

Smith deserves a large vote, mainly to give heart to future challengers. But – given that no party has ever overthrown two leaders in a single parliament without either having fought a general election – his victory would leave the party with the prospect of nearly four wasted years followed by defeat in 2020. Labour should be able to find a better alternative to Corbyn. There is still time for him (or preferably her) to emerge.

Agent Choudary

It is widely believed in the Muslim community that the Islamist preacher Anjem Choudary is an MI5 agent, whose high-profile flamboyance was used to attract and flush out the most dangerous radicals. Those who subscribe to this theory are not fazed by his conviction at the Old Bailey on terrorism-related charges. Although the prosecution detailed numerous instances in which people allegedly linked to him were convicted of planning violent attacks, nearly all such attacks failed, according to the theory, because Choudary did his job, allowing plotters to be apprehended before they could strike. Now MI5 has decided that he should continue his work in prisons, which are said to be increasingly potent sources of radicalisation.
I hesitate to scoff too much. Who would have thought that the Soviet security services could recruit several former public school boys in the 1930s and plant them in positions at the top of MI6 and the Foreign Office? We should not assume that our spymasters are incapable of being equally clever. Besides, the MI5 agent theory probably does Choudary far more damage among young Muslims than the media’s standard portrayal of him as an evil genius.

Apt pupils

A new hurdle, in the form of a university-wide exam to test “aptitude”, will confront applicants to Cambridge from this autumn. It illustrates why state schools can never hope to catch up, still less overtake, fee-charging schools in the race for elite university places (another manifestation of what the NS calls “the 7 per cent problem”).
Unlike its predecessor, which was abolished three decades ago because it was thought to favour those from privileged backgrounds, the new entrance exam, Cambridge argues, does not require coaching. The publication of sample questions shows that this is not true. Several are, in essence, exercises in logic, which comes naturally to a tiny minority but not to the majority who will need, if nothing else, a great deal of practice to achieve competence even at an elementary level. The better fee-charging schools will organise the necessary preparation for the dozen or so candidates each year who try to get into Cambridge. Comprehensives, with far more modest resources, will not do so for the one or two candidates they are likely to have even in a good year. Their teachers’ inferior knowledge of how the exam will be marked and what tutors will be looking for – matters on which Cambridge is unhelpfully vague – will further disadvantage state school candidates.

Stashing cash

I cannot think of a better example of what crazy times we live in than this. Keeping cash under the mattress used to be something that criminals and mentally impaired old folk did. Now, the Financial Times reports, banks and other financial institutions are thinking of doing it, although they will use vaults rather than mattresses. This is because interest rates are moving into negative territory, so private-sector banks are, in effect, charged for keeping cash in their central bank accounts. The FT estimates that banks have lost €2.64bn since European Central Bank rates became negative in 2014. Some pension funds have already asked their banks for wads of cash in €500 notes.
Could any satirist or futuristic novelist have envisaged this?

Foreign throngs

The Brexit vote and the subsequent fall in sterling’s value has led, it is reported, to a sharp increase in tourism. I thought of this as we struggled through people crammed into the excellent Brontë Parsonage Museum in Haworth, West Yorkshire, the other day. Haworth is a tiny village (population 6,379) that was so poor two centuries ago that raw sewage ran down the main street. Now, it has created a flourishing industry from being the place where the Brontës’ novels were written. 

The prospects for British manufacturing and financial services may be uncertain but there’s always tourism, for which we seem to have an absolute gift. Even the damp, cold climate is an advantage, because it forces more people into the shops. But I wonder what the Brexiteers think of this growth in the number of foreigners, possibly including terrorist sympathisers, now walking our streets and thronging our museums, royal palaces and country houses. 

Peter Wilby was editor of the Independent on Sunday from 1995 to 1996 and of the New Statesman from 1998 to 2005. He writes the weekly First Thoughts column for the NS.

This article first appeared in the 25 August 2016 issue of the New Statesman, Cameron: the legacy of a loser