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October 24, 2013

Carl Icahn’s Letter to Apple CEO Tim Cook

Just a few days before Apple’s Q4 report, billionaire investor Icahn gave his input to Cook.

We want to be very clear that we could not be more supportive of you, the existing management team, the culture at Apple and the innovative spirit it engenders. The criticism we have as shareholders has nothing to do with your management leadership or operational strategy. Our criticism relates to one thing only: the size and timeframe of Apple’s buyback program. It is obvious to us that it should be much bigger and immediate.

I have no doubt that Icahn has strong confidence in the executives at Apple. His issue is with the board of directors. He continues with:

As we proposed at our dinner, if the company decided to borrow the full $150 billion at a 3% interest rate to commence a tender at $525 per share, the result would be an immediate 33% boost to earnings per share, translating into a 33% increase in the value of the shares, which significantly assumes no multiple expansion. Longer term (in three years) if you execute this buyback as proposed, we expect the share price to appreciate to $1,250, assuming the market rewards EBIT growth of 7.5% per year with a more normal market multiple of 11x EBIT.

While, this in theory will boost AAPL shares to a new high of $1,250 per stock. Is this really what needs to be done? Shouldn’t Apple be using this large amount of cash to acquire companies and new technologies? Or at least a combination of both buyback and acquisitions?

Finally, a bill to end patent trolling

The bill would require patent holders to lay out details about their infringement case early in a lawsuit, and would require the loser of a patent suit to pay legal fees unless they could show that the case was “substantially justified.” It would expand a program to allow for the review of “business method” patents at the US Patent and Trademark Office, a key request by CCIA that has not been without controversy. And the bill would also allow customers or end users of a technology to stay a lawsuit while the patent holder and the manufacturer battle it out. That would prevent patent trolls from pulling moves like one last month, where a judge let Lodsys dodge Apple’s lawyers— while it continues to threaten iOS developers.

The patent system is broken. No question. Hopefully, this will end all of the wasted sums of money, time and energy by these companies. And maybe they can get back to doing something more productive.

HTC One Max Fingerprint Scanner

The new technology is a major feature of HTC’s behemoth phablet, and it mostly performs the way the company intended. But HTC failed to take into account everyday usability, which is a huge shame—planting it on the back is just plain awkward; it’s a huge oversight that greatly diminishes a stand out feature.

This is a prime example of what separates Apple from the rest. The design of the scanner on the new HTC device is so terrible. Why would anyone in their right mind place the camera lens right above where users are supposed to slide their fingers?

Google breaks 2005 promise never to show banner ads in search results

Google’s decision to start showing banner ads is a repudiation of many of its founding principles. The company gained attention when it started in 1998 because its opening search page, and following results page, was uncluttered by adverts and other elements – and especially banner ads. In 2000 Google’s founder Larry Page and Sergey Brin were offered $3m by Visa to display an ad for the credit card company on the site homepage – and turned it down, even though the site was losing money at the time.

Promises are meant to be broken eh Google? Eventually people are going to just be sick to their stomach with all the garbage plastered over the content they want.

Samsung fined $340,000 over faking negative web comments about competition

Throughout last year, Apple-friendly web sites were infested with an avalanche of ugly comments by anonymous posters concerning the iPhone, iPad and the Apple brand in general. While website owners were reluctant to publicly point the finger of blame at the South Korean conglomerate, many had suspected it was no coincidence given Samsung was riding high on its anti-Apple ad campaign.

I can only make fun of Samsung so much more…

Why Android first is a Myth

The reality is that platform constraints at the engineering and financing levels tell a much different story. “Android-first” faces structural and financial barriers which are unlikely to be overcome. iOS will remain the primary platform that startups develop for regardless of how much more quickly Android grows share.

Steve Cheney goes on to list a lot of outstanding and strong points on this position. I agree with all of them.