(MoneyWatch) Apple (AAPL) stock crossed over the $500 per share mark for a while yesterday, seemingly pumped up by .
The activist (or corporate raider, depending on who is describing him) said that he had spoken with CEO Tim Cook and said that Apple's stock buyback program needed an immediate boost. Icahn further mentioned that he has a large position in Apple shares and that the stock is "extremely undervalued."
Arguing Apple's stock as undervalued is hardly a new position to take, and it is true that the company's worth is often discounted by analysts and big investors. What other tech firm has managed the amazing levels of revenue and profitability? But the bump is temporary. What will return the stock to higher price levels, or send it tumbling down even further, is how Apple's new products this fall perform.
Icahn has been known to take large positions in companies, nudge them this way or that, and then pocket a profit. His mantra of "unlock value for shareholders" sounds like something from the 1980s, when corporate raiders like Icahn would buy companies, break them apart, and sell off the pieces for large profits. It is a different approach to activism than someone such as Ralph Whitworth, founder of hedge fund Relational Investors LLC, who is currently chairman of the board at struggling HP (HPQ) and who focuses on good corporate governance and making information transparent.
When Icahn starts pushing, big investors realize that some volatility and at least a temporarily higher stock price are distinct possibilities. But while a buyback might funnel some of Apple's huge cash hoard into the pockets of investors, it won't fix the underlying issues for the company.
Although many like to judge Apple on its strength in the North American market, the consumer electronics industry is a global one. Winning means not just in one region, but having a strategic approach that can bring success in many countries.
Especially with a push into emerging markets, the average Apple customer has become far more price sensitive,. As a result, Apple's average sales price on iPhones and iPads has dropped significantly over the last six months.
Companies can effectively balance price and margin against volume, adjusting the mix to maximize profits. But Apple has always been most successful as a premium product purveyor and is nowhere as experienced as Samsung at working low-margin business to obtain market share. And falling prices and margins mean more pressure on profits, which can throw many investors who expect constant, high growth into a tizzy.
If Apple can knock one out of the park with a new product that sets imaginations on fire, expect a big, sustained stock uptick. But if the emphasis is on new less expensive versions of the iPhone and iPad, and financial payouts urged by the likes of Carl Icahn, a long-term recovery of its share price will be difficult.