Carl Icahn, the famous activist investor whose name became synonymous with "corporate raider" during his hostile takeover of TWA in the 1980s, has set his sights on Silicon Valley.
Despite controlling relatively small stakes in both companies, he's pushing for big changes. He wants Apple to give part of that cash hoard to shareholders -- like him! And he wants eBay to spin off PayPal, which would probably send its stock shooting up.
While his arguments may have some merit, they illustrate Wall Street's classic short-term mentality and, more important, would damage the long-term prospects of two of tech's most important companies.
He's been here before, pressuring Yahoo (YHOO) to sell to Microsoft in 2008, and more recently taking a 9 percent stake in Netflix (NFLX), then selling half his shares after 15 months to make more than $700 million in profit.
Look, there's a place in the world for short-term investors like Icahn. We all want to be able to get out of investments with something to show for them.
But it's not what the executives at tech firms like Apple and eBay should be worried about. They are investing for the long run and need to continue working on products and new markets without trying to figure out how to make Icahn go away.
"He's like a virus," Rob Enderle, an analyst at the Enderle Group, told my colleague Dan Nakaso. "Wherever he goes, he causes damage. He does well, but the firm he touches, not so much. It's the nature of a raider."
Apple and Icahn did not respond to requests for comment. eBay declined to comment.
So far, Icahn is doing what he does best -- trying to get leverage by buying company shares, proposing shareholder measures and nominating board members.
In Apple's case, the issue is the $150 billion the iPhone maker has amassed. Some see the cash, which is roughly the GDP of Ukraine, as a strategically smart bulwark to help the iPhone maker compete in the hypercompetitive tablet and smartphone markets.
But Icahn sees the company's position as "overly conservative (almost to the point of being irrational)," as he said in a letter Thursday advocating for a shareholder proposal for the company to spend more of that money than it plans buying its own shares, which would probably increase the price of each share.
Apple's CEO Tim Cook did the right thing by engaging with Icahn, who described their encounter as a "good conversation." In his letter Thursday, Icahn was complimentary about the company he called the "pre-eminent and most innovative consumer products company in the world."
But Icahn also is clearly not mollified. He plunked down another $500 million Thursday, bringing his total Apple ownership to about $3.6 billion. That's still less than 1 percent ownership of the firm.
His activity has had one effect. Since he began his campaign in August, Apple's shares have risen nearly 20 percent.
One expert isn't convinced Icahn has much of a chance. Shareholders, said Scott Galloway, professor of marketing at NYU Stern, don't revolt over "financial engineering." Apple reports earnings Monday and Cook may address Icahn's proposal.
Icahn has also set his sights on eBay, where he is lobbying CEO John Donahoe to spin off PayPal, the digital payment division it bought in 2002.
In an earnings call this week, Donahoe rebuffed Icahn and spelled out why it is important for PayPal and eBay's Internet marketplace business to stay together. eBay reported that Icahn had purchased a less than 1 percent stake in the firm and had made two board nominations. In contrast to Apple, eBay shares haven't shot up with news of Icahn's involvement.
Is Icahn right about PayPal? Maybe. NYU's Galloway says eBay shareholders would benefit from a spinoff.
But that doesn't mean eBay should do it.
The only thing Icahn makes are short-term profits. Companies like Apple and eBay that produce real innovation should ignore him and do what they do best.
Contact Michelle Quinn at 510-394-4196 and firstname.lastname@example.org. Follow her at twitter.com/michellequinn.