Icahn Says Apple Should Launch 4KTVs

27 Jan, 2014 By: Erik Gruenwedel

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Maverick investor believes Apple could sell 25 million 4KTVs

Maverick billionaire investor Carl Icahn not only wants higher dividends from his Apple stock, he believes the renowned brand should begin production of Apple televisions with 4K resolution (four times the resolution of regular HD).

In a Jan. 23 letter to shareholders, Icahn, who owns $3.6 billion worth of Apple shares, said the Cupertino, Calif.-based company’s stock is undervalued by more than 50% — even at $550 per share.

Icahn, who said he purchased $500 million of Apple shares on the day of the letter, called his investment a “no brainer,” on par with previous investments made in Netflix and other properties.

“Given the degree to which Apple appears undervalued to us, we almost feel that it’s a waste of time to debate the point,” Icahn wrote.

In addition to suggesting CEO Tim Cook redistribute a greater portion of Apple’s more than $130 billion in free cash, Icahn said the company should use its brand’s prowess to launch a line of 4KTVs priced at $1,600 — a scenario he said would result in the sale of 25 million units given Apple’s success with the iPhone and iPad.

“At a gross margin of 37.7%, which would be consistent with that of the overall company, such a debut would add $40 billion of revenue and $15 billion to operating income annually,” Icahn wrote.

Samsung’s co-CEO last week said he believes the price gap between standard HDTVs and 4KTV should fall to 10% by the end of the year. The investor also cited Netflix’s rollout of the second season of original series “House of Cards” in 4K as a worthy catalyst for 4KTV production.

“While this is true for Netflix, we believe it is also true for Apple, not just for its hardware but also for selling ultra-high-definition movies and shows on iTunes through the Internet,” he wrote.

While Netflix had select episodes of the first season of “Cards” filmed in 4K, CEO Reed Hastings — in the rental service’s Jan. 22 investor interview — cautioned that widespread consumer adoption of 4K was still a ways off.

“In the short-term, there are not many people who own a 4KTV,” Hastings said. “So 4K is going to come about as a percentage of all viewing fairly slowly because you have to get a 4KTV and then only a percentage of our content is available in 4K. So there is no tidal wave coming in the next 18 months.”

Apple, which releases first-quarter results Jan. 27, might have sold more than 57 million iPhones in the quarter, according to Sanford Bernstein analyst Toni Sacconaghi, Jr., who cites the company’s accelerated launch in China for the upped sales expectations.

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