Einhorn Scores Legal Victory Versus Apple in Cash Scuffle

U.S. District Judge Richard Sullivan in Manhattan granted a motion by Einhorn's Greenlight Capital for a preliminary injunction stopping a vote on that proposal, scheduled for the company's February 27 stockholders' meeting.

The decision could hand Einhorn more leverage as he pursues his pitch for Apple to issue what he has called the "iPref": preferred stock with a perpetual dividend that he contends would reward investors and help boost the company's share price.

Greenlight sued Apple on February 7 as part of a broader pitch to unlock more of its $137 billion in cash. The hedge fund manager has lobbied Apple to issue preferred stock with a perpetual 4 percent dividend, and on Thursday made a direct appeal to shareholders on a teleconference.

Apple Chief Executive Tim Cook last week dismissed the lawsuit as a "silly sideshow."

The lawsuit itself challenged a measure called Proposal No. 2 that Apple put forward, which would eliminate its power to issue preferred shares without a shareholder vote.

At issue is Apple's "bundling" of that measure with two other unrelated matters into a single proxy proposal.

Greenlight said it supported two of the proposed amendments, but not the one on preferred shares.

In his ruling, Sullivan said Greenlight and another investor who also sued Apple "are likely to succeed on the merits and face irreparable harm if the vote on Proposal No. 2 is permitted to proceed."

"We are disappointed with the court's ruling. Proposal No. 2 is part of our efforts to further enhance corporate governance and serve our shareholders' best interests," Apple spokesman Steve Dowling said. "Unfortunately, due to today's decision, shareholders will not be able to vote on Proposal No. 2 at our annual meeting next week."

A spokesman for Greenlight called the ruling a "significant win for all Apple shareholders and for good corporate governance."

But not all shareholders were happy. California pension fund Calpers, a major Apple investor and public supporter of Apple's proposal, said implementation of "majority voting and shareholder approval for the issuance of new stock - preferred or otherwise - is worth waiting for."

"We encourage Apple to reintroduce these measures as soon as is practical so that all investors can be heard," Anne Simpson, Calpers' director of global governance, said in a statement.

BUNDLES

The ruling could be a warning for other companies when issuing proxy proposals, said James Cox, a professor at Duke University School of Law.

"It's going to make managers reluctant to bundle things together, because you're never going to know when you send them out if there's an Einhorn out there," he said.

The lawsuit was centered on a narrow issue of whether Apple violated U.S. Securities and Exchange Commission rules by "bundling" the preferred shares item with two other unrelated matters into one proxy proposal.

Greenlight's lawyers contended the SEC rules were intended to protect shareholders from being forced to vote for a proxy proposal involving materially different issues that the investors might not entirely support.

Apple had argued Proposal No. 2, which only dealt with amendments to its charter, constitute a single matter and wasn't bundled. Sullivan called the company's arguments "unavailing."

"Given the language and purpose of the rules, it is plain to the Court that Proposal No. 2 impermissibly bundles 'separate matters' for shareholder consideration," Sullivan wrote.

Judge Sullivan also found that Greenlight would be irreparably harmed without the injunction, since it would be forced to vote against its own interests. Denying Greenlight's motion would prevent it and other investors from exercising their rights to a fair vote, Sullivan said.

Sullivan separately declined to block a vote from going forward on a separate proxy proposal, Proposal No. 4, which sought an advisory "say on pay" vote on Apple executives' compensation.

The proposal had been challenged by investor Brian Gralnick of Pennsylvania, who contends Apple did not disclose enough details about how it made its compensation decisions.

Sullivan rejected that argument, saying Apple's disclosures were "plainly sufficient under SEC rules."

Arnold Gershon, a lawyer for Gralnick at Barrack, Rodos & Bacine, said he was "very pleased" with Sullivan's decision to the extent it enjoined the Proposal No. 2 vote, though said he would have to decide what to do next with regard to the say-on-pay proposal.

Sullivan directed the parties to submit a joint letter by March 1 outlining the next contemplated steps in this case.

Apple shares closed up 1.1 percent at $450.81 on Friday.

The case is Greenlight Capital LP, et al., v. Apple Inc., U.S. District Court, Southern District of New York, 13-900.

(Reporting by Nate Raymond in New York; Additional reporting by Poornima Gupta in San Francisco; Editing by Martha Graybow, Gary Hill, Leslie Adler, Carol Bishopric and Lisa Shumaker)

On Twitter and Apps, Audience at Home Scores the Debate

Presidential debates are customarily scored and picked apart the instant the moderator says “good night” at 10:30 p.m. But the Web is speeding up time. When the first of this season’s debates started on Wednesday in Denver, the scoring began at 9:01 p.m., as soon as Jim Lehrer, the moderator, said “Good evening.”

Jim Lehrer, the moderator, during the debate on Wednesday night in Denver. After the debate, television commentators tapped into social networks to gauge immediate reactions. More Photos »

A one-stop destination for the latest political news — from The Times and other top sources. Plus opinion, polls, campaign data and video.

Mr. Lehrer’s open-ended questions, Mitt Romney’s plan to end the federal subsidy for PBS and Mr. Romney’s high energy level — against President Obama’s comparatively low energy level — all received spikes of attention from viewers who were chatting online along with the debate. The instant feedback helped harden conventional wisdom that Mr. Obama had turned in a weak performance, even before he had finished speaking.

On MSNBC, liberal hosts like Ed Schultz were taken aback by Mr. Obama. Mr. Schultz threw up his arms at one point after the debate and asked, “Where was the president tonight?”

His colleague, Chris Matthews, loudly suggested that Mr. Obama watch MSNBC’s programs for debating advice. “He will learn something every night on this show and all these shows,” he said.

After Mr. Obama was pronounced “rusty” by CNN hosts, the analyst David Gergen said, “I didn’t think he was rusty so much as I don’t think anybody’s ever spoken to him like that over the last four years. I think he found that not only surprising, but offensive in some ways.”

The recent surge in so-called second-screen behavior was vividly on display during the debate, both on social networking sites like Twitter that barely existed four years ago and on all manner of even newer apps promoted by media companies. At least half a dozen outlets, as varied as CNBC and The Huffington Post, had debate drinking games ready to go beforehand.

Afterward, the television networks that used to have a monopoly on pre- and postgame shows tapped into the torrent of online opinions. On NBC, Brian Williams quoted from the instant reactions of the journalists Ron Fournier and James Fallows. Fox News Channel’s Greta Van Susteren cited Twitter messages from the progressive HBO host Bill Maher (“I can’t believe I’m saying this, but Obama looks like he does need a teleprompter”) and the Republican strategist Mike Murphy (“It’s funny; tonight Romney is much better than his campaign; Obama is far worse”).

Mr. Romney’s mention of Big Bird — in the context of ending federal funding for PBS — stirred an enormous amount of online attention, as well as a few parody accounts on Twitter, with made-up names like “Fired Big Bird.” Hours after the debate concluded, Big Bird was still a trending topic on Twitter.

Outlets like NBC used the debate, the first of four this month, as a test bed for new online tools. Reflecting the changes in consumer behavior, Vivian Schiller, the chief digital officer for NBC News, said, “I can’t watch a debate anymore without having my iPhone in my hand. I don’t feel like I’m having the full experience if I’m not reading the reaction in real time.”

For the duration of the debate, many of the reactions were cynical, particularly on Facebook, far preferred over Twitter by normal viewers at home. Users there accused both candidates of dodging questions and lying their way through the 90-minute session. Joked one Facebook user afterward, “I should have played the debate drinking game!”

And in something of a Rorschach test, Votizen, a technology company, tracked Twitter messages from registered voters. Minutes after Mr. Lehrer ended the debate, Votizen found “love” to be the top term used by Republicans and “tax” to be the top term by Democrats.

And independent voters? The top term was “LOL,” short for laugh out loud.

State of the Art: Apple’s iPhone 5 Scores Well, With a Quibble - Review

First, design. A single company, known for its obsession over details, produces both the hardware and the software. The result is a single, coherently designed whole.

Second, superior components. As the world’s largest tech company, Apple can call the shots with its part suppliers. It can often incorporate new technologies — scratch-resistant Gorilla glass, say, or the supersharp Retina screen — before its rivals can.

Third, compatibility. The iPhone’s ubiquity has led to a universe of accessories that fit it. Walk into a hotel room, and there’s probably an iPhone connector built into the alarm clock.

If you had to write a term paper for this course, you might open with this argument: that in creating the new iPhone 5 ($200 with contract), Apple strengthened its first two advantages — but handed its rivals the third one on a silver platter.

Let’s start with design. The new phone, in all black or white, is beautiful. Especially the black one, whose gleaming, black-on-black, glass-and-aluminum body carries the design cues of a Stealth bomber. The rumors ran rampant that the iPhone 5 would have a larger screen. Would it be huge, like many Android phones? Those giant screens are thudding slabs in your pocket, but they’re fantastic for maps, books, Web sites, photos and movies.

As it turns out, the new iPhone’s updated footprint (handprint?) is nothing like the Imax size of its rivals. It’s the same 2.3 inches wide, but its screen has grown taller by half an inch — 176 very tiny pixels.

It’s a nice but not life-changing change. You gain an extra row of icons on the Home screen, more messages in e-mail lists, wider keyboard keys in landscape mode and a more expansive view of all the other built-in apps. (Non-Apple apps can be written to exploit the bigger screen. Until then, they sit in the center of the larger screen, flanked by unnoticeable slim black bars.)

At 0.3 inch, the phone is thinner than before, startlingly so — the thinnest in the world, Apple says. It’s also lighter, just under four ounces; it disappears completely in your pocket. This iPhone is so light, tall and flat, it’s well on its way to becoming a bookmark.

Second advantage: components. There’s no breakthrough feature this time, no Retina screen or Siri. (Thought recognition will have to wait for the iPhone 13.)

Even so, nearly every feature has been upgraded, with a focus on what counts: screen, sound, camera, speed.

The iPhone 5 is now a 4G LTE phone, meaning that in certain lucky cities, you get wicked-fast Internet connections. (Verizon has by far the most LTE cities, with AT&T a distant second and Sprint at the rear. Here’s a cool coverage comparison map: j.mp/V5wEwN.)

The phone itself runs faster, too. Its new processor runs twice as fast, says Apple. Few people complained about the old phone’s speed, but this one certainly zips.

The screen now has better color reproduction. The front-facing camera captures high-definition video now (720p). The battery offers the same talk time as before (eight hours), but adds two more hours of Web browsing (eight hours), even on LTE networks. In practical terms, you encounter fewer days when the battery dies by dinnertime — a frequent occurrence with 4G phones.

The camera is among the best ever put into a phone. Its lowlight shots blow away the same efforts from an iPhone 4S. Its shot-to-shot times have been improved by 40 percent. And you can take stills even while recording video (1080p hi-def, of course).

So far, so good. But now, the third point, about universal compatibility.

These days, that decade-old iPhone/iPad/iPod charging connector is everywhere: cars, clocks, speakers, docks, even medical devices. But the new iPhone won’t fit any of them.

Apple calls its replacement the Lightning connector. It’s much sturdier than the old jack, and much smaller — 0.31 inch wide instead of 0.83. And there’s no right side up — you can insert it either way. It clicks satisfyingly into place, yet you can remove it easily. It’s the very model of a modern major connector.

Well, great. But it doesn’t fit any existing accessories, docks or chargers. Apple sells an adapter plug for $30 (or $40 with an eight-inch cable “tail”). If you have a few accessories, you could easily pay $150 in adapters for a $200 phone. That’s not just a slap in the face to loyal customers — it’s a jab in the eye.

Even with the adapter, not all accessories work with the Lightning, and not all the features of the old connector are available; for example, you can’t send the iPhone’s video out to a TV cable.

Apple says that a change was inevitable — that old connector, after 10 years, desperately needed an update. Still, Apple has just given away one of its greatest competitive advantages.

The phone comes with new software, iOS 6, bristling with large and small improvements — and it’s a free download that also runs on the iPhone 3GS, iPhone 4 or iPhone 4S.

State Of the Art: Apple’s iPhone 5 Scores Well, With a Quibble - Review

First, design. A single company, known for its obsession over details, produces both the hardware and the software. The result is a single, coherently designed whole.

Second, superior components. As the world’s largest tech company, Apple can call the shots with its part suppliers. It can often incorporate new technologies — scratch-resistant Gorilla glass, say, or the supersharp Retina screen — before its rivals can.

Third, compatibility. The iPhone’s ubiquity has led to a universe of accessories that fit it. Walk into a hotel room, and there’s probably an iPhone connector built into the alarm clock.

If you had to write a term paper for this course, you might open with this argument: that in creating the new iPhone 5 ($200 with contract), Apple strengthened its first two advantages — but handed its rivals the third one on a silver platter.

Let’s start with design. The new phone, in all black or white, is beautiful. Especially the black one, whose gleaming, black-on-black, glass-and-aluminum body carries the design cues of a Stealth bomber. The rumors ran rampant that the iPhone 5 would have a larger screen. Would it be huge, like many Android phones? Those giant screens are thudding slabs in your pocket, but they’re fantastic for maps, books, Web sites, photos and movies.

As it turns out, the new iPhone’s updated footprint (handprint?) is nothing like the Imax size of its rivals. It’s the same 2.3 inches wide, but its screen has grown taller by half an inch — 176 very tiny pixels.

It’s a nice but not life-changing change. You gain an extra row of icons on the Home screen, more messages in e-mail lists, wider keyboard keys in landscape mode and a more expansive view of all the other built-in apps. (Non-Apple apps can be written to exploit the bigger screen. Until then, they sit in the center of the larger screen, flanked by unnoticeable slim black bars.)

At 0.3 inch, the phone is thinner than before, startlingly so — the thinnest in the world, Apple says. It’s also lighter, just under four ounces; it disappears completely in your pocket. This iPhone is so light, tall and flat, it’s well on its way to becoming a bookmark.

Second advantage: components. There’s no breakthrough feature this time, no Retina screen or Siri. (Thought recognition will have to wait for the iPhone 13.)

Even so, nearly every feature has been upgraded, with a focus on what counts: screen, sound, camera, speed.

The iPhone 5 is now a 4G LTE phone, meaning that in certain lucky cities, you get wicked-fast Internet connections. (Verizon has by far the most LTE cities, with AT&T a distant second and Sprint at the rear. Here’s a cool coverage comparison map: j.mp/V5wEwN.)

The phone itself runs faster, too. Its new processor runs twice as fast, says Apple. Few people complained about the old phone’s speed, but this one certainly zips.

The screen now has better color reproduction. The front-facing camera captures high-definition video now (720p). The battery offers the same talk time as before (eight hours), but adds two more hours of Web browsing (eight hours), even on LTE networks. In practical terms, you encounter fewer days when the battery dies by dinnertime — a frequent occurrence with 4G phones.

The camera is among the best ever put into a phone. Its lowlight shots blow away the same efforts from an iPhone 4S. Its shot-to-shot times have been improved by 40 percent. And you can take stills even while recording video (1080p hi-def, of course).

So far, so good. But now, the third point, about universal compatibility.

These days, that decade-old iPhone/iPad/iPod charging connector is everywhere: cars, clocks, speakers, docks, even medical devices. But the new iPhone won’t fit any of them.

Apple calls its replacement the Lightning connector. It’s much sturdier than the old jack, and much smaller — 0.31 inch wide instead of 0.83. And there’s no right side up — you can insert it either way. It clicks satisfyingly into place, yet you can remove it easily. It’s the very model of a modern major connector.

Well, great. But it doesn’t fit any existing accessories, docks or chargers. Apple sells an adapter plug for $30 (or $40 with an eight-inch cable “tail”). If you have a few accessories, you could easily pay $150 in adapters for a $200 phone. That’s not just a slap in the face to loyal customers — it’s a jab in the eye.

Even with the adapter, not all accessories work with the Lightning, and not all the features of the old connector are available; for example, you can’t send the iPhone’s video out to a TV cable.

Apple says that a change was inevitable — that old connector, after 10 years, desperately needed an update. Still, Apple has just given away one of its greatest competitive advantages.

The phone comes with new software, iOS 6, bristling with large and small improvements — and it’s a free download that also runs on the iPhone 3GS, iPhone 4 or iPhone 4S.