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One of Apple's biggest shareholders has a plan for the company's cash stockpile

Stephen Lam/Getty Images

Carl Icahn, the legendary investor, is out with a new "open letter" to Apple CEO Tim Cook with a message that should be unwelcome to Apple's management: the company needs to do even more dividends and (especially) share buybacks.

Icahn has been beating this drum for a while, and Cook has responded by launching Apple's first program to flush money out of the company and into the hands of shareholders and then repeatedly increasing its size. But Icahn thinks the program should be even bigger. His core argument is that while Apple's stock is currently very valuable, it actually reflects a fairly pessimistic market outlook.

They say that "the market continues to value Apple at a significantly discounted multiple of only 10.9x, compared to 17.4x for the S&P 500."

That means investors either think Apple will grow at a below-average rate in the future, that Apple will waste the cash it's already accumulated, or some combination of the two. Icahn's letter is full of rah-rah talk about how he loves Apple and how he thinks the Apple Watch and hypothetical Apple car and television products will be huge hits. But his bottom line is that rather than spending its enormous pile of cash on shoot-the-moon efforts to do those things, he wants to see Apple spend its enormous pile of cash on buying shares of Apple stock.

That will, naturally, push up the price of Apple stock, earning a nice profit for Icahn and other major Apple shareholders.

If you don't happen to be a major Apple shareholder, by contrast, it might be nice to see the company spend the money on something technologically and structurally ambitious. But management's current strategy of simply building up higher and higher piles of cash when they already have $194 billion on hand seems difficult to sustain. The impulse to think of this as offering flexibility and security is very understandable. But unless Cook wants to end up just handing this over to his shareholders (boring), he'd better think of a few ways to spend a couple tens of billions of dollars.