Carl Icahn thinks he knows just what Apple (AAPL) stock needs to start moving in the right direction: Fewer shares of Apple stock the market.

But Apple investors who think this is a good idea need to take a hard look at other failed stock buybacks before they endorse Icahn’s plan for AAPL.

The activist investor has been pushing for an unprecedented AAPL stock buyback tallying $150 billion — more than one-third Apple’s current market cap. For perspective, that alone is more than tech buyback leaders Microsoft (MSFT), Oracle (ORCL), Cisco (CSCO), Hewlett-Packard (HPQ) and Texas Instruments (TXN) have spent in the last five years combined.

That would come on top of Apple’s recently approved $60 billion buyback of shares — already the largest single approved buyback plan ever.

The idea is pretty straightforward: Fewer shares outstanding means that Apple stock supply goes down — and thus can rise without a broad uptick in demand. Furthermore, stock buybacks naturally boost earnings per share… because even if the numerator of profits remain constant, the number of shares outstanding declines in that equation.

But big buybacks for tech rivals have hardly meant big gains, as history shows, either in relation to their earnings or their share prices. And Apple stock investors should take note before they jump on the Icahn bandwagon.

Are Stock Buybacks Wasted Money?

The three biggest spenders in the aforementioned bunch are Microsoft, Cisco, and Hewlett-Packard. Over the last five fiscal years through mid-2013 — with exact dates varying slightly depending on accounting — these three tried-and-true tech stocks have spent over $100 billion taking shares off the market.

Those buybacks were meant to boost earnings per share and share price, in theory. But since January 2008, the group has hardly impressed anyone with share performance.

• MSFT: -9%
• CSCO: -21%
• HPQ: -60%
• Average return for group: -30%
• S&P 500: +12%

Microsoft has been the biggest spender of the three, and held the title for single largest buyback program before Apple’s recent announcement. In fact, MSFT just announced yet another $40 billion share repurchase plan.

Indeed, from the five years through the end of fiscal 2013, which wrapped up June 30, Microsoft bought back $39.1 million worth of shares according to its 10-K filings — an average of  just over $7.8 billion per year.

The two biggest years for stock buybacks during that time frame came in 2010 and 2011, with repurchases totaling $10.8 billion and $11.5 billion respectively.

In 2010, Microsoft posted decent results: Net income grew 29% year-over-year thanks to a weak 2009 — yet that was only a 6% improvement over stronger 2008 numbers. Thanks to buybacks, though, that growth rate from 2008 to 2010 was twice as large on a per share basis.

But how did MSFT stock perform during that period? Well, Microsoft stock is up just 10% since January of 2010 vs. a 50% gain for the S&P 500. And in 2010 alone, the stock shed nearly 10% of its value, followed by another 7% slide in 2011.

Having fewer shares hasn’t been enough to prop up earnings since then either. EPS suffered an ugly 25% decline in 2011, while even 2013’s year-over-year improvement didn’t bring the company’s earnings per share back to 2011 levels.

Meanwhile, Microsoft remains behind on mobile and is still struggling to succeed with its new tablet line — both areas that, if successful, could have handily helped organic growth. There’s no guarantee the money earmarked for buybacks could have resulted in new revenue streams, but $40 billion is a lot of cash to throw at research and see what new ideas pop out.

Buybacks come with another peril as well: Buying stock at the top. Stocks like Apple and Microsoft frequently embark on big buyback plans when they don’t have obvious growth ahead of them, and that means there’s a huge risk of buying shares before they decline.

Apple, for example, initiated its buyback plan in 2012, and made its first purchases at the peak at $700 a share. That was a pretty bad time for Apple to invest in itself, obviously. Since then, shares have been sliced nearly in half.

Bottom Line on Stock Buybacks

The bottom line is that buybacks — while often used as short-cut to EPS growth and share appreciation — hardly have an impressive track record for some of the biggest tech stocks out there.

So while Apple has a boatload of money, it hopefully can think of a better way to spend it.

That could mean research, that could mean a big-time acquisition — or heck, that could mean a big special dividend where shareholders get that money directly instead of a roundabout way through AAPL buybacks that may never pan out.

Besides, the stock buyback route is especially questionable for Apple, as it could easily be seen as a sign that the company is throwing its hands in the air and admitting it can more effectively add value by decreasing its number of shares than by designing and releasing a new, popular gadget.

Seems like an odd strategy considering a lack of innovative products is part of the reason the stock has tanked of late as it is — and considering its far from the one that sent Apple stock to $700 in the first place.

As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.