(Reuters) - Fund manager David Einhorn's Greenlight Capital sued Apple Inc, saying the company needs to do more to unlock value for shareholders.

Einhorn, a well-known short seller, is long Apple shares and said in a television interview on Thursday that while he admires the company, it has a "cash problem" that it needs to fix.

Greenlight filed suit in federal court in New York to force Apple to modify a proposal in its proxy, which Greenlight believes does not conform to regulatory rules.

Greenlight said it is opposed to the proposal, No. 2 on Apple's proxy, which the firm said would remove Apple's ability to issue preferred stock from its charter.

In a filing with the U.S. Securities and Exchange Commission, Greenlight said it was "dissatisfied with Apple's capital allocation strategy."

Apple could not be immediately reached for comment.

In a CNBC interview, Einhorn said shareholders would be happy to received preferred stock with a 4 percent yield.

Calling Apple shares "utterly misvalued" at current levels, Einhorn said the company no longer needs to grow at the near-triple digit rates of the past.

In a statement, Greenlight said it spent part of 2012 in discussions with Apple on the idea of perpetual preferred stock, but that the company rejected it last September.

"We understand that many of our fellow shareholders share our frustration with Apple's capital allocation policies. Apple has $145 per share of cash on its balance sheet. As a shareholder, this is your money," Greenlight said in an open letter to other investors.

(Reporting By Ben Berkowitz; Editing by Gerald E. McCormick)