Apple has nearly $100 billion in cash. $97.6 billion to be precise. That is a lot of iDough. Even for Warren Buffett. Perhaps it’s time for Apple to, I don’t know, use some of it?
Unless Apple (AAPL, Fortune 500) is planning to build an army of Siri-voiced iBots, it’s hard to defend why the company needs that much cash. Even company executives admit that it may soon have to deploy some of it.
During the company’s celebratory earnings conference call Tuesday, Apple CFO Peter Oppenheimer said the company “was not letting [the cash] burn a hole in our pockets.”
Really? Apple’s iMountain of money has nearly doubled since the end of fiscal 2010. But Apple doesn’t pay a dividend. It doesn’t make splashy acquisitions or buy back stock.
If Apple’s cash keeps piling up, at this rate it won’t just burn a hole in the company’s pockets. It would be big enough to swallow up the entire universe.
Now one reason Apple is still hanging onto cash is because it doesn’t want to pay a sizeable chunk of taxes to Uncle Sam if it used that money on something productive or shareholder friendly. Oppenheimer said Tuesday that $64 billion of its cash was offshore. It is “trapped” if you will.
Apple is a multinational company. So there is nothing legally wrong with keeping cash abroad. But it is apparently doing so to avoid having to pay the 35% tax rate on it if it were repatriated or brought back to the U.S.
Many companies are in the same boat. And that’s why Apple, Cisco Systems (CSCO, Fortune 500), Google (GOOG, Fortune 500), Microsoft (MSFT, Fortune 500) and other cash-rich techs are urging Congress to enact a so-called tax holiday.
This group wants the tax rate on profits and cash held overseas to be temporarily lowered. They argue that doing so would help stimulate the economy. Lawmakers have yet to bite.
Apple passes Exxon in market cap again
But even if Apple wants to keep fighting the tax holiday fight, you can’t ignore the fact that it has $33.6 billion in cash in the United States.
That still is a lot of money that Apple could use for a regular, steady dividend, a big one-time cash payout or stock buybacks. Heck, it could do all three. That would all be good for shareholders.
And Apple would still have plenty left over to keep investing in research and development. Keep in mind that Apple generated $17.5 billion in cash flow from operations in its last quarter alone!
Related articles
- Apple stock surges nine percent on record earnings (electronista.com)
- Apple Hints It May At Last Do Something With The Cash (forbes.com)
- Apple Promises To Not Let Its $97 Billion In Cash “Burn A Hole” In Its Pocket (cultofmac.com)
Two thousand U.S. companies paid a median effective cash rate of 28.3 percent in federal, state and foreign income taxes in a 2005 study by academics at the University of Michigan and the University of North Carolina. The combined national-local statutory rate is 34.4 percent in France, 30.2 percent in Germany and 39.5 percent in Japan, according to the Paris-based Organization for Economic Cooperation and Development.
But an iWatch News survey of some major players in the tax repatriation debate found that corporations, far from being cash-starved, are sitting on billions of dollars of liquid assets. In new filings with the Securities and Exchange Commission and conference calls with Wall Street analysts, some big players flatly say they don’t need the tax holiday.
Today, and not a moment too soon, the non-profit Citizens For Tax Justice (CTJ) has put out their findings revealing that twelve of the nations largest Fortune 500 companies, while making $170 billion in profits during the period of The Great Recession, paid an effective tax rate of negative 1.5%.