4 ms·

This is so, so dumb. The cash hoard is going to sit overseas where it has until the tax situation changes. Apple will continue to take over companies that help

by cwyers 10y ago

This is so, so dumb. The cash hoard is going to sit overseas where it has until the tax situation changes. Apple will continue to take over companies that help it control its supply chain, which are mostly companies you haven't heard of, and not do any of these big acquisitions that Wall Street loves to speculate about (a month or so ago it was Disney) but that Apple has never done.

jozzz 10y ago
> Until the tax situation changes Do you mean in the country the cash is sitting in? Because in the article it says: > With over 90 percent of its cash sitting overseas, a one-time 10 percent repatriation tax would give Apple $220 billion for acquisitions or buybacks, Citigroup analyst Jim Suva said in a note to clients. > U.S. President Donald Trump's tax blueprint, which was unveiled last month, proposes allowing multinationals to bring in overseas profits at a tax rate of 10 percent versus 35 percent now.
- Moto7451 10y ago
  The US. Until the tax holiday is law it's a "what if."
arcanus 10y ago
> Apple will continue to take over companies that help it control its supply change, which are mostly companies you haven't heard of This. Was surprised to not see any hardware manufacturers on this list.
- sandworm101 10y ago
  But many of those companies face limitations on forgien ownership (china). I also think apple enjoys not having low-paid workers directly on its payroll.
  - mediaman 10y ago
    Most of the parts are not made in China. That's where assembly is, but very little of the value added content of an iPhone is from China (<5%).
    - sjg007 10y ago
      assembly will probably go robotic.. at least if I was Apple that's what I would do.
- gigatexal 10y ago
  Buying a company might help them double or quadruple their services revenue as they have stated that's a goal. I would love it if they bought Twitter and made it a public service. I know there could be some synergies (sic) there as the engineers could certainly help bolster the stability of Apples cloud offerings in terms of uptime and such.
  - throwaway40483 10y ago
    To me, Twitter goes against anything stands for. Twitter is like the wild wild west. I really can't imagine how they would fit in with Apples very polished M.O.
    - iamatworknow 10y ago
      I agree. As soon as Apple bought Twitter people would want to hold Apple liable for some of the more unsavory things that happen on there. Apple will want to nip those complains in the bud quickly, else risk their brand reputation. Quick changes to appease the loud minority would likely overreach, frustrate the majority, and most of the user base just move on to some other service and think less of Apple at the same time. All while they'll be making no money off of it. It's a no win proposition for them.
  - inthewoods 10y ago
    Recent deal aside, I've long thought that Bloomberg would be a good place for Twitter - they already fund their excellent news services on the back of their financial services products. Twitter would fit well into that and also matches their "real time" approach.
runako 10y ago
I keep hearing this argument that companies won't repatriate offshore cash until they can do so at an arbitrarily low tax rate. What I don't understand is why they wouldn't continue to do what they have been doing: - borrow in the US, potentially by issuing low-rate bonds - use the cash to fund dividends or acquisitions - OR using stock to fund acquisitions It seems this gameplan would hold up until effective interest rates on blue-chip corporate debt are higher than the proposed repatriation tax. Apple offered 3.25% on its most recent bond issue, so it would seem that a 10% tax on repatriation would not be attractive. What am I missing?
- Joeri 10y ago
  There's no magic trick I know to borrow indefinitely at a low accumulated interest rate. If they borrow money with the overseas cash as collateral, how do they repay it? If they do it by borrowing more money, they need to cover the initial debt + the interest. That way the interest cumulates, and eventually the accumulated interest rate dwarfs the original interest rate as well as the tax rate on overseas cash repatriation. Let me also ask: what am I missing?
  - runako 10y ago
    > how do they repay it? Out of cash flow in the US. The companies in question have no problem generating cash in all their markets. > the accumulated interest rate dwarfs the original interest rate as well as the tax rate on overseas cash repatriation See a post down thread about this, but I'm assuming the offshore cash is held in e.g. Treasuries earning ~2%+/-, or roughly 100 basis points below where they can issue debt. This math also neglects the fact that the interest on the debt reduces US tax liability, plus any sweeteners other jurisdictions may offer for keeping piles of cash stored there. Depending on where the cash is stored, it also may be subject to lower tax rates on earned interest than it would be in the US after repatriation.
- djrogers 10y ago
  3.25% is the annual interest rate, it compounds and will cost considerably more than a one-time 10% tax would.
geppeto 10y ago
Apple could issue more bonds and use that cash domestically for buyouts if they wanted. Their last bond sale was just 8 billion. They can do whatever they want.
- cwyers 10y ago
  You're right, they can do whatever they want. And they have been able to do so for several years now. So the best predictor of what they will do is look at what they have done and figure out what they want. Here's Apple's acquisitions: https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Apple https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitio... They have never done the sort of acquisition that Citi is positing here. Why is that? The most straightforward explanation is that they don't want to. And yet financial "analysts" constantly make up these Apple merger rumors... Netflix, Twitter, Tesla, Disney, Blackberry, TimeWarner, Yelp, Tidal, those are just once I came up with looking at a Bing search for "apple merger rumors." They never happen. Yet people still keep responding to them like they're not total bullshit.
  - geppeto 10y ago
    People have to come to that realization on their own. There's a new sucker born every minute, and the way you target those suckers has to adapt to regulations. The way I realized it was when I went through ten year old yahoo finance message boards, and compared consensus arguments on stocks with what happened in those stocks. It was 100% uncorrelated.

by cwyers 10y ago

jozzz 10y ago

> Until the tax situation changes Do you mean in the country the cash is sitting in? Because in the article it says: > With over 90 percent of its cash sitting overseas, a one-time 10 percent repatriation tax would give Apple $220 billion for acquisitions or buybacks, Citigroup analyst Jim Suva said in a note to clients. > U.S. President Donald Trump's tax blueprint, which was unveiled last month, proposes allowing multinationals to bring in overseas profits at a tax rate of 10 percent versus 35 percent now.

Moto7451 10y ago
The US. Until the tax holiday is law it's a "what if."

arcanus 10y ago

> Apple will continue to take over companies that help it control its supply change, which are mostly companies you haven't heard of This. Was surprised to not see any hardware manufacturers on this list.

sandworm101 10y ago
But many of those companies face limitations on forgien ownership (china). I also think apple enjoys not having low-paid workers directly on its payroll.
- mediaman 10y ago
  Most of the parts are not made in China. That's where assembly is, but very little of the value added content of an iPhone is from China (<5%).
  - sjg007 10y ago
    assembly will probably go robotic.. at least if I was Apple that's what I would do.
gigatexal 10y ago
Buying a company might help them double or quadruple their services revenue as they have stated that's a goal. I would love it if they bought Twitter and made it a public service. I know there could be some synergies (sic) there as the engineers could certainly help bolster the stability of Apples cloud offerings in terms of uptime and such.
- throwaway40483 10y ago
  To me, Twitter goes against anything stands for. Twitter is like the wild wild west. I really can't imagine how they would fit in with Apples very polished M.O.
  - iamatworknow 10y ago
    I agree. As soon as Apple bought Twitter people would want to hold Apple liable for some of the more unsavory things that happen on there. Apple will want to nip those complains in the bud quickly, else risk their brand reputation. Quick changes to appease the loud minority would likely overreach, frustrate the majority, and most of the user base just move on to some other service and think less of Apple at the same time. All while they'll be making no money off of it. It's a no win proposition for them.
- inthewoods 10y ago
  Recent deal aside, I've long thought that Bloomberg would be a good place for Twitter - they already fund their excellent news services on the back of their financial services products. Twitter would fit well into that and also matches their "real time" approach.

runako 10y ago

I keep hearing this argument that companies won't repatriate offshore cash until they can do so at an arbitrarily low tax rate. What I don't understand is why they wouldn't continue to do what they have been doing: - borrow in the US, potentially by issuing low-rate bonds - use the cash to fund dividends or acquisitions - OR using stock to fund acquisitions It seems this gameplan would hold up until effective interest rates on blue-chip corporate debt are higher than the proposed repatriation tax. Apple offered 3.25% on its most recent bond issue, so it would seem that a 10% tax on repatriation would not be attractive. What am I missing?

Joeri 10y ago
There's no magic trick I know to borrow indefinitely at a low accumulated interest rate. If they borrow money with the overseas cash as collateral, how do they repay it? If they do it by borrowing more money, they need to cover the initial debt + the interest. That way the interest cumulates, and eventually the accumulated interest rate dwarfs the original interest rate as well as the tax rate on overseas cash repatriation. Let me also ask: what am I missing?
- runako 10y ago
  > how do they repay it? Out of cash flow in the US. The companies in question have no problem generating cash in all their markets. > the accumulated interest rate dwarfs the original interest rate as well as the tax rate on overseas cash repatriation See a post down thread about this, but I'm assuming the offshore cash is held in e.g. Treasuries earning ~2%+/-, or roughly 100 basis points below where they can issue debt. This math also neglects the fact that the interest on the debt reduces US tax liability, plus any sweeteners other jurisdictions may offer for keeping piles of cash stored there. Depending on where the cash is stored, it also may be subject to lower tax rates on earned interest than it would be in the US after repatriation.
djrogers 10y ago
3.25% is the annual interest rate, it compounds and will cost considerably more than a one-time 10% tax would.

geppeto 10y ago

Apple could issue more bonds and use that cash domestically for buyouts if they wanted. Their last bond sale was just 8 billion. They can do whatever they want.

cwyers 10y ago
You're right, they can do whatever they want. And they have been able to do so for several years now. So the best predictor of what they will do is look at what they have done and figure out what they want. Here's Apple's acquisitions: https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Apple https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitio... They have never done the sort of acquisition that Citi is positing here. Why is that? The most straightforward explanation is that they don't want to. And yet financial "analysts" constantly make up these Apple merger rumors... Netflix, Twitter, Tesla, Disney, Blackberry, TimeWarner, Yelp, Tidal, those are just once I came up with looking at a Bing search for "apple merger rumors." They never happen. Yet people still keep responding to them like they're not total bullshit.
- geppeto 10y ago
  People have to come to that realization on their own. There's a new sucker born every minute, and the way you target those suckers has to adapt to regulations. The way I realized it was when I went through ten year old yahoo finance message boards, and compared consensus arguments on stocks with what happened in those stocks. It was 100% uncorrelated.