16 ms·

The End to Apple’s Cash Dilemma

124 points by imartin2k 9y ago

thebiglebrewski 9y ago
How could one profit off of this? Buy Apple stock now?
- adamw2k 9y ago
  That assumes some of this isn't baked into the price already. But yes, if you think the market hasn't factored in any one or more of these potential actions, then buying the stock would be the most logical way to profit...
  - lisper 9y ago
    > if you think the market hasn't factored in any one or more of these potential actions And if you believe that, I have a bridge you might be interested in buying.
    - EliRivers 9y ago
      The market does seem to be frequently bad at that sort of thing. I've done pretty well (better than my index funds) over the years by reading the news and buying shares in companies that seem to have more wealthy futures. I very rarely sell so I can see how they've done over many years and, by and large, pretty well. Maybe everyone assumes that the market has already factored it all in so they don't bother buying so it isn't factored in because the increased demand never arose. Maybe I'm just out of sync, and as other people start to notice this they'll start buying and it'll turn back around and then the market will have factored these things in because lots of people assume it hasn't.
      - icebraining 9y ago
        Or maybe you got lucky. Not saying you did, but how would you tell the difference?
        lisper 9y ago
        This. If you throw darts at the stock page you have a 50% chance of beating the market.
        EliRivers 9y ago
        I have thrown a dozen or so darts, and my rate seems to be around 80%. But then, I'm not just throwing darts; I'm reading that companies are going to do better in the future and will see a rise in stock price, and it makes sense, so I sometimes buy them. Maybe I'm just the lucky one. I started with ARM a good eight years ago, when I read that they were going to do really well by supplying Apple. Of course, if I'd done the same thing with Imagination technologies 8 years ago, it would have been a less happy ending; I can only assume that the news I read at the time was more effusive about ARM. Most recently (13 months ago - this isn't a regular thing), a British pasty retail outfit named Greggs. The news said things were looking good, I could see their stores were busy, I bought some shares, they're up about 40% in 13 months (which is unusually good, I freely admit, and I certainly didn't expect that). That's really all I do, and it seems to work out (and it really is rare when I do; typically, I just dump all my pennies into index funds - easily 80% of my pennies are in index funds). I think some of the big name successful investors do something similar, but obviously on a much grander and more informed scale. Plus the British house-builders. Every time the UK government announces another plan to help young people get fifty year mortgages, it's time to buy some more of them! They will crash eventually, I'm sure :(
        jogjayr 9y ago
        > I'm reading that companies are going to do better in the future and will see a rise in stock price, and it makes sense, so I sometimes buy them. I think that way about my index funds too. But then it's impossible to know the reason for the price rise. Maybe it's because of millions of other guys like me who read the same articles, came to the same conclusion as me, and put their money in too.
        EliRivers 9y ago
      - aetherson 9y ago
        Survivorship bias seems worth investigating here. Do people who make bad stock buying decisions come to these threads and comment on them?
- kondro 9y ago
  Apple is already massively undervalued. $884B market cap. $150B in free cash (which you can effectively take off the top of the market cap). So an adjusted market cap of $734B. A net income after tax (yes, they still pay tax) of $48B. So an adjusted P/E of 15.3x. Some other P/Es of popular tech companies: Facebook: 33.14x Google: 35.03x Salesforce: 12,992x Amazon: 293.84 Intuit: 41.36 Twitter: Can't have a P/E if you don't make money.
matt_wulfeck 9y ago
The question is why was there ever a dilemma in the first place. We were the only country to tax corporations this way, which made us incredibly uncompetitive -- but worse kept money from being invested in the US. This is great news for the USA and bad news for everywhere else in the world that would have otherwise received the investment. We should be doing everything possible to bring that money home.
- SaltySolomon 9y ago
  The easy solution would be to tax all earnings worldwide equally, but that doesn't work either because then they will create a subsidiary in that country which will store the cash and the mother cooperation will have no earnings on it. Actually thinking about it, this way of taxing is pretty much the same in every country in the world.
- cowsandmilk 9y ago
  What is the mechanism by which it has kept money from being invested in the US?
  - mattnewton 9y ago
    If they bring the money back here to pay people or buy things in the us, they get taxed, but they don’t get taxed if they pay people in other countries. So it effectively makes the US more expensive for that money.
  - lacker 9y ago
    When Apple or Google had billions of dollars kept overseas like this, they could still invest it outside the US with no additional tax burden. So when these companies were building new datacenters or hiring new employees or doing any sort of investment in their business, there was essentially a 30% discount to do it internationally rather than in the US.
    - seanmcdirmid 9y ago
      Not the whole 30%, they will get a credit for taxes paid overseas, though because different tax systems don’t match up very well, double taxation is inevitable without a decent treaty in place.
guelo 9y ago
> This has led Apple, along with other Silicon Valley firms, to keep foreign cash offshore as it is the financially prudent thing to do for shareholders. The kept the cash offshore with the belief that they would eventually be able to bring it back without paying taxes. They started a multi-year political lobbying campaign to change the tax system. And it worked. If our political system was not up for sale they would have eventually had to bring the cash home and pay their damn taxes.
- garmaine 9y ago
  Or keep it offshore and use it to finance foreign investments.
  - seanmcdirmid 9y ago
    Ya, they can always open up a few R&D centers in say china, or finance a non-American acquisition using overseas money. Microsoft has done this well (MS china, as well as a Skype and Nokia).
    - bobsman123 9y ago
      Have you worked with Microsoft China? There’s a serious quality and copyright issue with everything they produce.
  - hawkice 9y ago
    So, it's actually largely kept, denominated in USDs, in US banks -- quite a lot of it in US Treasury bonds. So they can finance investment in US companies with it pretty easily right now. https://www.bloomberg.com/graphics/2016-apple-profits/ https://www.bloomberg.com/graphics/2016-apple-profits/ Offshore has to do with ownership, not custody, currency, and obviously not control.
    - westiseast 9y ago
      Yeah this is the bit nobody seems to realise - the money isn’t outside the US at all. There’s an in-house ‘hedge fund’ managing it all in Delaware. Edit: Reno
dkrich 9y ago
Not sure I agree with the urgency angle to this analysis. Sure, if sales and the influx of cash slows Apple will need that cash to pay off its bonds, but... 1. There's no reason to believe that's going to happen anytime in the near to distant future. They are in the midst of a super upgrade cycle which figures to result in record profits again when they report in January and that growth is likely to continue for the foreseeable future. 2. Pulling the cash from overseas doesn't make sense simply because they can issue bonds at a far lower rate, practically zero, than what they would pay in repatriation. I'm not so sure if the repatriation rate were lowered permanently that they would even bring much back at all. If it were a one-time benefit, then sure. If/when they need cash they can hold their nose and pay the tax rate, but I would argue that the market has already priced the supposed tax penalty into the share price. To put it another way, if they were granted a one-time repatriation rate far below what they would be forced to pay currently, you would see the share price jump because that is effectively adding billions of cash to their balance sheet from the federal government's. 3. Going back to the first point, if sales did slump they would probably need the cash anyway with or without the bond issuances. Hoarding enormous piles of cash to avoid taxes is a luxury of the few extraordinarily profitable international companies of the world, not those that have diminishing sales.
- IBM 9y ago
  On number 2, there's no need to "pull" the cash from overseas because the 14% is a deemed tax rate, i.e you have no choice in the matter. Going forward it changes to a territorial system so the US won't be taxing international profits. Apple will likely still issue debt because they can take on a lot more leverage given their cash flow and interest payments will still be deductible up to 30% of EBITDA or EBIT (depending on whether the House or Senate wins out on that) so it will still lower their cost of capital. This does give them more flexibility on financing decisions and it will increase GAAP profit because Apple has been conservative and has been booking deferred taxes until now.
jacksmith21006 9y ago
Do also remember Apple also has over a $100B of debt which you subtract from the cash.
- tzakrajs 9y ago
  > the company is on track to soon have $300 billion of cash, almost all of which is located abroad, and $150 billion of debt
nathan_long 9y ago
> Given Apple’s current balance sheet strategy and assuming no change to the U.S. corporate tax code, the company is on track to soon have $300 billion of cash, almost all of which is located abroad, and $150 billion of debt. I don't understand business. If I owed $15,000 and had $30,000 in the bank, I'd pay off my debt. Why is this different?
- erentz 9y ago
  I believe there’s some tax advantage for them. Possibly they can claim a tax deduction of some kind on the debt interest. And of course this way not only do they get that but they avoid paying any taxes on the profits they’ve funneled overseas. (I am not an accountant so fully prepared to be told I am well wrong.)
  - ash_gti 9y ago
    I also think most companies usually invest their additional cash into things that they think will grow faster than their debt interest. Long term it makes more sense to grow a part of their company that will have a larger return investment than being debt free.
- _ph_ 9y ago
  Because to pay off the debt, Apple first would have to move the cash back to the US, at which time by the current tax law, it would be taxed by 35%. So, to pay back $150B, they would have to bring back about $230B, paying $80B in taxes.
- unk 9y ago
  It may be better to invest that money if the rate of return is higher than the interest on their debt.
  - ryandrake 9y ago
    Good luck finding a guaranteed rate of return higher than the interest rate on any of your debt. Most credit cards are >10%. Even on the low end, if, say, my mortgage was 4% and I had the cash to pay it off, it would certainly make sense to do it. It would only make sense not to if I could find an investment that paid over 4% guaranteed. Such an investment does not exist, period. (If it does, please let me know and I will put all my money into it).
gman83 9y ago
> Instead of using M&A to buy revenue or users, which is a disastrous strategy in Silicon Valley, Apple looks to fill asset holes in terms of technology and talent. Um, Facebook buying WhatsApp and Instagram or Google buying YouTube wasn't a disastrous strategy.
- astrodust 9y ago
  For every smart buy like YouTube there's been dozens of utter failures. MySpace. Netscape. Flickr. Softimage. It's to the point where being acquired is the kiss of death for most start-ups. Sure, you get your exit, but your product is toast. Apple has a very particular culture and it's difficult for other companies to integrate into that. Google was more accommodating, like with Nest, but even then they realized they had to restructure and make Alphabet for it to actually work. Sure, Google bought YouTube, but they also bought Boston Dynamics and fumbled it.
  - lukestevens 9y ago
    Motorola too!
    - astrodust 9y ago
      It's quite a list, isn't it? Sony's aquisition of Ericsson, Microsoft of Nokia's phone business, which like Danger did not end well.
maxehmookau 9y ago
I wonder what $80b in extra tax receipts could do for American education, healthcare or social mobility. Ah well, at least Apple shareholders get a few more dollars.
- mempko 9y ago
  Sad thing is we don't need the tax receipts to pay for those things. Its a political problem , not a fiscal one .
  - maxehmookau 9y ago
    That may be true, but the political problem is one where American politicians put low taxation above almost all social issues. Having the political will to collect that money is the first step to correcting the political problem you refer to.
    - MaysonL 9y ago
      Orrin Hatch, after voting for a trillion-dollar tax cut, said there wasn't any money for CHIP.
  - woolvalley 9y ago
    Whats even funnier is how inefficient we are with the capital we use in healthcare and education.
- moxious 9y ago
  With that amount of money the federal government could make a few interest payments on its debt and not even really make a dent in the total
- valuearb 9y ago
  Since we already spend more on education, healthcare and social mobility now than ever before, pretty much nothing. It’s like a mob unhappy with their winter meals seeing a large grain store that a prosperous farmer has stored up to plant next years harvest with, and saying “Let’s eat that until we are full!”. Yea but you’ll be starving next winter.
blueprint 9y ago
> One fear that investors have with companies holding excess cash is that future management teams will waste the cash on frivolous M&A and other questionable investments. This results in the value of the cash being discounted, leading to a lower stock valuation. Great example of why I maintain that price != value. The former is an objective metric while the latter is probably subjective to a problem, context, application, etc..
leoh 9y ago
It's insane that corporations are taxed less than individuals abroad. If you live abroad and work - you pay income tax, whether that money is repatriated or not.
- Thiez 9y ago
  That is the case for a handful of countries, the US among them. In the vast majority of countries you don't have to pay income taxes when you live and work abroad. Of course you still pay such taxes in the country where you live and work.
skywhopper 9y ago
> "Apple owes 35% tax to the federal government on all revenue earned" Tax is assessed on income, not revenue. It's an important distinction. Apple had 52.6 billion in revenue, and 10.7 billion in income.
- elephant_burger 9y ago
  Yeah that sounded odd to me.
ksec 9y ago
Excuse my completely naive and ignorant views and questions. Moral issues aside, do they have to bring it back to US? I dont see what's wrong with it sitting there doing nothing. Are there no other way to invest the $250B cash generating 2% yearly interest? i.e Additional $5B / year? ( Isn't that is what subsidiaries are doing ? ) Why is it every call to maximize only shareholders value? Could they not provide more value in their product or product line up with those additional Interest from Cash? Investing into better after sales services particular in South East Asia Region? Apple could provide iPhone as a Services, much like iPhone upgrade program in the US but worldwide. Combining iPhone + Apple Care + iCloud Backup as basic, and with top up like Apple Music and future Apple TV. Making Apple being the actual creditor themselves, that needs lots of cash. As a matter of facts I have long wanted Apple to be a Virtual Mobile Carrier. There are lots of people in the world without Credit Card or dont want themselves associate with credit cards, which is different to US. And prefer to have Mobile Billing, a monthly payment. These people also failed to get iCloud backup, which is increasing dangerous as we put more important things in our phone. Apple could finally offer Visual Voicemail, and free iCloud Backup over LTE during off peak hours like 1AM to 5AM, iPhone, Apple Music, Carrier Services, All under one monthly fees. There are lots of thing to help and improve, invest to bring more value and future returns, dividends is ok, but share buy back to me seems dump. This is speaking from a long time $AAPL investor.

124 points by imartin2k 9y ago

thebiglebrewski 9y ago

How could one profit off of this? Buy Apple stock now?

adamw2k 9y ago
That assumes some of this isn't baked into the price already. But yes, if you think the market hasn't factored in any one or more of these potential actions, then buying the stock would be the most logical way to profit...
- lisper 9y ago
  > if you think the market hasn't factored in any one or more of these potential actions And if you believe that, I have a bridge you might be interested in buying.
  - EliRivers 9y ago
    The market does seem to be frequently bad at that sort of thing. I've done pretty well (better than my index funds) over the years by reading the news and buying shares in companies that seem to have more wealthy futures. I very rarely sell so I can see how they've done over many years and, by and large, pretty well. Maybe everyone assumes that the market has already factored it all in so they don't bother buying so it isn't factored in because the increased demand never arose. Maybe I'm just out of sync, and as other people start to notice this they'll start buying and it'll turn back around and then the market will have factored these things in because lots of people assume it hasn't.
    - icebraining 9y ago
      Or maybe you got lucky. Not saying you did, but how would you tell the difference?
      - lisper 9y ago
        This. If you throw darts at the stock page you have a 50% chance of beating the market.
        EliRivers 9y ago
        I have thrown a dozen or so darts, and my rate seems to be around 80%. But then, I'm not just throwing darts; I'm reading that companies are going to do better in the future and will see a rise in stock price, and it makes sense, so I sometimes buy them. Maybe I'm just the lucky one. I started with ARM a good eight years ago, when I read that they were going to do really well by supplying Apple. Of course, if I'd done the same thing with Imagination technologies 8 years ago, it would have been a less happy ending; I can only assume that the news I read at the time was more effusive about ARM. Most recently (13 months ago - this isn't a regular thing), a British pasty retail outfit named Greggs. The news said things were looking good, I could see their stores were busy, I bought some shares, they're up about 40% in 13 months (which is unusually good, I freely admit, and I certainly didn't expect that). That's really all I do, and it seems to work out (and it really is rare when I do; typically, I just dump all my pennies into index funds - easily 80% of my pennies are in index funds). I think some of the big name successful investors do something similar, but obviously on a much grander and more informed scale. Plus the British house-builders. Every time the UK government announces another plan to help young people get fifty year mortgages, it's time to buy some more of them! They will crash eventually, I'm sure :(
        jogjayr 9y ago
        > I'm reading that companies are going to do better in the future and will see a rise in stock price, and it makes sense, so I sometimes buy them. I think that way about my index funds too. But then it's impossible to know the reason for the price rise. Maybe it's because of millions of other guys like me who read the same articles, came to the same conclusion as me, and put their money in too.
        EliRivers 9y ago
    - aetherson 9y ago
      Survivorship bias seems worth investigating here. Do people who make bad stock buying decisions come to these threads and comment on them?
kondro 9y ago
Apple is already massively undervalued. $884B market cap. $150B in free cash (which you can effectively take off the top of the market cap). So an adjusted market cap of $734B. A net income after tax (yes, they still pay tax) of $48B. So an adjusted P/E of 15.3x. Some other P/Es of popular tech companies: Facebook: 33.14x Google: 35.03x Salesforce: 12,992x Amazon: 293.84 Intuit: 41.36 Twitter: Can't have a P/E if you don't make money.

matt_wulfeck 9y ago

The question is why was there ever a dilemma in the first place. We were the only country to tax corporations this way, which made us incredibly uncompetitive -- but worse kept money from being invested in the US. This is great news for the USA and bad news for everywhere else in the world that would have otherwise received the investment. We should be doing everything possible to bring that money home.

SaltySolomon 9y ago
The easy solution would be to tax all earnings worldwide equally, but that doesn't work either because then they will create a subsidiary in that country which will store the cash and the mother cooperation will have no earnings on it. Actually thinking about it, this way of taxing is pretty much the same in every country in the world.
cowsandmilk 9y ago
What is the mechanism by which it has kept money from being invested in the US?
- mattnewton 9y ago
  If they bring the money back here to pay people or buy things in the us, they get taxed, but they don’t get taxed if they pay people in other countries. So it effectively makes the US more expensive for that money.
- lacker 9y ago
  When Apple or Google had billions of dollars kept overseas like this, they could still invest it outside the US with no additional tax burden. So when these companies were building new datacenters or hiring new employees or doing any sort of investment in their business, there was essentially a 30% discount to do it internationally rather than in the US.
  - seanmcdirmid 9y ago
    Not the whole 30%, they will get a credit for taxes paid overseas, though because different tax systems don’t match up very well, double taxation is inevitable without a decent treaty in place.

guelo 9y ago

> This has led Apple, along with other Silicon Valley firms, to keep foreign cash offshore as it is the financially prudent thing to do for shareholders. The kept the cash offshore with the belief that they would eventually be able to bring it back without paying taxes. They started a multi-year political lobbying campaign to change the tax system. And it worked. If our political system was not up for sale they would have eventually had to bring the cash home and pay their damn taxes.

garmaine 9y ago
Or keep it offshore and use it to finance foreign investments.
- seanmcdirmid 9y ago
  Ya, they can always open up a few R&D centers in say china, or finance a non-American acquisition using overseas money. Microsoft has done this well (MS china, as well as a Skype and Nokia).
  - bobsman123 9y ago
    Have you worked with Microsoft China? There’s a serious quality and copyright issue with everything they produce.
- hawkice 9y ago
  So, it's actually largely kept, denominated in USDs, in US banks -- quite a lot of it in US Treasury bonds. So they can finance investment in US companies with it pretty easily right now. https://www.bloomberg.com/graphics/2016-apple-profits/ https://www.bloomberg.com/graphics/2016-apple-profits/ Offshore has to do with ownership, not custody, currency, and obviously not control.
  - westiseast 9y ago
    Yeah this is the bit nobody seems to realise - the money isn’t outside the US at all. There’s an in-house ‘hedge fund’ managing it all in Delaware. Edit: Reno

dkrich 9y ago

Not sure I agree with the urgency angle to this analysis. Sure, if sales and the influx of cash slows Apple will need that cash to pay off its bonds, but... 1. There's no reason to believe that's going to happen anytime in the near to distant future. They are in the midst of a super upgrade cycle which figures to result in record profits again when they report in January and that growth is likely to continue for the foreseeable future. 2. Pulling the cash from overseas doesn't make sense simply because they can issue bonds at a far lower rate, practically zero, than what they would pay in repatriation. I'm not so sure if the repatriation rate were lowered permanently that they would even bring much back at all. If it were a one-time benefit, then sure. If/when they need cash they can hold their nose and pay the tax rate, but I would argue that the market has already priced the supposed tax penalty into the share price. To put it another way, if they were granted a one-time repatriation rate far below what they would be forced to pay currently, you would see the share price jump because that is effectively adding billions of cash to their balance sheet from the federal government's. 3. Going back to the first point, if sales did slump they would probably need the cash anyway with or without the bond issuances. Hoarding enormous piles of cash to avoid taxes is a luxury of the few extraordinarily profitable international companies of the world, not those that have diminishing sales.

IBM 9y ago
On number 2, there's no need to "pull" the cash from overseas because the 14% is a deemed tax rate, i.e you have no choice in the matter. Going forward it changes to a territorial system so the US won't be taxing international profits. Apple will likely still issue debt because they can take on a lot more leverage given their cash flow and interest payments will still be deductible up to 30% of EBITDA or EBIT (depending on whether the House or Senate wins out on that) so it will still lower their cost of capital. This does give them more flexibility on financing decisions and it will increase GAAP profit because Apple has been conservative and has been booking deferred taxes until now.

jacksmith21006 9y ago

Do also remember Apple also has over a $100B of debt which you subtract from the cash.

tzakrajs 9y ago
> the company is on track to soon have $300 billion of cash, almost all of which is located abroad, and $150 billion of debt

nathan_long 9y ago

> Given Apple’s current balance sheet strategy and assuming no change to the U.S. corporate tax code, the company is on track to soon have $300 billion of cash, almost all of which is located abroad, and $150 billion of debt. I don't understand business. If I owed $15,000 and had $30,000 in the bank, I'd pay off my debt. Why is this different?

erentz 9y ago
I believe there’s some tax advantage for them. Possibly they can claim a tax deduction of some kind on the debt interest. And of course this way not only do they get that but they avoid paying any taxes on the profits they’ve funneled overseas. (I am not an accountant so fully prepared to be told I am well wrong.)
- ash_gti 9y ago
  I also think most companies usually invest their additional cash into things that they think will grow faster than their debt interest. Long term it makes more sense to grow a part of their company that will have a larger return investment than being debt free.
_ph_ 9y ago
Because to pay off the debt, Apple first would have to move the cash back to the US, at which time by the current tax law, it would be taxed by 35%. So, to pay back $150B, they would have to bring back about $230B, paying $80B in taxes.
unk 9y ago
It may be better to invest that money if the rate of return is higher than the interest on their debt.
- ryandrake 9y ago
  Good luck finding a guaranteed rate of return higher than the interest rate on any of your debt. Most credit cards are >10%. Even on the low end, if, say, my mortgage was 4% and I had the cash to pay it off, it would certainly make sense to do it. It would only make sense not to if I could find an investment that paid over 4% guaranteed. Such an investment does not exist, period. (If it does, please let me know and I will put all my money into it).

gman83 9y ago

> Instead of using M&A to buy revenue or users, which is a disastrous strategy in Silicon Valley, Apple looks to fill asset holes in terms of technology and talent. Um, Facebook buying WhatsApp and Instagram or Google buying YouTube wasn't a disastrous strategy.

astrodust 9y ago
For every smart buy like YouTube there's been dozens of utter failures. MySpace. Netscape. Flickr. Softimage. It's to the point where being acquired is the kiss of death for most start-ups. Sure, you get your exit, but your product is toast. Apple has a very particular culture and it's difficult for other companies to integrate into that. Google was more accommodating, like with Nest, but even then they realized they had to restructure and make Alphabet for it to actually work. Sure, Google bought YouTube, but they also bought Boston Dynamics and fumbled it.
- lukestevens 9y ago
  Motorola too!
  - astrodust 9y ago
    It's quite a list, isn't it? Sony's aquisition of Ericsson, Microsoft of Nokia's phone business, which like Danger did not end well.

maxehmookau 9y ago

I wonder what $80b in extra tax receipts could do for American education, healthcare or social mobility. Ah well, at least Apple shareholders get a few more dollars.

mempko 9y ago
Sad thing is we don't need the tax receipts to pay for those things. Its a political problem , not a fiscal one .
- maxehmookau 9y ago
  That may be true, but the political problem is one where American politicians put low taxation above almost all social issues. Having the political will to collect that money is the first step to correcting the political problem you refer to.
  - MaysonL 9y ago
    Orrin Hatch, after voting for a trillion-dollar tax cut, said there wasn't any money for CHIP.
- woolvalley 9y ago
  Whats even funnier is how inefficient we are with the capital we use in healthcare and education.
moxious 9y ago
With that amount of money the federal government could make a few interest payments on its debt and not even really make a dent in the total
valuearb 9y ago
Since we already spend more on education, healthcare and social mobility now than ever before, pretty much nothing. It’s like a mob unhappy with their winter meals seeing a large grain store that a prosperous farmer has stored up to plant next years harvest with, and saying “Let’s eat that until we are full!”. Yea but you’ll be starving next winter.

blueprint 9y ago

> One fear that investors have with companies holding excess cash is that future management teams will waste the cash on frivolous M&A and other questionable investments. This results in the value of the cash being discounted, leading to a lower stock valuation. Great example of why I maintain that price != value. The former is an objective metric while the latter is probably subjective to a problem, context, application, etc..

leoh 9y ago

It's insane that corporations are taxed less than individuals abroad. If you live abroad and work - you pay income tax, whether that money is repatriated or not.

Thiez 9y ago
That is the case for a handful of countries, the US among them. In the vast majority of countries you don't have to pay income taxes when you live and work abroad. Of course you still pay such taxes in the country where you live and work.

skywhopper 9y ago

> "Apple owes 35% tax to the federal government on all revenue earned" Tax is assessed on income, not revenue. It's an important distinction. Apple had 52.6 billion in revenue, and 10.7 billion in income.

elephant_burger 9y ago
Yeah that sounded odd to me.

ksec 9y ago

Excuse my completely naive and ignorant views and questions. Moral issues aside, do they have to bring it back to US? I dont see what's wrong with it sitting there doing nothing. Are there no other way to invest the $250B cash generating 2% yearly interest? i.e Additional $5B / year? ( Isn't that is what subsidiaries are doing ? ) Why is it every call to maximize only shareholders value? Could they not provide more value in their product or product line up with those additional Interest from Cash? Investing into better after sales services particular in South East Asia Region? Apple could provide iPhone as a Services, much like iPhone upgrade program in the US but worldwide. Combining iPhone + Apple Care + iCloud Backup as basic, and with top up like Apple Music and future Apple TV. Making Apple being the actual creditor themselves, that needs lots of cash. As a matter of facts I have long wanted Apple to be a Virtual Mobile Carrier. There are lots of people in the world without Credit Card or dont want themselves associate with credit cards, which is different to US. And prefer to have Mobile Billing, a monthly payment. These people also failed to get iCloud backup, which is increasing dangerous as we put more important things in our phone. Apple could finally offer Visual Voicemail, and free iCloud Backup over LTE during off peak hours like 1AM to 5AM, iPhone, Apple Music, Carrier Services, All under one monthly fees. There are lots of thing to help and improve, invest to bring more value and future returns, dividends is ok, but share buy back to me seems dump. This is speaking from a long time $AAPL investor.