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What I don't understand is not the value of Apple as a company, because I clearly see the value of their products directly as a customer for more than a decade,
by caiobegotti 6y ago
What I don't understand is not the value of Apple as a company, because I clearly see the value of their products directly as a customer for more than a decade, but WHY IN HELL they have so much actual cash piling up. I won't say they should split it with investors and blablabla but, really, why a company like that would have a cash stockpile so gigantic (around 200 billion USD) for so long without a long-term plan shared with stakeholders? It seems nearly impossible for them to use all that money with whatever comes up for half a century at least.
- draw_down 6y agoThey do stock buybacks, which return cash to investors in the form of higher share price.
- kgwgk 6y agoBuybacks return cash to investors mostly in the form of “investors selling their shares back to the company get dollars in exchange.”
- greedo 6y agoI thought that buybacks reduced the amount of shares in total, increasing the value of the remaining shares?
- kgwgk 6y agoThe value of the shares is not increased when the buyback is made. The total value of the shares goes down, as they would have if a dividend was paid. The total value of the shares will go up in the future, as it would if a dividend was paid. The value per share will grow more than in the dividends case, as there will be less shares, but of course an investor who kept all their shares won’t have received any cash (unlike in the dividends case).
- draw_down 6y ago........ after which there are fewer shares outstanding (= reduced supply) so the price goes up. Hooray. You guys are funny.
- JumpCrisscross 6y ago> WHY IN HELL they have so much actual cash piling up In 1997, Apple was on the verge of bankruptcy [1]. That experience deeply scarred the company's culture. Prior to that, Apple didn't hoard cash (relative to revenues). Afterwards, it did. At this point, the instinct is overplayed. But cultures are difficult to change. So the obsession with runway remains. [1] https://www.businessinsider.com/apple-comeback-story-2010-10?op=1 https://www.businessinsider.com/apple-comeback-story-2010-10...
- jayparth 6y agoI think you're off base. It's simply not runway at this point. That like 200 years of runway at their peak losses. It's pretty simple why they have such a big cash pile. They literally don't have a better place to put it.
- playingchanges 6y agoYep, same problem Warren Buffett has.
- throwaway5792 6y agoApple's operating expenses for the last year was around $200bn.
- Judgmentality 6y agoThis a little misleading, as it's hard to imagine Apple making zero revenue well, ever. They could possibly be losing money, but there is no plausible scenario where they lose that much money. It's hard to imagine a scenario where they lose even an order of magnitude less money than that.
- scarface74 6y agoJust imagine the unlikely scenario that a pandemic shut down factories in China.....
- hindsightbias 6y agoI dont care how much they amass, I wonder wtf they can’t be bothered to throw $50M into OSX fixes.
- Thaxll 6y agoEven banks don't have 200B in cash?
- pydry 6y agoThey're holding out for a tax holiday. Meanwhile they think it's better to hold the cash rather than pay tax on it. The shareholders own the money either way.
- hilbertseries 6y agoWhy didn’t they use the one provided by the tax cuts a few years back?
- jonas21 6y agoThey'd still have to pay 21% on it. They're probably waiting for a tax holiday like the one in 2004 where companies could bring back cash at a 5.25% tax rate.
- hpen 6y agoThat is just sick. They should pay a tax rate at least as high as what the average worker pays if not higher
- briandear 6y agoWhy? How about lowering taxes for the “average worker?”
- baddox 6y agoThose certainly aren't mutually exclusive ideas.
- vkou 6y agoBecause cutting taxes will cut spending, and military spending is a sacred cow, so among the useful things the government provides, the average worker needs things like roads and a working school system, and healthcare when they get to Medicare age.
- hpen 6y ago
- yrral 6y agoA lot of their cash is overseas, and so to bring it back into the US to either issue a dividend (which is suboptimal from a tax perspective) or to buyback their own stock, they need to pay US corporate tax on the income (this is on top of the tax charged in the foreign countries.)
- HenryKissinger 6y agoWhat do you mean when you say that their cash is overseas? I assume Apple does not have stacks of green bills in giant vaults overseas. Is it in foreign banks?
- i_am_proteus 6y agoIt's in bank accounts in Ireland.
- ska 6y agoPaying taxes in a country doesn't mean the realized income stays in that country.
- vishnugupta 6y agoIndeed, some of it is in banks in tax havens such as Ireland and Singapore. They are also in the form of US treasury bills bought through their offshore entities in the same havens. So I guess at least some money does make it back to the US ;-)
- nwellnhof 6y agoThe cash (or other short-term investments) could even be held in US bank accounts owned by non-US subsidiaries of Apple.
- vishnugupta 6y agoFor sure! With this offshore thingy one could create a mind bending structure to trap tax authorities in an infinite loop trying to trace the origin. I was completely ignorant about this menace until I started reading couple of books to educate myself —- Treasure Islands and Moneyland...recommend them both. Since then I just use the term offshore to encompass any of those hundreds or so possible structures.
- paulpauper 6y agoBecause it is a public company. Public companies are under strict fiduciary duties. If it were private, it would just go to the owners and investors in large dividends. Dealing with so much money requires considerable deliberation.
- ska 6y agoThis doesn't make sense to me. Apple absolutely could return most of this to shareholders via a dividend if they chose to (less taxes if they bring from offshore, etc.) It's not at all clear the best exercise of the boards fiduciary duty is to hold cash.
- ChrisLomont 6y agoAs of March they had 100B USD. Is there a link for 200B? Ah, finance sites claim 100B in cash. Rest is not cash, nor on hand, but 100B in securities awaiting maturation.
- r00fus 6y agoHaving a large cash hoard gives them a shield against external financial manipulation from Wall St.
- deleted 6y ago[deleted]
- Solstinox 6y agoLook around at all the companies shaking taxpayers for loose change because they could not handle a moderate economic downturn. A responsible company needs a cash stockpile for the same reason a responsible person needs savings, to weather storms.
- mrfusion 6y agoSounds like a prudent idea. On the other hand I’d worry about the macro economic effects if every company held large amounts of unproductive capital.
- beervirus 6y agoIt’s not sitting under a mattress. It’s surely invested in something productive.
- anbotero 6y agoI think in this particular case, it’s cash, or at least the promise from a bank or fund or whatever the hell it is, that they can count on that money in cash whenever they one.
- Consultant32452 6y agoWhen they say "cash" they almost certainly mean CCE (Cash and Cash Equivalents), which is being put to productive use by third parties in exchange for nominal interest income. https://www.investopedia.com/terms/c/cashandcashequivalents.asp https://www.investopedia.com/terms/c/cashandcashequivalents....
- zepto 6y agoNo - it’s the worlds largest hedge fund: https://en.m.wikipedia.org/wiki/Braeburn_Capital https://en.m.wikipedia.org/wiki/Braeburn_Capital
- baddox 6y agoI think that depends on what you mean by "large amounts." If we're talking about cash savings to whether economic downturns, pandemics, etc., presumably we should be looking at what is large relative to the operating costs of the company. In the same way that it's common advice for individuals to have some number of months of living expenses saved for emergencies, I think that also makes sense for companies, and I don't see that portion of savings being a threat to the economy.
- reaperducer 6y agoWHY IN HELL they have so much actual cash piling up If nothing else, it can keep paying their all of their employees, not just the work-from-home IT crowd, during a pandemic shutdown.
- bennettfeely 6y agoOkay, so now what to do with the other $199 billion
- tikwidd 6y agoBuy startups and competitors.
- sushshshsh 6y agoI can think of a few ways to spend 200 billion very quickly to be honest. I think this is one of the smarter things that Apple does. Imagine if they started engaging in pointless acquisitions in the idea that this cash should be put to use. You'd have another Nokia, another Sun..
- Swizec 6y agoYou know how everyone jokes that we expect consumers to have 6 months of savings for emergencies, but big corporations start begging for bailout within days of the epidemic? With $260bil revenue and $55bil net income, Apple’s monthly expenses are around $17bil. That means they need $102bil cash on hand for emergencies. As someone else mentioned, they’ve experiences near bankruptcy before. Maybe they never wanna be there again.
- maskedinvader 6y agoI think a comment above pointed this out too, its a bt misleading to add up expenses with 0 revenue for 6 months, can think of all those subscriptions and services to be bringing in revenue even in times of a pandemic when factories get shut and phones and macs are on sold, its difficult to imagine apple bringing in 0 revenue. so $194 billion cash is just way too much, even for emergencies me thinks
- Swizec 6y agoI’m sure airlines thought the same. As did hotels and restaurants. That’s the point of an emergency fund. It’s for when the unthinkable happens. Croatia for example is a country with a GDP of $63bil. 20% of their whole economy is tourism. This year tourism is down 90%+. Oops
- Alupis 6y agoAirlines, Hotels and Restaurants don't sell services that are necessary for operating the devices they already sold you. Even if Apple sold zero iPhones next year, they would still collect a lot of revenue from all the App Store Sales and iCloud services. It would probably take a decade of zero iOS updates and no new iDevices being released to make Apples revenue decline so dramatically.
- Swizec 6y agoYeah maybe, I don’t know what goes on in Apple’s mind. I’m merely pointing out that emergency funds get ridiculously large when you’re a big corporation. The risk an emergency fund has to guard against is of course offset by your level of diversification of revenue streams. And again, Apple knows better about their situation and risk tolerance than I would.
- vlkr 6y agoNet cash is "only" 81 billion and long term plan is share buybacks, they already bought back around 200 bil iirc.
- one2know 6y agoWell, in corporate tech America management thinks that it is their money, they just haven't figured out a way to remove it from the company yet.
- mzs 6y agoBecause there is not enough they want to buy strategically.
- hlfy_hn 6y agoBecause they don't pay taxes. Apple designs an iPhone, has it produced in China, sold to Apple HK, then sold to Germany. Profit margin in China by Foxcon? Small Profit margin in the offshore jurisdiction (e.g. Hongkong). Big. Taxes in HK for this transaction: Zero This transaction also does not show up in the US trade balance. ("Black matter in accounting")
- ogre_codes 6y agoApple is the worlds biggest tax payer in terms of $ paid out. For example: Between 2014 and 2017 Apple paid $35 billion in taxes. While you can argue they should pay more in taxes, the fact is they pay vastly more than their peers. Amazon in particular is notoriously good at keeping their tax bills low. I don't know what is fair in terms of taxes and I'm not suggesting Apple is a perfect tax citizen, but they do pay a good chunk of cash out to keep the White House lights on.
- hlfy_hn 6y ago"Between 2003 and 2014, the European Commission found, Apple had lowered its effective corporate tax rate from 1% to just 0.005%." https://observer.com/2019/09/apple-ireland-tax-lawsuit-european-union-corporate-tax-dodging/ https://observer.com/2019/09/apple-ireland-tax-lawsuit-europ... 1. I don't know why I get downvoted 2. I would not say a corporate tax rate of 0.005% is high.
- ogre_codes 6y agoDidn't down vote you, but you are quoting a biased source. Maybe Apple pays 0.005% in the EU, but since 2011, Apple's paid over $10b/ year every single year (and many years it's been higher). This is on public record: https://www.macrotrends.net/stocks/charts/AAPL/apple/total-provision-income-taxes https://www.macrotrends.net/stocks/charts/AAPL/apple/total-p... > I would not say a corporate tax rate of 0.005% is high. I'm not sure what that number comes from so I can't say, but since they paid $10b/ year for the past 9+ years, they'd have to have 2 trillion dollars in profit in a single year for that rate to be accurate.
- xwdv 6y agoThe cash hoard is for making powerful acquisitions that can rock industries. 200 billion might not even be enough to buy some really big players out there. Don’t sweat it.
- ta17711771 6y agoPrediction: Apple leverages their capital to become to the US highway dept as Space X is to NASA.
- xwdv 6y agoA better angle would be for them to become the US Public Education system. Schools designed by Apple, curriculums for the next generation of thinkers and doers.
- FPGAhacker 6y agoThey started doing buybacks in 2012. They've bought back $338 billion so far. https://ycharts.com/companies/AAPL/stock_buyback https://ycharts.com/companies/AAPL/stock_buyback
- prostoalex 6y agoDeep wallets help with manufacturing negotiations. Apple's demand might require substantial commitments from manufacturers like Foxconn. Not only can Apple finance those factory and process investments (if they chose to), having a letter of intent from a deep-pocketed customer like Apple helps Foxconn et al. procure loans and offset the risks.
- bitxbit 6y agoAside from avoiding tax, that practically limitless cash holding gives them strategic leverage in supply chain.
- ogre_codes 6y ago> why a company like that would have a cash stockpile so gigantic (around 200 billion USD) for so long without a long-term plan shared with stakeholders? In the past 10 years, Apple has bought back over $400B worth of Apple stock, mostly at under $200/ share. This has massively reduced the number of shares on the market and been hugely rewarding to shareholders. They have shared their plan with shareholders, pretty much every quarter they put updates on how it's going. They have a good summary of how they are performing on their plan on their site: https://s2.q4cdn.com/470004039/files/doc_financials/2020/q3/Q320-Return-of-Capital-Timeline.pdf https://s2.q4cdn.com/470004039/files/doc_financials/2020/q3/... I'm not sure what kind of plan you had in mind, but what Apple has done has been spectacularly good for shareholders.
- frank2 6y agoI see only $100 billion of cash and short-term investments: https://www.wsj.com/market-data/quotes/AAPL/financials/annual/balance-sheet https://www.wsj.com/market-data/quotes/AAPL/financials/annua... and $100 billion is only one year's worth of Apple's earnings: https://www.wsj.com/market-data/quotes/AAPL/financials/annual/income-statement https://www.wsj.com/market-data/quotes/AAPL/financials/annua...
- Tiktaalik 6y agoBuilding a money bin, and Tim Cook is gonna swim in the money
- shagmin 6y agoLooking at the responses I see a lot of possibilities. But one thing I remember reading elsewhere is something they wouldn’t admit - they have no good places to put that money, and inflation is low so hoarding it is not a bad option right now.
- runawaybottle 6y agoMaybe the company remembers when it almost went bankrupt. Maybe the know what technology will break out, but is not ready yet (autonomous cars, AR), and waiting to invest when the time comes.
- cameldrv 6y agoI think a lot of it is offshore untaxed money and Apple is waiting for a repatriation holiday.
- shi314 6y agoIt's because of that cash stockpile apple is valued so much. Stock Buyback gives company the option to decide share price.
- lumost 6y agoI wonder how much game theory there is in having a super sized cash stockpile. Internally apple managers are unlikely to be pressured on R&D costs including salaries, long-term goals. They also are more likely to not be concerned with sunk costs, and can cut projects/features if they don't seem useful to users. From an external standpoint, competitors have to be aware that "you can't manufacture like apple" and that they will always be forced to make compromises on features/packaging/price in comparison to an apple product.