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Apple encouraged to borrow against its $94B in overseas cash for greater flexibility

post #1 of 52
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Apple should borrow money at low costs against its significant overseas cash position to avoid a tax hit when repatriating that cash, one analyst believes.

Ben A. Reitzes with Barclays believe it's time Apple strongly consider "tapping the debt markets," which would allow it to borrow against the $94 billion in cash the company has overseas, $40.4 billion of which is untaxed.

Barclays


"This way, Apple could maintain flexibility to make acquisitions and not incur a tax hit for repatriation ??all for very low current borrowing costs," Reitzes said in a note to investors on Tuesday. "As a result, we calculate that Apple could easily double the size of its current three-year capital return plan, among the many options it has."

If Apple were to borrow, Barclays estimates that the company could double its level of capital returns. Doing so could allow Apple to boost its dividend to more than $14.75, giving it a 3.75 percent yield that would be comparable to other blue chip companies.Borrowing at low rates against its overseas cash could allow Apple to "maintain flexibility to make acquisitions and not incur a tax hit for repatriation," Ben A. Reitzes believes.

Reitzes believes AAPL stock could reach the $575 level if its dividend yield were in line with "bellwethers" such as Cisco. He also said the company has the capacity to increase its share buyback program by $30 billion over three years, up from its current $10 billion share repurchase program.

The analysis assumes that Apple would want to maintain at least $10 billion per year in domestic cash. That money could be reserved for mergers and acquisitions, as well as general corporate purposes.

Asymco
Apple's growing cash, cash equivalents, and securities, via Asymco.


At the end of last quarter, Apple's growing cash hoard had reached $137 billion. Particular attention has been given to the company's $40.4 billion in untaxed overseas cash, with calls from the U.S. for the American company to repatriate that money and pay taxes on it.Apple had $137 billion in cash as of last quarter, with most of it held overseas and more than $40 billion untaxed.

Last week, The Wall Street Journal did an analysis of 60 large U.S. corporations, and found that they collectively held $166 billion in untaxed offshore earnings as of 2012. Apple's $40.4 billion represented nearly a quarter of that from just one company.

Market watchers expect that Apple will soon announce what it plans to do with its growing cash and reserves.

It was about a year ago that Apple announced it would begin a quarterly dividend along with a stock buyback plan. With the company's annual shareholder meeting and a lawsuit from hedge fund manager David Einhorn now behind Apple, analyst Brian White of Topeka Capital Markets said this week he believes the timing would be right for the company to announce its next move.
post #2 of 52
When will AI stop publishing this kind of b*sh*t...
post #3 of 52

Borrowing sucks.

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post #4 of 52

Planet Banking is so desesperate that Apple has no need for its services ....

post #5 of 52
Or they could just, you know, pay their f*cking taxes.

On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?

My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.
post #6 of 52
Why are all these people pushing Apple to get into debt? Even my kid would say that it is stupid! I hate this American mentality of living on borrowed monies! This country got here because of this!
post #7 of 52
Quote:
When will AI stop publishing this kind of b*sh*t...

What is wrong in publishing this?  Do you expect AI to publish only about iPhone, Mac, Pro and Air?

Anything related to Apple, Apple competitors and former employees can be posted here!

 

A real Apple Fanboy would want to know about all these!  

post #8 of 52

Borrowing for WHAT?!!  They have $50B in cash sitting here!  How much more will they need to borrow against using their overseas cash?  Are they planning on buying Google or something?

AI is just getting downright pathetic with these nonsense postings.

post #9 of 52
Originally Posted by BlueDjinn View Post
Or they could just, you know, pay their f*cking taxes.

On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?

My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.

 

No, let's not make this about the taxes they've already paid.

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Originally Posted by Marvin

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post #10 of 52
Quote:
Originally Posted by BlueDjinn View Post

Or they could just, you know, pay their f*cking taxes.

On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?

My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.

I think they pay their bills from oversees countries with the money that is in that specific country. Makes sense to me, otherwise they would need to pay taxes to bring all the money home and then spend it on foreign expenditures. What am I missing from your post? Patriotic, ok, but why state they should pay their taxes? They are paying their taxes.
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post #11 of 52
Quote:
Originally Posted by Chandra69 View Post

What is wrong in publishing this?  Do you expect AI to publish only about iPhone, Mac, Pro and Air?

Anything related to Apple, Apple competitors and former employees can be posted here!

 

A real Apple Fanboy would want to know about all these!  


We should all be skeptical of these analyst "ideas".

But IMO borrowing in this specific situation is a better idea than issuing preferred stock, fwiw.

post #12 of 52
Quote:
Originally Posted by BlueDjinn View Post

Or they could just, you know, pay their f*cking taxes.

On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?

My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.
Or you could, you know, make sure you know what you're talking about before spouting tripe. They aren't evading taxes. It's not like they're hiding earnings in an offshore account. That money was foreign earned and taxes were paid where it was earned.
post #13 of 52
Quote:
Originally Posted by jguther View Post

When will AI stop publishing this kind of b*sh*t...

 

when it stops getting page hits

A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

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A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

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post #14 of 52

Why am I not surprised that someone who works for a bank is suggesting Apple borrows from a bank.

 

Be a nice chunk of commission in signing up a $40 Billion loan.

 

What next?

 

Apple should spend their money on food says McDonalds worker.

 

Apple should spend their money on cars says Ford worker.

 

etc

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post #15 of 52
Quote:
Originally Posted by PhilBoogie View Post


I think they pay their bills from oversees countries with the money that is in that specific country. Makes sense to me, otherwise they would need to pay taxes to bring all the money home and then spend it on foreign expenditures. What am I missing from your post? Patriotic, ok, but why state they should pay their taxes? They are paying their taxes.

 

The point is there are rules and established laws regarding returning the cash to the US (for better or worse is irrelevant). Companies (not just Apple) whine over wanting this 'holiday' to do it. To that I say tough &#^$. You want the money here, follow the rules, if not ok fine just use it where it is. Them's the rules and that simple. It has nothing to do with being 'patriotic', what's in Apple's supposed 'best interest' or anything else that people dream up related to the stock. 

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post #16 of 52
Quote:
Originally Posted by BlueDjinn View Post

Or they could just, you know, pay their f*cking taxes.

On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?

My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.

My guess is that you don't have any idea what you're talking about. Oh, wait. It's not a guess - it's obvious.

Apple paid their taxes. In fact, last year, Apple paid 2.5% of ALL US corporate income tax. There is no US tax owed on money that is earned overseas - according to the US tax code and essentially every country on the planet. If the US government started taxing income earned in other countries, it would trigger a massive global trade war-they have no right to do that.

Now, if you have any evidence that Apple has not paid the taxes that they're required to pay, please feel free to present it. Otherwise, in the future, please learn about a topic before spouting off.
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post #17 of 52
Apple survived the tough times in the past with no debt.

Debt [is] simply not sustainable for government or corporations.

Cash is King.

EDIT: politics removed.
post #18 of 52
Quote:
Originally Posted by BlueDjinn View Post

Or they could just, you know, pay their f*cking taxes.

On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?

My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.

Apple has paid their f*cking taxes in the country where that money was generated. It's not "the right thing to do". Apple, as you stated, is a global company. They are not obligated to bring money generated in a country outside of the United States back in to the United States. What don't you understand about that?

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NOTICE: While every effort has been made to ensure the accuracy of the information supplied herein, fahlman cannot be held responsible for any errors or omissions. Unless otherwise indicated,...
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post #19 of 52

Paying taxes that can be "legally avoided" would leave Apple open to legal action by shareholders for unnecessarily incurring expenses (taxes).Has there ever been a business that paid taxes that were not require to be paid?

post #20 of 52
Quote:
Originally Posted by yourmama View Post

Apple survived the tough times in the past with no debt.

Debt [is] simply not sustainable for government or corporations.

Cash is King.

EDIT: politics removed.

Isn't Apple already in debt? They have 402.32B in liabilities (market capitalization)

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post #21 of 52

Paying taxes that can be "legally avoided" would leave Apple open to legal action by shareholders for unnecessarily incurring expenses (taxes).Has there ever been a business that paid taxes that were not require to be paid?

post #22 of 52
Quote:
Originally Posted by Tallest Skil View Post

No, let's not make this about the taxes they've already paid.

BS. First Apple gets to write the taxes paid in bringing the money back here in the Country the money rests. Second, companies like Apple benefit heavily from US infrastructure and diplomacy overseas. Third, Apple gets to write off foreign expenses here.
post #23 of 52
Originally Posted by TBell View Post
BS.

 

Okay, do you have evidence that Apple has not paid taxes on the money they have earned both domestically and abroad? It can be even one country in which they operate; not all, of course.


Second, companies like Apple benefit heavily from US infrastructure and diplomacy overseas.

 

Okay. … So? I don't understand why this matters (or where it would be applicable, in this case).

 

Say I go to Ireland, buy an EU-style license plate, and bring it back here. I paid tax there. Do I have to pay another tax in US-equivalent pricing just to bring it back? If so, why? 

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post #24 of 52

Paying taxes that can be "legally avoided" would leave Apple open to legal action by shareholders for unnecessarily incurring expenses (taxes).Has there ever been a business that paid taxes that were not require to be paid?

post #25 of 52
Quote:
Originally Posted by BlueDjinn View Post

Or they could just, you know, pay their f*cking taxes.

On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?

My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.

You know that if you work outside the US and make money out side the US you are still required to pay taxes on that money, So you elected representative saw fit to make sure you pay your taxes no matter where you earn your money. They also saw fit to allow companies to not pay taxes on money earned elsewhere as long as they do not deposit the money into a US bank.

 

So it is not Apple you should be upset with it is your elected official who created the double standard. Why not just remove the double standard,  either let us work elsewhere and not pay taxes if we leave the money off shore or tax companies on everything they make not matter where.

 

Just so you know if you make money elsewhere an pay taxes there the US will not tax you if what you paid was more than what the US would have taken from you. if you paid a lot more, the US will not refund you the extra either.

 

On a different note, go figure someone in banking is suggesting the Apple borrow money that is not a self serving suggestion. Why borrow when they can pay cash for anything they want. 

post #26 of 52
Quote:
Originally Posted by Tallest Skil View Post

Originally Posted by BlueDjinn View Post
Or they could just, you know, pay their f*cking taxes.

On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?

My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.

 

No, let's not make this about the taxes they've already paid.

 

That's funny, I haven't read anywhere that Apple has repatriated their foreign holdings and paid US taxes on it. Where have you read that?

 

BlueDjinn was obviously saying if Apple wants to bring its foreign money to the US, they should stop waiting/lobbying for some tax holiday from politicians and just bring it here and pay whatever they owe as required by law. Personally, I don't think Apple cares to nor needs to bring foreign money to the US. If they don't want to pay taxes on it, don't bring it to the US. Seems simple to me.

 

Quote:
Originally Posted by PhilBoogie View Post

Quote:
Originally Posted by BlueDjinn View Post

Or they could just, you know, pay their f*cking taxes.

On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?

My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.

I think they pay their bills from oversees countries with the money that is in that specific country. Makes sense to me, otherwise they would need to pay taxes to bring all the money home and then spend it on foreign expenditures. What am I missing from your post? Patriotic, ok, but why state they should pay their taxes? They are paying their taxes.

 

You're right. They are paying their taxes. I believe BlueDjinn was referring to if Apple decides to move the money to the US, they should just pay the taxes and move it.

 

Quote:
Originally Posted by robogobo View Post

Quote:
Originally Posted by BlueDjinn View Post

Or they could just, you know, pay their f*cking taxes.

On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?

My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.
Or you could, you know, make sure you know what you're talking about before spouting tripe. They aren't evading taxes. It's not like they're hiding earnings in an offshore account. That money was foreign earned and taxes were paid where it was earned.

 

Maybe you shouldn't read things into what someone is saying when they are obviously NOT saying what you think they are. BlueDjinn didn't say Apple was evading paying taxes. He was stating if they want to move the money to the US, they need to owe up and pay the taxes required to move it.

 

Quote:
Originally Posted by jragosta View Post

Quote:
Originally Posted by BlueDjinn View Post

Or they could just, you know, pay their f*cking taxes.

On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?

My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.

My guess is that you don't have any idea what you're talking about. Oh, wait. It's not a guess - it's obvious.

Apple paid their taxes. In fact, last year, Apple paid 2.5% of ALL US corporate income tax. There is no US tax owed on money that is earned overseas - according to the US tax code and essentially every country on the planet. If the US government started taxing income earned in other countries, it would trigger a massive global trade war-they have no right to do that.

Now, if you have any evidence that Apple has not paid the taxes that they're required to pay, please feel free to present it. Otherwise, in the future, please learn about a topic before spouting off.

 

My guess is you totally took his statement the wrong way. Apple paid their taxes. If Apple wants to move their foreign money to the US, they'll have to pay more taxes. Is that so hard to understand?

 

Quote:
Originally Posted by fahlman View Post

Quote:
Originally Posted by BlueDjinn View Post

Or they could just, you know, pay their f*cking taxes.

On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?

My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.

Apple has paid their f*cking taxes in the country where that money was generated. It's not "the right thing to do". Apple, as you stated, is a global company. They are not obligated to bring money generated in a country outside of the United States back in to the United States. What don't you understand about that?

 

BlueDjinn wasn't mandating that Apple bring that money to the US. He was commenting on all these analysts and their opinions on what Apple should do with their foreign-earned money. BlueDjinn was offering another option: bring the money to the US, pay the taxes required to do so.

 

*

 

Why is everyone on the crazy train today? Someone offers an opinion and everyone reads too much into it and jumps all over them. Could it have been stated more eloquently? Sure.

When a company stops chasing profit and start chasing the betterment of their products, services, workforce, and customers, that will be the most valuable company in the world.
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post #27 of 52
Why borrow against the family farm if you don't need to do so. I know this is a little different, but when I paid my house & cars off, I said never again. The lenders would make more, but we don't care about the investment banks. Apple knows what to do and will do it when the time is right.
post #28 of 52
Originally Posted by silverpraxis View Post
Could it have been stated more eloquently? Sure.

 

It could have also been stated accurately. Apple has paid the taxes required on that money.

Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
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post #29 of 52
Quote:
Originally Posted by mstone View Post

Isn't Apple already in debt? They have 402.32B in liabilities (market capitalization)

Not even close. Market cap is not debt, nor is it a liability.

Apple had about $58 M in liabilities at the end of the last period. The largest buckets were accounts payable and deferred income taxes.
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post #30 of 52
Quote:
Originally Posted by silverpraxis View Post

If they don't want to pay taxes on it, don't bring it to the US. Seems simple to me.

 

I'm not a finance guy but what would be the problem with just wire transferring to the US funds drawn on foreign banks?

 

For example the contractor building the data center in the US could get paid from an account in a foreign country?

 

I do that all the time, but in the reverse direction.

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post #31 of 52
Originally Posted by jragosta View Post
Market cap is not debt, nor is it a liability.

 

The way the market (and some here) is (are) treating Apple, you'd think otherwise. lol.gif 

 

Apparently these individuals believe they're personally entitled to a portion of the hundreds of billions in market cap Apple has lost recently.

Originally Posted by Marvin

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post #32 of 52
Quote:
Originally Posted by fahlman View Post

Apple has paid their f*cking taxes in the country where that money was generated. It's not "the right thing to do". Apple, as you stated, is a global company. They are not obligated to bring money generated in a country outside of the United States back in to the United States. What don't you understand about that?

Technically, they have paid the taxes they are legally required to pay. That doesn't necessarily mean they have paid the taxes in the country the profit was generated. (Double irish with a dutch sandwitch or something...)

That said, paying more taxes than you are required is not keeping your owner's interests at hand. Have the US give a tax holiday, and then they can issue a special dividend. THEN, all their shareholders can choose to give the government extra money that they aren't otherwise obligated to do.
post #33 of 52
They borrow from themselves, they place their cash into an investment company they own, and from that same company they borrow the money.
The rate they borrow at would probably be better than the one they are getting today from their cash holdings.

I suggested this a few months ago.

With that money they should buy over 20 percent of the shares outstanding.

Hope it happens
post #34 of 52
Quote:
Originally Posted by jragosta View Post

Quote:
Originally Posted by mstone View Post

Isn't Apple already in debt? They have 402.32B in liabilities (market capitalization)

Not even close. Market cap is not debt, nor is it a liability.

Apple had about $58 M in liabilities at the end of the last period. The largest buckets were accounts payable and deferred income taxes.

How many columns are there in a balance sheet? Liabilities, assets and what else? 


Edited by mstone - 3/12/13 at 4:21pm

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post #35 of 52
Quote:
Originally Posted by AppleInsider View Post

Apple should borrow money at low costs against its significant overseas cash position to avoid a tax hit when repatriating that cash, one analyst believes.

Ben A. Reitzes with Barclays believe it's time Apple strongly consider "tapping the debt markets," which would allow it to borrow against the $94 billion in cash the company has overseas, $40.4 billion of which is untaxed.

lol.gif Anant must still be busy kicking that other guy's ass.
post #36 of 52
Quote:
Originally Posted by mstone View Post

I'm not a finance guy but what would be the problem with just wire transferring to the US funds drawn on foreign banks?

Sure, you can borrow abroad (even in US$), and have them send the funds to the US. (Sometimes, US$ borrowing costs for some companies can be cheaper abroad than in the US -- hence the existence of a "currency swaps" market).

 

But if it's your (i.e., the company's) own cash that is wired back to the US, taxes will have to be paid on it at the US corporate tax rate.

post #37 of 52
Quote:
Originally Posted by bizzare View Post

The rate they borrow at would probably be better than the one they are getting today from their cash holdings.

I doubt it. Apple will have to pay a premium over treasury bonds (no company can borrow cheaper than the US government in US$). 10-year Tbonds are yielding over 2% currently, and Apple's earnings on cash are around 1% (as I vaguely recall).

post #38 of 52
Quote:
Originally Posted by mstone View Post

How many columns are there in a balance sheet? Liabilities, assets and what else? 

Two.

 

Assets (stuff you 'own', carried mostly at historical cost) and Liabilities & Equity (stuff you 'owe').

post #39 of 52

Im with a lot of the comments here what a stupid suggestion, go into debt?  I read that apple already put aside the taxes for those overseas funds and if they did bring the money back to the US which I doubt  they could and not change there bottom line.   But being that 2/3rds of apples money is made outside the us I think it should stay there.

They paid 6 billion in US taxes last year so they paid there share on the US portion of there money.

post #40 of 52
Quote:
Originally Posted by mstone View Post

How many columns are there in a balance sheet? Liabilities, assets and what else? 

Apple publishes an abbreviated version of theres if anyone wants to look.

 

I think you can get the full version at the SEC.

 

Here is a link to the abbreviated version pdf for Q1 2013:  http://images.apple.com/pr/pdf/q1fy13datasum.pdf

 

Sorry that first one is just the earnings  here is the full version with everything:  http://files.shareholder.com/downloads/AAPL/2362481347x0x630682/0629c90d-47c2-4ca6-8578-33ac095623cd/AAPL_Q1_10Q_01.24.13.pdf


Edited by Mechanic - 3/12/13 at 6:40pm
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