Apple CEO Tim Cook: Cash discussions intensifying

“Apple Inc is in very active discussions at the board level about what to do with its cash, Chief Executive Tim Cook said on Tuesday, responding to calls for the world’s most valuable electronics company to put its massive reserves to work,” Poornima Gupta and Noel Randewich report for Reuters.

“Investors are increasingly calling on Apple to return some of its $98 billion warchest to shareholders through dividends or share buybacks – even if it is only a one-time deal,” Gupta and Randewich report. “On Tuesday, Cook, who took over from Silicon Valley icon Steve Jobs last August, urged investors at a Goldman Sachs technology conference to be patient about the cash reserves.”

“‘I only ask for a little bit of patience, so we do this deliberately and in the best interest of shareholders,’ Cook said,” Gupta and Randewich report. “He joked that Apple will not be holding any toga parties with the money. ‘It is not new that we are discussing it. It is being discussed more and in more detail.'”

Read more in the full article here.

38 Comments

  1. Readers should remember that over 60 Billion of that is overseas and the government will not let it come back with out double taxing it. So there is only 30 Billion for them to play with.

    Just a thought,
    en

      1. It doesn’t have to pass thru the US to be used internationally. The issue is that even after paying all the suppliers and fronting the cost of new plant and equipment as a means to get preferential supply and cost there is piles of dough left over.

    1. It’s not double taxed unless the foreign tax jurisdiction has a tax rate higher than the USA. When the foreign tax is paid, a foreign tax credit is generated that can be utilized against USA taxes to the extent the credit can be used by the USA tax rate applied to the foreign tax item.

    2. Yes, any cash Apple brings back would require Apple pay the balance of US corporate taxes. Having said that, Apple might only realistically bring back 2/3rds of its foreign-held cash, as it would likely keep 1/3rd of its foreign cash as working capital, to pre-buy components and invest in property, plant and equipment, etc.

      Since Apple has long been contemplating the repatriation of a portion of its foreign-held cash, it accounts for the potential US corporate taxes ALREADY. So, as a shareholder, this would not have any effect upon earnings, but it would diminish the potential amount that Apple might use as a dividend or share repurchase.

      My read of Apple’s financials is that Apple is paying about 31% on its US-earned income, and maybe as little as 2% on its foreign-earned income. Since 2/3rds of its income is foreign-earned, that would imply a net tax rate of about 12%. However, Apple accounts for about 25% in taxes. This is the evidence that Apple has been setting aside cash to potentially pay the US corporate tax bill. So, no material effect upon earnings requiring a restatement or anything.

      Now, if Apple were to bring back ALL of its foreign cash, then it would have to account for an additional $8+B in US corporate taxes, but as I noted above, it’s very unlikely as Apple has stated that they would most likely keep about 1/3rd of their foreign-held cash, indefinitely, as working capital.

      1. And I’m with you on keeping a third of that cash overseas. Apple’s remaining nimble and maintaining the ability to purchase property and components is a perfect reason to do so. And contributes significantly to their success.

    1. Exactly!! Whoever is calling for a dividend now during this hyper growth period needs to have their shares automatically sold for them and banned from owning the stock for the next 10 years.

      That money is needed to help fuel massive growth now!! This opportunity won’t ever come again to own the phone and portable computing landscape.

      It would simply be a collossal disaster to give away money now.

      1. Are you kidding????
        Apple is throwing off excess cash even at their crazy growth rate. It doesn’t need all the cash. That’s why Apple is looking more deeply into how to return some cash to shareholders.

        I don’t believe Apple is capable of accelerating the growth rate to the point where cash is consumed. I think it is a daily struggle to support the current growth rate, and I think Tim Cook and Co would be very very very happy and far exceed their own plans if they could keep up the current growth rate for the next several years.

        1. Giving any of it away now is a disaster. You simply cannot know what options they are considering for growth and Apple is not going to take the risks that they need to take if their cash pile is reduced to being barely above their needs.

          Besides all this the money is already being returned to shareholders in the form of stock value increase. If you owned stock and got a dividend, where are you going to invest it that is showing the returns that Apple stock is?

          This whole dividend discussion is sickening and terrifying.

          1. Unless you’re an Apple insider, stop talking like you know what you’re saying. You have no idea how much money Apple does or does not need to fuel future growth. To date, they have not needed as much cash as they have. Only they know what they may need in the future. Rest assured, if a dividend is announced, it will be only a fraction of their ongoing profits (i.e. they will still be INCREASING their already huge cash hoard) and it will not be at the expense of future growth.

            Some people are just so silly.

          1. Thank you.

            And Chaz if you own any of the stock Apple is doing you a favor by not giving you cash to waste. Let Apple make you crazy amounts of money and sit back and enjoy the ride. They are not done.

            If you desperately need cash, sell some shares. But if you can avoid doing so you will be very happy.

            Also: track share price against cash pile. There is a very clear correlation. Asymco has a great chart here:

            http://www.asymco.com/2012/02/10/following-up-when-will-apples-share-price-reach-500/

            1. You guys are so ignorant. It’s not that we want a 2% dividend a year, it’s the fact that it opens up the stock to a new class of investors. By the way, it’s quite likely that the recent stock surge is at least in part due to an expectation of a dividend announcement. You guys are just ignorant about the investing world.

              As for the asymco article, it’s a very nice correlation but will Apple go to zero if they had no cash?

            2. “As for the asymco article, it’s a very nice correlation but will Apple go to zero if they had no cash?”

              We won’t have to worry about that, because none of that money is going to Bongo through a dividend.

  2. Like he says:

    “Said woman take it slow, and it’ll work itself out fine
    All we need is just a little patience
    Said sugar take it slow and we’ll come together fine
    All we need is just a little patience”

  3. Too bad apple can’t just buy out the majority shares of Microsoft and finish running that company into the ground. Haha. I can’t stand using my office PCs anymore. It needs to die.

  4. They should pay out 3 dollars per share, then they could say that they have given the money back to the shareholders, like Michael Dell said, but without selling the company.

    That would really show him up.

  5. Apple should not pay a dividend and should become a bank with their own credit card with product purchasing incentives.
    Then, one by one, eliminate 3rd party component suppliers and factorize and make their own components to their own high standards…use their cash to eliminate middlemen and become a high quality proprietary product. If all else were to fail, then license your components, but only if necessary.
    People like Bongo who cry for a dividend are the same kind of people who will push Apple off a cliff in a heartbeat for the next generation non-Apple fad…and Apple knows this and will not cater to the same shareholders who had them written off in the late 90’s. Apple will not make a mistake twice.

  6. I could care less about whether Apple pays a dividend or does a share repurchase or buys components or equipment or whatever. Having said that, Chaz is right, Apple is throwing off so much cash now that even if it were to do a dividend or repurchase, I still would expect Apple’s cash pile to grow enormously.

    I think if Apple were to announce a dividend or repurchase, they could make it simpler by stating a $100B bar. Anything above that would be used for a dividend or repurchase. That way all those who think Apple needs cash, Apple will have more than they need for just about anything, and those wanting a dividend or repurchase will get those. Then, we can avoid those, how much will Apple give back type discussions which will come next, since they’ll have spelled it out.

    1. “Apple will have more than they need for just about anything”

      That “just about” part is disturbing… save your money Apple! Never limit Apple to any price point. They should buy some cool stuff instead and save save save! Never trust people who have a vested interest such as KenC, Bongo or Chaz. Their statements mean nothing since they’d be obvious beneficiaries from what they think is “right”.

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