Apple may have already covered $42 billion of its overseas cash tax issue

“Tech companies like Apple Inc. with large piles of cash sitting overseas typically cite the large tax liabilities they would face if they repatriated any of that money to fund dividends, or make acquisitions,” Dan Gallagher reports for MarketWatch.

“But Apple has already hedged much of the risk it might face in this respect, at least as far as risk to its income statement, according to one analyst on Monday,” Gallagher reports. “In this break-down, Apple has already been accruing taxes for much of its offshore cash, which would theoretically allow it to bring back about $42 billion worth of those funds without incurring any hit to its reported earnings.”

Gallagher reports, ““Apple can access about half of its offshore cash and return it to shareholders without incurring an incremental hit to its income statement,’ Toni Sacconaghi of Bernstein Research wrote [in a note to client today], though added that the company would still have to actually pay the cash tax. ‘That means that about $75 billion in total cash could be returned to shareholders with no impact to Apple’s reported tax rate or EPS.'”

Read more in the full article here.

19 Comments

  1. Or Apple could repatriate the cash and start buying shares back from the shareholders… The value of the existing shares would rise and Apple could continue making heaps of dollars offshore to create the next BIG THING…

    or not…

    Prognosticating what Apple will do or armchair recommending what Apple should do is ludicrous.

    I guess the old adage, “Don’t should on your self or others” may just apply here.

    🙂

  2. Why would they want to give that cash to the guvment. Appletcould wait until their is a favorable tax break to bring it on shore. Then it could restate its earnings upward to reverse the accrual of income taxes. If it wants to repatriate dollars to buy back shares, it could borrow at about 1.5% to buy back 50 million shares and pay it back from about one year’ free cash flow. Not sure if it is borrowed overseas, it could be paid from overseas cash without negative tax consequences.

    1. Apple repatriated cash back in 2004. With the favorable tax rates applied to repatriated cash it lowered Apple’s effective tax rate to 10% for the quarter.

        1. Well that counts as the most stupid statement I’ve ever heard. Going into debt for dividends is ridiculous since they would have to borrow for every quarter. You can only borrow with the expectation that you can pay it off.
          Apple has to live within it’s own income and that applies to dividends too.

          1. Well doggonetoo, now you’ve done it. In fact, you’ve gone too far. Of all the half cocked, hair brained ideas, saving money and living within your means…..

            You’re just the kind of person banks and wallstreet hate because they can’t own you, or make you their debtor slave.

            Why do you think Apple is taking such a manipulated beating from the street? All Apple needs to do is suck up to wallstreet, turn over their $140 billion, borrow 10-20 billion, and they will once again be a high flying wallstreet stock darling.

  3. I don’t care if Apple keeps most of the damn money for itself. As a shareholder, I’d happily watch Apple go after Google and knock that company down off its high horse for making Apple stock nearly worthless. I still think Apple has something to gain by going into the search engine business with Yahoo or DuckDuck-Go as partners. Google keeps trying to copy all the things Apple is doing and needs to face a little competition on its own soil. I’m getting sick and tired of Apple always being seen as the loser.

    Wall Street thinks Google is an invincible company but Apple should try kick Google directly where it hurts the most. Why should Google shareholders get all the gravy and Apple shareholders get all the pain? I think Apple could build a pretty formidable search engine with some outside help. It’s sure a lot better than seeing Google run away with everything without facing any challengers at all. Google is always seen as a threat to Apple but Apple is never seen as a threat to Google. That needs to change. The sooner the better.

    1. Agree…pretty much 🙁
      Seems that as Gruber says ‘Google is getting better at doing Apple’s core stuff but the opposite is not happening’.
      ICloud needs some serious love.

  4. ‘That means that about $75 billion in total cash could be returned to shareholders with no impact to Apple’s reported tax rate or EPS.’”

    There is NO “returning money to shareholders”. That money is the property of the corporation. It is the property of Apple, Inc. NOT AAPL. You CANNOT return what the APPL stock holders never had — ever. I thought we got this all resolved weeks ago. Even Einhorn no longer claims that Apple, Inc.’s cash is owned by the AAPL stock holders. Apple stock holders never, never, NEVER have had any direct claim to *any* of that cash.

    MDN needs to start calling out any and all persons who make that stupid mistake. (It’s almost as stupid as the claim that new financial instruments or other moves can “unlock value” in AAPL. There is no such thing as “locked up value”. It’s all a ruse.)

    1. Do you even understand what a share in a company is? Shareholders have a direct claim on every cent of assets of the company.

      However, different shareholders have different objectives and opinions, which is why corporations are democracies, and major issues are either decided by the board (who are installed by the shareholders) or a direct proxy vote. If someone buys enough shares for a controlling interest, he would absolutely have the right to dictate what is done with the cash. If management doesn’t go along with it, the shareholders can replace the management. Management WORKS for the shareholders if it is a public company.

      Also, there is absolutely such a thing as “locked up value”. However, this is usually something unique to a specific point in time (either based on the company or other factors in the market and investor psychology), so it is somewhat pointless to chase this if you have any kind of long-term thinking. That is why you will never hear Warren Buffet worry about it, although he absolutely would be buying back his own shares hand-over-fist if he thought it was artificially low. As he puts it, “why wouldn’t you want to buy a dollar for eighty cents?”

      I think Apple needs to get off its a** and buy back shares.

      1. Clearly you do not know what a share of a publicly traded company is. A share is a financial instrument the a company sells to the public to raise cash. The company is NOT selling a piece of the company.

        Once the company sells those shares it is not directly tied to the company unless that company also holds shares (undistributed shares). Then those undistributed shares have a book value directly related to whatever the current selling price is of the distributed shares.

        People who buy and sell AAPL shares have absolutely no direct claim on any profits of the company. NONE. You cannot go into Apple and DEMAND that they give you anything for the stock. If AAPL had a non zero par value you MIGHT have been able to force AAPL to buy the stock back for that value, but strangely enough for AAPL the par value is zero. You get no guarantee of anything from AAPL financially. You do NOT have any direct claim on the company’s profits.

        The officers and board members of the company have a fiduciary duty to make Apple, Inc. the best company they can. They legally must put forth their best effort to do this. They have absolutely no legal responsibility to make any AAPL stock holder richer. NONE. Again, their responsibility is to make Apple, Inc. (NOT AAPL) the best is can be.

        How the board is governed is set forth in the corporate charter. Typically, but not always, changes in that charter — as defined within the charter itself — are made by stockholder vote. It does NOT have to be that way. Typically board members are voted in (or out) by stockholders. It does NOT have to be that way. The corporate charter says how things are run, NOT the stockholders.

        Typically the board chooses the corporate officers and higher ranking positions (who may, or may not, be officers). It does NOT have to be that way. In some corporations the charter MIGHT say that the stockholders get to vote on the officers.

        There is no place in any major corporation of which I am aware that the charter or the initial offering of any group of stock (yes, you can have multiple “initial offerings”) says that the holders of that stock have a direct right to *any* of the assets of the corporation. There is no law of which I am aware that says this either.

        When you own AAPL stock you own a financial instrument. It’s YOUR asset. It has no direct tie to any Apple, Inc. asset. What happens to YOUR asset depends upon what happens on Wall Street.

        Yes, we all say that AAPL is tied to the financials of Apple, Inc. But the tie is not direct. Just witness what has happened for the last six months. As of 31 December 2012 Apple, Inc. is having the best financials ever yet the stock is WAY down. YOUR ASSET went down, not Apple, Inc. Rumors and innuendo and sometimes outright lies have driven AAPL way down.

        APPL is not directly tied to Apple, Inc. Indirectly, yes. But there is no direct tie that says any AAPL stock holder has any right to any asset of Apple, Inc.

    2. Agreed. Its me and others who purchase Apple products that put that money into Apple the corp, NOT AAPL the stock.

      Shareholders are NOT entitled to that cashpile. Their profits come from the sale of the stock. If they are angry at the stock price, look to Wallstreet and complain to the SEC.

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