“Apple’s addiction seems to have no bounds,” Matt Krantz reports for USA Today.
“The gadget maker is expected this week to borrow somewhere between $1.2 billion to $1.6 billion through a Yen-denominated bond deal in Japan, says Gerald Granovsky, debt analyst at Moody’s Investors Service,” Krantz reports. “This would be latest in a string of debt offerings piles on top of Apple’s mounting pile of long-term debt, which reached $40.7 billion as of the end of the first quarter. Apple’s total debt after this offering could reach upwards of $45.5 billion.”
“It’s interesting to see how Apple has gone from being a company that completely shunned debt under former CEO Steve Jobs to one that increasingly embraces it. Just three years ago – Apple carried no debt. How things have change,” Krantz reports. “Debt is adding up so fast – it’s now about 25% of Apple’s enormous pile of $160 billion in long-term investments.”
Read more in the full article here.
MacDailyNews Take: Free money. And certainly smarter than the alternative.
SEE ALSO:
Apple set to issue $1.6 billion of yen-denominated bonds – May 27, 2015
Apple takes on more debt to fund expanded capital-return program – May 6, 2015
Apple’s continued debt offerings are good news for investors – February 10, 2015
Famously debt-free under Steve Jobs, Apple is now on the hook for $43 billion in total debt – February 4, 2015
No matter how good it is, debt was a bad invention. It’s addictive and seems to be the root at why companies go bankrupt. It’s a self-fulfilling pyramid scheme. Apple today can cover all it’s debt, but tomorrow?
I am not negative. But, rivers run dry, boat rides end, and tides turn. It’s not a reason to sell stock, but why be disappointed when you roll snake eyes once in a while?
Gollum,
While I normally agree that debt is normally a bad thing but in this case you just have to look at the politicians and governments to see the “addition” problem. They tax every freak’n thing, especially companies who have large piles of cash and this is the only way to stay ahead of their ever changing rules.
The only addict in this story is the government.
That’s so frustrating. It’s a poison pill.
“Addiction not addition” haha
Yes make less money because of taxes. Why not?
Can someone please explain in simple terms why this works as a money making proposition for Apple?
Because Lodger, at Appleverse, “Everything just works”.
Simples! 🙂
First of all, this is not really “debt” in the conventional sense. What Apple is really doing is borrowing against its foreign profits (which it can’t bring home because the tax penalty would be too high). So instead of repatriating all this taxable money, they borrow against it by issuing foreign bonds. The pay minimal interest on the bonds (which, btw, is tax deductible) and use the money to buy back their outstanding shares which drives the price of the shares higher (which is good both for investors as well as Apple employees who are vested). It really costs them very little to do this and is profitable in the end (they can always sell those shares they buy back at a later date and actually make a profit, but more likely they will be issued to Apple employees).
Does the author with his negative tone even understand the nature of this debt ?
I dont think so !
As MDN put it.. Free money …
If they were to use the money as dividends I whole heartedly agree.
They are using it instead as buy backs which do not benefit long term investors. WS shysters are the biggest winners. The provide their services at 30 basis points to service the loan. Another 30 basis points to buy th stock and since they too are servicing the other side (the sell) another 30 basis points. Nearly one percent, not counting the negotiated sale (mostly a negative for Apple, instead of buying from the market). Jobs would never have done this. He would have flipped these shysters a finger.
“The gadget maker…”