“With approximately $200 billion of cash on the balance sheet, Apple’s financial strength has never been stronger,” Neil Cybart writes for Above Avalon. “However, Apple has a growing dilemma on its hands concerning its cash and capital return program.”
“Apple is unable to keep the pace of share buybacks and dividends in-line with its foreign cash generation. As a result, excess cash that is not needed to run Apple’s business continues to build on the balance sheet,” Cybart writes. “While labeling a company with $200 billion of cash as having a cash dilemma seems like hyperbole, Apple’s valuation metrics will likely be negatively impacted in the coming years if Apple is unable to return this excess cash to shareholders. ”
Cybart writes, “Management does not have many available options at its disposable for solving its cash dilemma.”
• Lobby for U.S. Tax Law Changes/Holiday
• Continue Issuing Debt to Fund Capital Return
• Do Nothing
Much more in the full article – recommended – here.
MacDailyNews Take: A problem everyone would love to have: Too much cash!
Obviously, U.S. corporate taxes are too high.
Under the current U.S. corporate tax system, it would be very expensive to repatriate that cash. Unfortunately, the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free flow of capital… Apple has always believed in the simple, not the complex. You can see it in our products and the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. This reform should be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates and implement a reasonable tax on foreign earnings that allows the free flow of capital back to the U.S. We make this recommendation with our eyes wide open, realizing this would likely increase Apple’s U.S. taxes. But we strongly believe such comprehensive reform would be fair to all taxpayers, would keep America globally competitive and would promote U.S. economic growth. – Apple CEO Tim Cook, May 21, 2013