Why Apple is borrowing $7 billion while sitting on a $200+ billion cash pile

Apple on Wednesday filed a prospectus for the issuance of debt, totaling around $7 billion, with maturities ranging from 2022 to 2049.

Molly Smith for Bloomberg:

With investment-grade bond yields hovering near record lows, it’s tempting even for Apple — with more than $200 billion of cash and investment securities on its books — to see what investors will lend it. Turns out that number is $7 billion, or just over 3% of its current coffers.

With the 30-year Treasury at record lows, many companies have been able to borrow more cheaply for much longer. Apple will pay around 2.99% interest on its new 30-year bonds, compared with the 3.45% it’s paying on three-decade bonds it sold in 2015. On a $1.5 billion issue, that equates to savings of nearly $7 million of interest annually, or more than $200 million over the course of three decades.

Today’s debt sale could help Apple refinance roughly $2 billion of debt that’s scheduled to mature this year in addition to much of the $10 billion it has coming due in 2020…

MacDailyNews Take: When they’re handing out free money, the wise take it.

6 Comments

  1. Some say this makes sense, but Apple should take that money and acquire a cloud-computing company which Wall Street claims has unlimited revenue and growth potential. Maybe that business would pay back that borrowed money in a short time. Almost every major tech company has a cloud business and they’re being highly valued for it. Look at Microsoft. The company was barely getting by as Windows licenses decreased and after throwing away billions of dollars on the Nokia mobile initiative. Now with a healthy cloud-computing business, Microsoft is leaving Apple in the dust in overall financial value and the company is now said to have unlimited growth potential.

    Unlimited growth potential will never be said about Apple now that their iPhone business is on the skids. It’s just a matter of Apple being able to convince big investors that their company isn’t completely dying. No one is going to give Apple any praise for starting a streaming content business and no one thinks Apple selling wearable devices will never take the place of a failing iPhone business. Big investors are only interested in certain businesses that are said to be high-growth businesses. Apple is no longer considered a high-growth business. Big investors are still fretting over decreasing iPhone sales despite Apple no longer reporting them. Almost everyone thinks Apple is only trying to hide bad news. At least if Apple had a cloud-computing business, investors wouldn’t have to be bothered with that annoying Chinese trade tariff crap every single day.

    So, yeah, Apple should take the money, but use it for something really constructive for future growth.

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