Apple’s cash hoard swelled to a staggering $246.09 billion in the December quarter, an increase of $8.49 billion. This, despite returning some $15 billion to shareholders in the form of stock buybacks and dividends. It’s an unprecedented concentration of corporate wealth in a financial web spanning the globe.
The 94 Percent
Most of Apple’s cash holdings—shorthand for both cash and short term securities that are made easily liquid—is held overseas. 94%, in fact, or roughly $231 billion, is outside the U.S.
President Donald Trump and the Republican-controlled Congress have indicated both a willingness and a desire to make changes to the tax code that would make it easier for U.S. companies to repatriate money earned outside the country. The move has backing from some Democrats, too.
Currently, companies owe roughly 35% of profits earned overseas to the U.S. government. Additional taxes might be owed to state governments. Those taxes aren’t due, however, until the money is brought to the U.S. Until then, it’s merely an obligation, rather than a debt, so to speak.
U.S. multinationals learned long ago that if they sit on overseas money long enough, the U.S. Congress will eventually give them some of kind of tax holiday. That, combined with near-zero costs for borrowing money on the bond markets, makes it more practical for Apple (and all the others) to borrow money against their overseas holdings than to repatriate their own money.
Some lawmakers want to lower corporate tax rates, especially the tax rate on money earned overseas. The argument goes that it would bring the U.S. more in line with the rest of the industrialized world, and all that money could be invested in infrastructure.
In reality, that’s never happened with tax holidays. For instance, Money brought in during the 1990s on the promise of jobs and investing internally was instead paid out in executive bonuses and shareholder dividends.
But there is so much money held overseas, $2.5 trillion as of September of 2016, that momentum is building for some kind of repatriation deal, or even a wholesale (permanent) overhaul of the tax code.
During Apple’s quarterly conference call with analysts on Tuesday, Apple CEO Tim Cook said, “I am optimistic, given what I’m hearing, that there would be some sort of tax reform this year. There do seem to be people in both parties who would favor repatriation of that, and I think that would be good for the country and good for Apple.”
Fun with Apple Cash
If Apple earned 1% annual interest on its cash holdings, that would be $2.46 billion in pure profit. That’s $615 million every quarter. The company probably earns a bit less than 1% for the same reason it can borrow money so cheaply—interest rates are LOW. The point, however, is that Apple’s earned-interest is far, far more money than most wildly successful companies earn in profits.
Apple’s cash holdings make it the 62nd largest country measured by gross domestic product (GDP). Comparing GDP to wealth is not a great comparison, but with numbers this large, any kind of contextualizing helps.
Sri Lanka—#62 in the CIA’s World Fact Book—has a GDP of $237.8 billion. Denmark—#61—has a GDP of $264.8 billion.
Apple could buy more than 4.9 billion Amazon Echo Dots if it wanted to.
At $4.8 million each, Apple could buy its top 51,268 employees each their own Koenigsegg CCXR Trevita super car. It has a top speed of 254(+) miles per hour, which would help them get to work faster. It can accelerate from 0 to 62 miles per hour in 2.9 seconds. Again, faster commutes. Just saying.
If Tim Cook was feeling a tad more egalitarian, Apple could cut everyone in the U.S. (318.9 million people in 2014) a check for roughly $771.
Lastly, Apple could have bought Dell almost ten times over.
*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.