Apple brings (some) money home
After years of back and forth, and Apple stashing its profits in overseas bank accounts (to the tune of $260+ billion), the company announced yesterday that it would bring some of that cash home to the US in the next year.
Apple's press release said it'll spend $350 billion in the US over the next five years, which is kind of misleading: that number is actually just its US investments all lumped into one basket — it's just obligated to pay $38 billion in tax, or 15% of those holdings, under a new law which will reduce the overall liability.
Asymco has a fantastic post about the implications of all of this, why tax law is complicated, and how this entire thing is fascinating in its complexity and dancing around.
This section stood out about how this is good news for Apple:
What about keeping it? Doesn’t having lots of cash make Apple more powerful?
As individuals we think that having lots of cash makes us rich. For companies it’s the opposite. Cash is a liability. If you come across a company that is cash rich and has nothing else, its enterprise value will be zero. Companies are valued on their future cash flows, meaning their ability to generate cash, not how much they managed to keep. In other words, cash is a measure of past success and investors are interested only in future value.
Apple's business is "extraordinary" indeed, with it making up over 30% of its total market capitalization, which would usually be a concern, but its cash flow (incoming and outgoing) is staggering as well: $63,598,000,000.
Paying this tax, and bringing some of that cash back to the US means it's able to free it up to invest back in operations back home. It plans to open a new HQ (bring on Amazon HQ2, the sequel — a great political move), build new data-centers and hire some 20,000 people.
It's important to keep in mind that this was going to happen anyway. Apple had no choice to do this, and events were set in motion in 2015 leading up to this.
Apple's free to spin it however positively it likes, but the reality is it had no choice here — and now it has to pay up (although considerably less than what it would've done if they'd not received a tax break) but it has a net positive for the US, and future investments of its own there.
Why does any of this matter? It's not every day you see a company investing a quarter of a trillion dollars anywhere and Apple is already planning to spend almost all of it. What's interesting
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