Ever since President Donald Trump signed the tax reform bill into law in December, speculation has been abounding about what Apple will do with its huge cash pile, the majority of which is outside the U.S. In addition to lowering the corporate tax rate, the tax reform bill enables companies to bring the cash back into the U.S. at a reduced tax rate, Investopedia reported.
“Our current net cash position is $163 billion and given the increased financial and operational flexibility from the access to our foreign cash, we are targeting to become approximately net-cash neutral over time,” Chief Financial Officer Luca Maestri recently told the press.
Most of the cash surplus will head directly back to investors, Market Watch reported. The company added $50 billion to its shareholder-return plan last year for buybacks and dividends, increasing its program to about $300 billion. The previous year they announced a $50 billion increase as well.
Maestri said the company typically returns approximately 100% of its free cash flow to investors, “so that is the approach that we’re going to be taking”, however no decisions have been indubitably made yet.
It seems apparent that buybacks and increased dividends will occur with the surplus.
If Apple goes ahead and doubles its typical annual increase this spring, however, the company would still have $63 billion in net cash left to spend, according to Market Watch. Apple said in a January announcement that it would invest “over $10 billion” in data-center expansions. The company also set out to build a new campus and “create” 20,000 jobs. Apple didn’t if these would be full time jobs.
As far as acquisition of other companies, Maestri said, “The thought process is always to acquire something that allows us to either accelerate our product road maps, filling a gap in our portfolio, [or] providing a new experience to customers… [Apple] looks at all sizes and we will continue to do so”
Apple made 19 acquisitions in 2017, according to Market Watch, all smaller purchases, which has been Apple’s typical approach. The company’s largest acquisition to date has been Beats, which it purchased for $3 billion back in 2014.
“Apple clearly is a beneficiary of overseas cash repatriation … Repatriation of Billions of offshore cash should increase the rate of Apple’s share buybacks since the company believes the stock remains attractive in that its service business is undervalued,” UBS analyst Steven Milunovich. predicted in January in a research report. The new tax code’s benefits continue to reverberate throughout the business world.
By Austin Myers