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Old Feb 25, 2013, 02:09 PM   #76
TallManNY
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Originally Posted by IJ Reilly View Post
Without resorting to calculations, the trajectory seems to put cash in the neighborhood of $200b within three or four quarters. Plus or minus a bit doesn't much matter. Soon or sooner.

I don't know the breakdown of overseas money vs. funds held in the U.S. offhand, but it seems to me more political gamesmanship than anything else when corporations argue for repatriation holidays. They will shift the money to the U.S. when they need or want it, either way. Waiting for Congress to give you a special deal may be good politics, but it is bad business. Apple should and I think will focus capital investments where they have the best growth opportunities. That's probably not in the the U.S. right now anyway. And keep in mind, they have more than enough capital to expand wherever they want, so I don't think where they have the money stashed is a huge issue.

We don't know if the buyback program the board initiated last year was ever spent out. At this point though they should probably be buying back/supporting the stock price when the multiples drop way low, as they have recently.
The reparation issue is actually a pretty significant business issue. Congress (especially the Republican Party) has suggested they would be open to another tax holiday. Since that seems possible, all US companies who can afford to are holding cash overseas in case this happens again. Now, or course you don't hold off on important investments for this. But as you point out Apple has plenty of money to do all the US investments it wants. Apple will basically never bring that cash back if it means paying 35% on it. At least not when changes to the tax code are so frequently discussed. And yes the overseas cash is most of the cash pile because Apple actually uses cash here in the US for development and to pay its dividends.

The buyback program is ongoing. But it is modest and mainly based on buying back shares to cancel the shares that are issued to executives as part of their competition. It isn't focused on any particular stock price or earning multiple.
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Old Feb 25, 2013, 05:29 PM   #77
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Originally Posted by TallManNY View Post
The reparation issue is actually a pretty significant business issue. Congress (especially the Republican Party) has suggested they would be open to another tax holiday. Since that seems possible, all US companies who can afford to are holding cash overseas in case this happens again. Now, or course you don't hold off on important investments for this. But as you point out Apple has plenty of money to do all the US investments it wants. Apple will basically never bring that cash back if it means paying 35% on it. At least not when changes to the tax code are so frequently discussed. And yes the overseas cash is most of the cash pile because Apple actually uses cash here in the US for development and to pay its dividends.

The buyback program is ongoing. But it is modest and mainly based on buying back shares to cancel the shares that are issued to executives as part of their competition. It isn't focused on any particular stock price or earning multiple.
Nobody pays the 35% corporate tax rate. The effective rate is much lower, and lower yet in this case because of the credits for foreign taxes paid. Yes I can see they'd prefer to hold out for a tax holiday, but then wouldn't well all if we thought we'd be able to get one? Maybe if the corporations got the idea that they weren't going to be entitled to special tax code treatment, they'd behave more rationally. This means making decisions for business reasons, not for tax reasons.

The repurchase program for 2013 is budgeted at $10b over three years. A fairly significant amount. The criteria for buybacks are never disclosed but logic dictates that they will attempt to buy back shares when the share price is depressed. We will find out what the average price is when the next 10-K is issued (in April, presumably).
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Old Feb 26, 2013, 11:07 AM   #78
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Originally Posted by IJ Reilly View Post
Nobody pays the 35% corporate tax rate. The effective rate is much lower, and lower yet in this case because of the credits for foreign taxes paid. Yes I can see they'd prefer to hold out for a tax holiday, but then wouldn't well all if we thought we'd be able to get one? Maybe if the corporations got the idea that they weren't going to be entitled to special tax code treatment, they'd behave more rationally. This means making decisions for business reasons, not for tax reasons.

The repurchase program for 2013 is budgeted at $10b over three years. A fairly significant amount. The criteria for buybacks are never disclosed but logic dictates that they will attempt to buy back shares when the share price is depressed. We will find out what the average price is when the next 10-K is issued (in April, presumably).
Overall nobody pays the 35% corporate tax rate, but on the marginal level of the last dollar brought in, companies pay it all the time. Apple makes a profit every year after using all the deductions it can qualify for. So every additional dollar that it makes, it pays 35% on because all the deductions have already been used. If Apple only brought back additional overseas cash there is no reason to think that would allow them additional deductions. So yes they would basically pay 35% on it.

The problem is that we've just had a national discussion on having a tax holiday and many prominent politicians pushed for one. The idea is that bringing that cash back to the US would be stimulative to the economy (which is probably true, though not significantly so). Heck many politicians push for much lower taxes in general. For the government to get credibility that a tax holiday is permanently off the table will take years, if not decades, of sending a consistent message. It will also take a radical change in the Republican Party's platform, which is broadly speaking anti-tax. See the last Presidential election where Republican Presidential candidates argued for flat taxes and such. Mitt even broke out the fact that it is unfair for corporations to be taxed and then dividends taxed (the double taxation argument), which is justification for his less than 15% tax rate. If that is "unfair", then maybe things change radically (e.g., no taxation of dividends, so Apple should hold off on dividends, or no taxation of corporations, so Apple should hold off reparations.)

These tax plays do influence business situations. But there is big money here so it can't be helped, taxes will always influence things.

I guess you can say the repurchase program is significant. But we are in agreement that at its current size and what we think Apple sales will be like in the future, that Apple is heading toward a bigger cash pile. Apple may try to buy when share prices are depressed, but also this must be done carefully since you are talking about a purchase from the ultimate set of insiders. I don't know how a company does that without running the risk of insider trading unless they set their repurchases on some sort of automated policy.
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Old Feb 26, 2013, 11:30 AM   #79
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/snip Hard.


/snip
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Old Feb 26, 2013, 03:47 PM   #80
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Good for the law courts on this one. It's a little sneaky.
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Old Feb 26, 2013, 05:50 PM   #81
IJ Reilly
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Originally Posted by TallManNY View Post
Overall nobody pays the 35% corporate tax rate, but on the marginal level of the last dollar brought in, companies pay it all the time. Apple makes a profit every year after using all the deductions it can qualify for. So every additional dollar that it makes, it pays 35% on because all the deductions have already been used. If Apple only brought back additional overseas cash there is no reason to think that would allow them additional deductions. So yes they would basically pay 35% on it.

The problem is that we've just had a national discussion on having a tax holiday and many prominent politicians pushed for one. The idea is that bringing that cash back to the US would be stimulative to the economy (which is probably true, though not significantly so). Heck many politicians push for much lower taxes in general. For the government to get credibility that a tax holiday is permanently off the table will take years, if not decades, of sending a consistent message. It will also take a radical change in the Republican Party's platform, which is broadly speaking anti-tax. See the last Presidential election where Republican Presidential candidates argued for flat taxes and such. Mitt even broke out the fact that it is unfair for corporations to be taxed and then dividends taxed (the double taxation argument), which is justification for his less than 15% tax rate. If that is "unfair", then maybe things change radically (e.g., no taxation of dividends, so Apple should hold off on dividends, or no taxation of corporations, so Apple should hold off reparations.)

These tax plays do influence business situations. But there is big money here so it can't be helped, taxes will always influence things.

I guess you can say the repurchase program is significant. But we are in agreement that at its current size and what we think Apple sales will be like in the future, that Apple is heading toward a bigger cash pile. Apple may try to buy when share prices are depressed, but also this must be done carefully since you are talking about a purchase from the ultimate set of insiders. I don't know how a company does that without running the risk of insider trading unless they set their repurchases on some sort of automated policy.
The SEC rules include safe-harbor provisions for stock repurchases. I don't know what they cover exactly, but companies do have some protection from insider trading prohibitions for this purpose.

I understand your argument about marginal taxation, but keep in mind that they get credits for foreign taxes paid, so they are definitely not paying the full marginal corporate rate to repatriate profits. The corporate tax rates in other countries might well be lower than the U.S. rates but most nations provide far fewer tax gimmes, so corporations are paying closer to the actual rate on foreign earnings than they do here. I regard the "double taxation" argument as a smokescreen.
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Old Mar 20, 2013, 07:34 PM   #82
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Old Mar 20, 2013, 08:06 PM   #83
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Originally Posted by DaveTheRave View Post
LMAO

Asking Apple to increase the dividend does absolutely nothing to threaten their ability to innovate. Thats how much unused cash they have.

BTW I'm sure Apple had their own "calculator cronies" - remember this is the company that charges an additional $100 to increase storage in the iPhone from 16GB to 32GB. That is innovative!

If the issue up for debate is whether or not Apple should have this much cash on its balance sheet, and the solution is a dividend, then by definition the "solution" of implementing a dividend to fixing their problem of having "too much cash" would significantly affect how much cash they have. what if they think they need that money to innovate? What if they need to get more money quickly, in order to be able to move quickly in a competitive environment? What if their $100 price increase for incremental Storage upgrades is one way of facilitating future innovation? Like no one else charges more for increases in storage?



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Originally Posted by pmasters View Post
It doesn't work that way nor should it. Look, we all see the value in Apple stock and as a company. But as a publicly traded company, Apple is responsible for generating as much value for our stocks as they can. Sitting on all of that cash is not generating any additional value. And without all these analyst and fund managers there is no way in hell Apple would have achieved the value it currently has. You don't cut off your nose to spite your face. What Einhorn is doing is smart. Because now he is indirectly putting Apple in a place where they have to do something or at some point the shareholders will begin to revolt.

What if Apple plans on using cash for some large investments? What Business is it of this number cruncher to tell innovators what they need to do to innovate and create value for the shareholders? What has he ever innovated for society that was so great? I'm a shareholder myself, and I would love to see them use this cash to buy large content companies. That would clearly create far more value over the long-term than having them give me some stupid large dividend for a couple quarters, or issue me some preferred shares or whatever, as I watch the institutional investors who were owning the stock specifically for that reason dump the stock as soon as that news hits the wire, and watch any money I made off of the dividend disbursement be annihilated by the stock price depreciation. Again, if shareholders don't like what their company is doing, then they can sell the stock, and go buy BlackBerry or whatever. They certainly don't have too much cash.
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