Apple Sells $14 Billion in Bonds to Take Advantage of Low Interest Rates

[MacRumors]

After years of hoarding cash, Apple has sold $14 billion in bonds to take advantage of cheap borrowing costs in order to return more cash to shareholders, according to a report by Bloomberg.

The company issued debt in six parts. The longest portion of the offering, a 40-year security, will yield 95 basis points above Treasuries, after initially discussing between 115 and 120 basis points, according to a person with knowledge of the matter, who asked not to be identified as the details are private.

The report notes that until last year, Apple hadn't borrowed in the U.S. investment-grade market more than once in a calendar year since 2017, but low interest rates were too tempting for the company in its pursuit of aggressive share buybacks and dividends. Apple may also use it in funding for working capital, capital expenditures, acquisition and repayment of debt, according to Bloomberg's source.

Apple is believed to be sitting on $196 billion of cash, but has been working to reduce its net cash position, largely through payouts to stockholders. The company recently reported on earnings on the last quarter in which revenue topped $100 billion for the first time.

Article Link: Apple Sells $14 Billion in Bonds to Take Advantage of Low Interest Rates

 

[syklee26]

Why not just buy a auto maker with that cash?

 

[velocityg4]

Couldn't they have used this to generate 2,800 hours of content for Apple TV+ this year. Figuring a production budget around $5 million per hour of content. Obviously some shows or movies would cost more or less per hour. That'd really get the ball rolling.

 

[azentropy]

I'm probably in the minority, but at this stage in my life and ownership (since 1996) I'd really like to see APPL substantially increase the dividend payout. It is down to 0.60% or so now.

 

[darkpaw]

Apple is believed to be sitting on $196 billion of cash, but has been working to reduce its net cash position, largely through payouts to stockholders. The company recently reported on earnings on the last quarter in which revenue topped $100 billion for the first time.

They could always knock their prices down a little, and not have so much cash in the first place.

 

[citysnaps]

Why not just buy a auto maker with that cash?

They don't need to own one. That would be a horrendously poor use of capital. It's also why smart tech companies, like Apple, don't own silicon foundries, even though they have the $$$ to do so.

 

[Kiimora]

Customers matter too not just the shareholders; they can start price reductions on all their products going forward. A win-win for all

 

[dazzer21-2]

Lend us a fiver!

 

[neuropsychguy]

They could always knock their prices down a little, and not have so much cash in the first place.

They are. Apple's hardware margins this past quarter were only about 31%, which is lower than they've been for years (e.g., 35% - 36% in 2017). That's effectively a 10+% decline in product costs to consumers over the past 3 - 4 years. Apple makes up the margins with services, however.

Could Apple lower prices more? Yes, but they've been very consistent in their approach to profit margins. This gives the company consistency for investors and it gives Apple finances to do things (reward stock owners, develop new products and services, have a rainy day fund, etc.).

 

[k1121j]

Why not just buy a auto maker with that cash?

Someone also said long ago why don't they just but a cell phone maker. They know what they are doing that's why aka "you don't put the cart before the horse"

 

[citysnaps]

Customers matter too not just the shareholders; they can start price reductions on all their products going forward. A win-win for all

Hmmmm, I dunno. I feel the Apple products are already well-priced and offer outstanding value. No need to lower prices.

If they weren't well priced Apple wouldn't be enjoying the massive success that they have in the market in the last decade.

 

[mdnz]

I'm probably in the minority, but at this stage in my life and ownership (since 1996) I'd really like to see APPL substantially increase the dividend payout. It is down to 0.60% or so now.

I guess it depends on how old (no offense) someone is to want more dividend or more stock price growth. I'm a relatively young investor but looking at some of the other bigger tech companies I also have to agree that 0.6% is pretty low.

 

[kiranmk2]

If they issue dividends or buy back shares do this out of spare cash then fine (although they should really wait for a decrease in share price to buy-back) but takinging on debt just to pay it to shareholders rather than invest in the company / R&D / make some acquisitions is nuts - even at low interest rates.

 

[quagmire]

Just see the airlines on how spending years of record profits on buy backs, etc went when things go the other way.....

as the poster above said, taking on debt just for buy backs is stupid. Debt should only be taken on for R&D.

 

[djcerla]

Like buying $100 bills at $90. What a moment in history.

 

[darkpaw]

This gives the company consistency for investors and it gives Apple finances to do things (reward stock owners, develop new products and services, have a rainy day fund, etc.).

Pay software testers to QA their software?

 

[otternonsense]

Imagine if they'd invest even a fraction of this amount into R&D instead of sticking to minor iterations over and over and over

 

[bklement]

Couldn't they have used this to generate 2,800 hours of content for Apple TV+ this year. Figuring a production budget around $5 million per hour of content. Obviously some shows or movies would cost more or less per hour. That'd really get the ball rolling.

More like should've paid out to shareholders the money they've wasted on tv+.

 

[bklement]

Hmmmm, I dunno. I feel the Apple products are already well-priced and offer outstanding value. No need to lower prices.

If they weren't well priced Apple wouldn't be enjoying the massive success that they have in the market in the last decade.

Their base models have great value. The upgrades on the other hand are horrendously overpriced.

 

[bklement]

If they issue dividends or buy back shares do this out of spare cash then fine (although they should really wait for a decrease in share price to buy-back) but takinging on debt just to pay it to shareholders rather than invest in the company / R&D / make some acquisitions is nuts - even at low interest rates.

It's still cheaper than bringing the cash to the us and pay corporate tax. They can deuct the interest as expense.

 

[clive27]

Imagine if they'd invest even a fraction of this amount into R&D instead of sticking to minor iterations over and over and over

Almost all of their spending other than overhead is on R&D as their production is relegated to third party companies.

 

[apparatchik]

Couldn't they have used this to generate 2,800 hours of content for Apple TV+ this year. Figuring a production budget around $5 million per hour of content. Obviously some shows or movies would cost more or less per hour. That'd really get the ball rolling.

I think they missed the correct industry where to heavily invest in content creation, it should have been gaming, not video streaming.

They could fund AAA exclusives playable on the whole ecosystem, from iPhone to Mac to Apple TV. With all that money they could buy 2-3 studios and sign tens of exclusives from independent agencies to jump start the Mac as the go-to desktop platform for gaming and to place the iPhone & iPad as the handheld leader above the Nintendo Switch.

After all, current iPhone/iPads are well above the GPU power of the Switch and improve year after year.

 

[SuperCachetes]

Just see the airlines on how spending years of record profits on buy backs, etc went when things go the other way.....

as the poster above said, taking on debt just for buy backs is stupid. Debt should only be taken on for R&D.

The difference is, Apple has the net cash (offshore, presumably) to cover this debt ten times over.

It is often cheaper to just to borrow money stateside than to bring corporate cash back home. Sounds to me like they think the corporate tax rate is going to go back up over time, which is definitely possible given short-term politics in the US.

 

[mi7chy]

How about using some of that to improve user experience like installing GGC at ISPs so Big Sur updates don't take an hour to download 4GB?

 

[nylonsteel]

Good move on aapl part
take advantage of that low interest
more higher dividends please