I would only look at the 3 year, maybe 5 year bonds.
Compared to other investments of class, it is not bad at all.
Scottrade wants $35 for trade, that stings. Probably not worth it then...
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Apple Talking With Investors About $15-16 Billion Bond Offering
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I would only look at the 3 year, maybe 5 year bonds.
Compared to other investments of class, it is not bad at all.
Scottrade wants $35 for trade, that stings. Probably not worth it then...
I think you have that backwards. USA is one that allows credits for foreign taxes paid. Not all do.
The buyback program is three years in duration (as is the bond sale), so they are not counting on buying back at the current price or any particular price. The objective is to reduce the number of outstanding shares over time.
Originally Posted by zin
How much would Apple's foreign reserves be subject to in the form of domestic taxes? Does anyone know an effective percentage?
Not even close. For the last several quarters Apple has said their effective tax rate is about 25 to 26%. Plus they can deduct any foreign taxes paid as well as overseas business expenses.
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Apple is pushing money into R&D. They have been growing the R&D budget in line with increased sales. I believe it is now around $4B a year. That's a huge amount of money and it is growing.
Apple is generating huge amounts of money. The buy back program will not reduce Apple's cash. The cash might even keep growing (at a slower rate) over the next few years.
Borrowing the money makes this almost a free action for Apple. At current prices they are paying a little over 2% dividend. They will not pay dividend on the stock they buy back. The interest they pay on the bonds will be a little over 2% and they interest they pay reduces their taxes as a cost of business. Buying back the stock might help the current shareholders, we'll see. Buy backs are not always helpful beyond the short term.
How much would Apple's foreign reserves be subject to in the form of domestic taxes? Does anyone know an effective percentage?
Not even close. For the last several quarters Apple has said their effective tax rate is about 25 to 26%. Plus they can deduct any foreign taxes paid as well as overseas business expenses.
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Apple is pushing money into R&D. They have been growing the R&D budget in line with increased sales. I believe it is now around $4B a year. That's a huge amount of money and it is growing.
Apple is generating huge amounts of money. The buy back program will not reduce Apple's cash. The cash might even keep growing (at a slower rate) over the next few years.
Borrowing the money makes this almost a free action for Apple. At current prices they are paying a little over 2% dividend. They will not pay dividend on the stock they buy back. The interest they pay on the bonds will be a little over 2% and they interest they pay reduces their taxes as a cost of business. Buying back the stock might help the current shareholders, we'll see. Buy backs are not always helpful beyond the short term.
"Should be" those famous last words. Who decides what should be? The country is split about 50/50 on what should be. What you think should be and what I think should be are two different things. I think I'm right and you think you're right. So who's really right? I am of course.
You're making up your numbers. I merely mentioned the basis of such assessments. I wasn't even referring to the differences in corporations vs citizens but those of small and large businesses. Beyond that not just foreign sales can be pushed into tax havens. As for government sinkhole again, I already mentioned that is a separate issue. It doesn't remove the need for a functional tax system. Out of curiosity, what do you really disagree with there? You are somewhat abstract like you've relegated it to ideological differences.
This post overall is just wrong. Share price is not related to cash reserves in the least. It's a speculative value based on the results of a company on the INCOME STATEMENT. The balance sheet has very little impact on the share price (unless the balance sheet is becoming progressively worse, i.e., liabilities are increasing steadily with no change in income).
No one would EVER go to jail for buying back shares to get rid of cash. There's absolutely nothing wrong with that. CASH is not taxed. INCOME is taxed. Returns have already been filed and all that has been handled.
What matters in this situation is their MARGINAL tax rate. Effective tax rate is not the measure in this case.
They should if a U.S. subsidiary is the one earning the income and the tax is less than what would be paid in the United States - and that's how it works. If the tax is $500M in a foreign country and $1MM in the US, you're going to pay the $500M difference.
That's how U.S. taxation works.
Obviously, their income is not earned by a U.S. based subsidiary or they'd be paying taxes.
I'm making up numbers? Not sure what you mean by that. So you beleive that if Apple pays more taxes you will pay less? You are naive if you believe that. Government spends far more than they recieve. They will take as much as they can get and there is no quota. If Apple pays more they will spend more and you will still pay the same and probably more next year. It will never end as long as you think it is "fair". I personally need close to zero government services. Why should I pay for all these services when I need and use none of them? Is that fair? I don't think it is. Tell me why it is.
True, but on the other hand, the board has not stipulated a specific schedule either. If they think that the stock is under valued, they can accelarate the buy back program.
Before this bond sale on Tuesday, there were some speculation that Apple may do this over many rounds over a period of time. That made sense, since like what you also said, they do not need the money right away. In fact, they do not need any money right now even if they want to complete a significant chunk of the buy back. They have enough in post tax dollars and enough money is coming in every quarter.
But they chose to do it in one round. That may signal something about their intent on the buy back schedule. Apple seems to do things in non traditional manner. So I would not be surprised if they announce in a few months that they have completed 50% of their buy back target. That may be wishful thinking on my part since that will make me very happy.
I wasn't trying to raise the conversation to a hostile level. Governments are more likely to raise taxes on the rest of us if they cannot balance it, but that wasn't the important point. I mentioned consistency. If the effective tax rate is too high, they should deal with that, but I doubt there's a good solution. It's unlikely that they will be able to abolish the use of tax havens in any event. In terms of services, do you drive only on private roads or not drive? These are always funded in some manner unless you take nothing but toll roads. Is the fire department based on volunteer service where you live? I realize that's possible in rural areas. Are you referring to public schools?
Anyway addressing this by being lenient on corporations is a backwards method of solving spending problems with government management.
Here's a solution to that problem. Let's cut the marginal tax rate in exchange for getting rid of tax deductions such that it's revenue neutral. That will remove the incentive for multinationals to create those convoluted tax-avoidance schemes because it won't be as advantageous anymore. Small businesses will be on a more level playing field with multinationals because they can pay a lower marginal tax rate.
As growth declines the debt ratio of a company increases. This is simple corporate finance.
The stock buyback program is the way to go. I never got it, why Apple started paying dividends.
Dividends attract the wrong kind of investor (stockholder).
Uh, I love corporate finance. This is the discipline where I "think different"
I am curious what's coming next.
Yeah dividends attract people who want companies to make money. One of the biggest problems with the stock market is that dividends used to be very common and now are super rare.
I would much rather have investors looking at actual profit sharing rather than voodoo economics that have caused stocks to be vastly overvalued of vastly undervalued. There is no real corrected middle ground and that used to be the norm.
I do think apples dividend program is a bit half hearted and will not have much impact. I agree a buy back is a better option for apple but a dividend over time will help the stock.
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Yeah and the ten and thirty year rates are likely stealing as rates are so low the chances they remain low for ten to thirty more years is extremely low. Even if they do there is little downside for apple.
What I don't get is why isn't Apple using its cash hoarde to invest in exciting technologies and infrastructure, so that it can become a titan that lasts for many decades. In mean, with $140 billion, surely a leader with imagination could do something with that?
This reeks of re-arranging chairs on the ship's deck. Not saying the ship is sinking yet, but this is just piddling around not moving in any specific direction. And it's a distraction.
This reeks of re-arranging chairs on the ship's deck. Not saying the ship is sinking yet, but this is just piddling around not moving in any specific direction. And it's a distraction.
"Governments are more likely to raise taxes on the rest of us if they cannot balance it".
Since when do they want or even try to balance it? Seriously? When was the last time there was a balanced budget? 14 years ago? Yes, I need roads and firemen and policemen. That's about 2% of the budget. I'll even happily pay for schools though I have no children and never will. That's maybe 8% of the budget. So the other 90% I pay for is of no importance to me. Why should I pay for 90% I will never need or use? A simple flat tax would solve all the tax problems and eliminate the loopholes and I'd happily pay for the 90% of government I don't need or use. Unfortunately, this will never happen because there are millions of tax accountants and tax lawyers that would be out of a job and they have way too much influence in politics to ever let that happen. Nothing is fair, it never has been fair and never will be. It appears you think the Government has your best interests at heart. The people in Government have there own best interests at heart. Why you want to trust them with your hard earned tax dollars is beyond me. They certainly haven't shown any good reasons for you to.
If you're going to rant, that's fine. I wasn't baiting you, making rhetorical statements, or crafting misleading arguments. I also don't subscribe to any of the opinions you just assigned me in these last few lines. I'm going to leave it at that. Edit:I meant to say you're going off on tangents, so I'll leave it at that.
Well there are limitations to certain practices similar to what you mention there. For example there are certain limitations on how much interest a corporation can write off from loans. This way they can't load up on debt to reduce their tax liability through interest payments while maintaining profits elsewhere. I'm not great at explaining it. Someone else may chime in there.
The topic of the cash hoard has come up for years. I kind of doubt the last CEO knew what to do with it, but you may be right about re-arranging chairs.
Right! Some OTHER company will set up an ecosystem and create both computers AND comprehensive suites of software, and Apple will be left in the dust....
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lend you money.
Microsoft tried and failed. HP tried and failed. Lots of companies invested lots of money and failed. CEO of a company I worked for said: "One thing I learned: If you have money in the bank, that's a very good place for it to be.".
Apple can do what they are good at with not very much money, and buy "exciting technologies" for tens of millions or hundreds of millions. They can make massive pre-orders for parts with a billion or two. There's nothing worth buying for them that would even make a dent into this quarter's profit, ignoring what they have in the bank. So Apple could buy a record company. How would that benefit Apple? They would just have to run a record company, and they have no experience doing that, and as shown when an Apple executive left to take over JCPenney, being good at one thing doesn't mean you are good at another. They could buy a telecoms business. Sprint or AT&T or whatever. How would that help them? There's the saying "it is very easy to create a small fortune. You just have to start with a large fortune". That's what could happen to Apple if they listen to people like you.
I think returning money to shareholders is the sensible thing to do.
Actually, if the US wants to stop this, then Congress can pass a law that taxes the funds raised by the bonds as de facto income. Seems to me that is what should be done in cases like this.... YT
The top 20% of US households hold over 80% of stocks and mutual funds. This maneuver by Apple will only benefit rich people to the disadvantage of poor people.
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Still, sad to see that it has reached this stage. A company so successful, earning money so quickly it starts to focus on "returning" it to shareholders. A majority of the shareholders aren't exactly doing anything for the company, or helped the company get funded, long ago. They are just part of the sick, but so tempting, speculative money game that is today's modern world.
The only thing that sounds sensible to me is to buy back stock for the purpose of becoming a private company again. Doesn't seem like that is their real goal though. They have to treat their shareholders with 'care'... or otherwise they could have just started bringing home 50% of their foreign money, take the tax hit, and buy back a much larger amount stocks in shorter time.
But yeah, what do I know... I don't play an active part in the 'speculation' that drives the world.
Explain why its not worth it, then?
Simply saying its not worth it will only put you on everyone's ignore list.
Unless you know Apple will go bankrupt in 3 years (or 5 for 5 year), I cannot think of another reason not to invest (expect high purchase fees)