Apple's dilemma: So much money, so much of it overseas

You say you need a quick $17 billion? But you want to avoid paying a heap of taxes in the transaction? What to do?

If you were Apple, which is looking to kick back $100 billion to its shareholders by the end of 2015, you’d borrow it, of course.

Which is why, according to investors familiar with the deal, Apple is jumping into the bond-selling business with both feet. And for Apple, which never does anything in a small way, the sale of $17 billion worth of bonds would set a new world’s record for borrowing other people’s money.

Apple’s blessing and curse, of course, is that its iPhone/iPad fortunes have left it perched atop a mountain or more than $100 billion in cash. And while it could use that money to make all sorts of insanely great acquisitions of other companies to grow its business, the money is also a pain for two reasons: Much of it is caught up overseas and to spend it on investors would mean paying big taxes to “repatriate” the cash back to the United States.

The other curse is that the longer Apple squats on that cash and the more the pile grows in size the more investors will be clamoring for the Cupertino company to give them fatter dividends, or, i.e., let them share in the wealth.

Hence the bond sale, which was reportedly hammered out this week during meetings between Apple and big investors, including  Goldman Sachs Group and Deutsche Bank, who according to people familiar with the deal are leading the sale.

Apple declined to comment on the timing or specifics of the sale, according to a report in the Wall Street Journal. But at his recent conference call with analysts after Apple announced its most recent quarterly earnings, CEO Tim Cook made it clear that Apple got the message from activist investors loud and clear. The company, he said, would be happy to return $100 billion to shareholders in the next two years or so.

Go ahead. Be our guest. Have at it.

Again, hence the bond sale.

 

Patrick May Patrick May (314 Posts)

With more than 30 years on the front line of daily American journalism, I'm currently a staff writer with the San Jose Mercury News, covering Apple and writing people-centric business stories from Silicon Valley.