APPLE’S US$257B CASH PILE DILEMMA
Firm resists bringing money back to US due to tax disincentives
IT is a sign of Apple’s success but also a thorny problem: its cash stockpile has hit a staggering US$256.8 billion (RM1.11 trillion), sparking debate on what do with such massive reserves.
Apple’s quarterly report on Tuesday showed its cash holdings — the vast majority held overseas — jumped to a sum that topped the entire economic output of Chile.
The tech giant has resisted the idea of bringing the cash home, because of disincentives in the United States tax code — it allows multinational firms to defer profits while they are held overseas, but taxes income at up to 35 per cent when repatriated.
Proposals by President Donald Trump and lawmakers could lower the tax rate for repatriated earnings, an incentive for Apple and others to put the money to work in the US.
“There’s something not quite healthy about it (the cash hoard),” said Roger Kay, Endpoint Technologies Associates’ analyst. “Normally, you would expect cash to fund investment opportunities, but obviously Apple doesn’t have any use for that much cash.”
Apple has become the most valuable and profitable firm of the current era. But the unique challenges it faces because its earnings come mostly from the iPhone, which faces increasingly tough competition.
Apple faces periodic pressure to return more cash to shareholders with higher dividends and more share buybacks, and has already spent some US$200 billion doing this.
On Tuesday, Apple reported a rise in quarterly profit but its shares took a hit from weaker iPhone sales ahead of a 10-yearanniversary model on the horizon. Profit climbed 4.9 per cent to slightly more than US$11 billion on revenue rising 4.6 per cent to US$52.9 billion.
Its shares were down nearly two per cent to US$144.94 in aftermarket trades that followed release of the earnings figures. Agencies
Apple’s quarterly report shows its cash holdings have jumped to a sum that tops the entire economic output of Chile.