Apple bringing home $245B
Computer giant plans to invest $350B in US, build new campus after recent corporate tax cut
In a dramatic move with financial and political implications, Apple on Wednesday announced plans to contribute more than $350 billion to the U.S. economy over the next five years by bringing home much of its overseas cash and investing more domestically, creating more than 20,000 jobs and building a new campus.
The iPhone maker, which just opened its Apple Park campus last year in Cupertino, said it will announce the location of a new campus focused on tech support for customers later this year.
Apple’s promise to “invest in advanced manufacturing in the United States” comes on the heels of major corporate tax cuts contained in the GOP’s tax reforms and a deep discount in repatriation taxes for bringing cash home from overseas. Other major U.S. companies have already announced plans to boost wages or award bonuses in the wake of the tax reforms passed late last year.
Apple’s expansion plan also comes as another technology giant, Seattle-based Amazon, holds many North American cities in suspense over where it will build its $5 billion second corporate headquarters.
In North San Jose, Apple — the world’s most valuable public company — has already assembled, through purchases of land and buildings, roughly 86 acres between U.S. 101 and North First Street fronting Charcot Avenue that potentially
could be used as a campus. The company has entitlements to develop up to 4 million square feet, enough room for potentially 8,000 to 10,000 office workers.
“We recognize that a sought-after employer like Apple has many choices,” San Jose Mayor Sam Liccardo said Wednesday, “but I’m confident that their existing investment in San Jose signals their recognition of the wealth of talent in our local workforce.”
The iPhone maker also has spoken with other property owners near its North San Jose holdings about potential purchases or leases of buildings or sites, according to a person familiar with Apple’s activity in the area.
ABC News on Wednesday evening, however, quoted Apple CEO Tim Cook as saying the new campus won’t be in Texas or California.
In its announcement Wednesday, Apple boosted its commitment to U.S. manufacturing initiatives from $1 billion to five times that much.
“Apple is a success story that could only have happened in America, and we are proud to build on our long history of support for the U.S. economy,” Cook said in a statement. “We believe deeply in the power of American ingenuity, and we are focusing our investments in areas where we can have a direct impact on job creation and job preparedness. We have a deep sense of responsibility to
give back to our country and the people who help make our success possible.”
Apple said it plans to create thousands of jobs through hiring at existing campuses and opening a new site. Those new jobs represent a roughly 25 percent increase in its domestic workforce, which now stands at 84,000 people in all 50 states.
An Apple spokesman declined to comment further about the company’s plans.
Apple promised a year ago to dedicate resources to American job creation with a $1 billion fund to expand its domestic manufacturing footprint, interpreted by many as a response to President Donald Trump’s call for U.S. companies to hire more American workers
and bring back jobs.
While Apple did not specify Wednesday how much of its overseas cash it will bring to the U.S. under the new tax code, some simple math suggests it could bring home the bulk of it. Apple, which holds 94 percent of its cash outside the United States, said it’s looking at repatriation tax payments of approximately $38 billion.
Using the new 15.5 percent repatriation tax rate, down from 35 percent under the older tax system, the $38 billion tax payment disclosed by Apple would imply that it plans on doing a $245 billion repatriation. As of the end of the September quarter, Apple had $252.3 billion in overseas cash, according to filings with the
Securities and Exchange Commission.
President Donald Trump tweeted about the Apple plan Wednesday, saying, “I promised that my policies would allow companies like Apple to bring massive amounts of money back to the United States. Great to see Apple follow through as a result of TAX CUTS. Huge win for American workers and the USA!”
The repatriation of cash is “a major game-changer for Apple,” said Daniel Ives, chief strategy officer and head of technology research at GBH Insights. “That cash has been getting dust overseas, and now they can use it.”
GBH Insights believes Apple ultimately could use repatriated cash to acquire
other companies, Ives said.
“There was an ironclad reason why large-capital tech companies like Apple could not bring (overseas cash) home,” said Ives. “It would have been tax suicide if they brought it back before the reform law.”
In a blog post, analyst Gene Munster with Loup Ventures wrote, “We believe 80 percent of Apple’s motivation related to today’s news is for economic reasons, 20 percent for political reasons, and both are good for the company long term.”
Munster’s post said he believes “share buybacks will be the primary use of funds.”
The $350 billion contribution to the economy will come from what Apple calls its “current pace of spending with domestic suppliers and manufacturers” — an estimated $55 billion for 2018. And that amount, said Apple, doesn’t include its “ongoing tax payments, the tax revenues generated from employees’ wages and the sale of Apple products.”
Apple said it will concentrate its new investments in “three areas where Apple has had the greatest impact on job creation: direct employment by Apple, spending and investment with Apple’s domestic suppliers and manufacturers, and fueling the fast-growing app economy which Apple created with iPhone and the App Store.”
More than $10 billion of the company’s expanded capital expenditures will be investments in data centers across the U.S. Over the last decade, Apple has invested billions of dollars in data centers and co-located facilities in seven U.S. states, including North Carolina, Oregon, Nevada, Arizona, and a recently announced project in Iowa. Apple said it broke ground Wednesday on a new facility in downtown Reno, which will support its existing Nevada facilities.
Apple shares rose 1.65 percent to $179.10 a share Wednesday.
Also on Wednesday, Apple told its employees that it would issue each of them a bonus of $2,500 worth of restricted stock units, according to people familiar with the matter who spoke to Bloomberg.