
Statement by Apple - lleims
http://www.apple.com/pr/library/2013/02/07Statement-by-Apple.html
======
cstross
Some things Apple could buy, for cash:

* SpaceX (market cap $10Bn, AIUI)

* Dell (a mere $23Bn!)

* Boeing

* Ford

* The entire global publishing industry (figures for the top 50 publishers' turnover are here: [http://www.publishersweekly.com/pw/by-topic/industry-news/fi...](http://www.publishersweekly.com/pw/by-topic/industry-news/financial-reporting/article/52677-the-world-s-54-largest-book-publishers-2012.html) \-- the largest only turns over $8.4Bn)

* A year of Puerto Rico's GDP (roughly $100Bn)

It is _really hard_ to get your head around just how big Apple's cash pile is.

~~~
vacri
Or they could pay their tax bill. On revenues of $6B in Australia, they paid
only $40M in tax, claiming only $99M in profit.

[http://www.theage.com.au/opinion/political-news/labor-mp-
tak...](http://www.theage.com.au/opinion/political-news/labor-mp-takes-aim-at-
apples-tax-bill-20130206-2dycv.html)

~~~
icelancer
Are they being prosecuted for tax evasion? If not, sounds like they are paying
their bill. Take it up with your politicians.

~~~
louischatriot
That's a pretty hyprocritical statement. Big companies know how to legally pay
almost no taxes, see: <http://en.wikipedia.org/wiki/Double_Irish_arrangement>

And that's probably not "our" politicians who are to blame.

~~~
icelancer
>legally

So it sounds to me like they are paying their tax bill. The fact that it's not
as high as vacri or you may like is not their fault.

~~~
logn
This attitude is annoying. They're forming overseas shell corporations with at
most a few employees in those offices who claim an extremely high percentage
of all IP-derived income. To claim these companies aren't doing anything
illegal, simply because we can't prove that a few people in Ireland aren't
responsible for all IP, isn't quite fair. Just because you've arranged fancy
license agreements with your Ireland offices doesn't mean those contracts are
valid or conscionable.

These companies pay almost no taxes yet feed off our public universities,
court systems, patent and trademark offices, copyright offices, public
airwaves, highways, federal banking infrastructure, etc. It's sick.

~~~
icelancer
> These companies pay almost no taxes yet feed off our public universities,
> court systems, patent and trademark offices, copyright offices, public
> airwaves, highways, federal banking infrastructure, etc. It's sick.

You misunderstand me.

I absolutely agree that it's sick.

But it is 100% legal because the government allows it to occur. If you are
expecting private organizations to not act in their own interest, you're
basically fighting gravity.

~~~
chii
but if you think about how it got to this point, this is almost an
inevitability.

Lets suppose that a country wised up, and tried to crack down on this sort of
thing. Or better yet, all countries did this at the same time! What would
happen?

At first, things would be sweet - the "proper" amount of tax (by proper, i
mean similar taxing schemes for corporate entities as well as individuals)
means more money to the gov't for social services etc.

However, a country might start thinking that they could attract move
investment by making these laws a little more lax - tax incentives? tax
breaks, or whatever else you name it. The thing is, companies that operate in
a particular country does provide that country with useful output (in terms of
jobs etc). It's in a country's best interest to attract as many businesses as
possible. This leads to the sort of behaviour we see today - lobby groups have
power, because they actually do!

I don't think equality is achievable. Not realistically.

~~~
icelancer
> but if you think about how it got to this point, this is almost an
> inevitability.

Of course. I also agree here.

Which is why all of this complaining is just barking up a tree.

------
WildUtah
This letter looks like it exposes Apple to an enormous potential tax penalty.

From
[http://www.irs.gov/publications/p542/ar02.html#en_US_2011_pu...](http://www.irs.gov/publications/p542/ar02.html#en_US_2011_publink1000257893)

"A corporation can accumulate its earnings for a possible expansion or other
bona fide business reasons. However, if a corporation allows earnings to
accumulate beyond the reasonable needs of the business, it may be subject to
an accumulated earnings tax of 15%. If the accumulated earnings tax applies,
interest applies to the tax from the date the corporate return was originally
due, without extensions.

"To determine if the corporation is subject to this tax, first treat an
accumulation of $250,000 or less generally as within the reasonable needs of
most businesses.....

"In determining if the corporation has accumulated earnings and profits beyond
its reasonable needs, value the listed and readily marketable securities owned
by the corporation and purchased with its earnings and profits at net
liquidation value, not at cost.

"Reasonable needs of the business include the following.

"Specific, definite, and feasible plans for use of the earnings accumulation
in the business.....

"The absence of a bona fide business reason for a corporation's accumulated
earnings may be indicated by many different circumstances, such as a lack of
regular distributions to its shareholders....

Good thing for Apple that the tax laws of the USA don't seem to apply to
megacorps.

~~~
bwilliams18
The last quote there seems to indemnify them...they need cash to pay out
"regular distributions to its shareholders" thus any amount of money they have
is justified by the need for cash to pay dividends.

------
cllns
Can someone explain what this means and why it's happening?

~~~
RyanZAG
Some shareholders want to sue Apple to force them to pay out more of Apple's
cash to shareholders. This is a fairly legitimate claim, as companies are
meant to pay out excess profits back to shareholders in the form of
dividends/preference shares, and Apple is earning more money every quarter
than they can use or are paying back. They are also sueing over a special term
that allows Apple to create preference shares... not a big deal.

This press release states that Apple is making plans to pay out more cash to
shareholders, and that the special term does not exclude the board of
directors from doing other things with preference shares in addition.

Apple shares are likely to rise on this news in the short term, but may be a
signal that Apple has no new healthy investments, and may lower share price in
the long term. Nobody knows, share markets are volatile.

~~~
cpeterso
If a public company does not pay dividends, what is the motivation for an
investor to buy their stock? As far as I can see, an investor can only make
money by selling to a "greater fool" or waiting in anticipation that the
company will pay a dividend.

~~~
gfodor
the company can also buy back shares. the point is that essentially that as
long as the company is profitable and continuing to generate cash flow, _some_
shareholder down the road will get his or her due, so the stock is worth some
value of these projected cash flows.

------
pedalpete
In a volatile industry like technology, where a competitors industry changing
technology can destroy your profitability in a very short time (eg. Nokia,
RIM, Yahoo!, etc) does it make sense for Apple to double down on research with
this 'excess cash'?

It seems Apple spends considerably less effort on the long-term research like
Google and Microsoft. In Microsoft's case, it may be some of these longer
range technologies which will keep it relevant, for Google, it seems their
research may keep them growing.

~~~
nirvana
Apple is far more efficient than companies like Google or Microsoft when it
comes to reasearch. In the last 15 years, they have produced the iPod, iPhone,
iPad, radically different computer designs, OS X, Final Cut, and quite a few
other products.

Over the same period, google has produced PageRank. Microsoft has produced
nothing innovative.

Apple pays less of its revenue in R&D, but that's because its revenue is so
big.

~~~
rednukleus
> Over the same period, google has produced PageRank. Microsoft has produced
> nothing innovative.

What are you, an idiot? Seriously.

EDIT: Downvote away, I stand by my comment - parent has got to be the dumbest
thing I've read on HN for a while and deserves to be called out on it.

~~~
jychang
It's a very fanboyish argument, I agree. Self driving cars don't fund
themselves.

------
mfringel
This looks like a _very_ tax-efficient way to repatriate cash.

~~~
cremnob
They actually don't touch the cash in this scheme.

~~~
mfringel
Agreed, and they don't want to... Apple's cash is much more useful to Apple
wherever it happens to be. It's the shareholders who want the cash, which in a
lot of cases means repatriation.

~~~
cremnob
I think you misunderstand me. The existing cash pile would remain untouched
and therefore would not be subject to any taxes. The preferred shares would
earn dividends from Apple which would be paid out from free cash flow. It's a
tax efficient way to deliver shareholder value without taking the tax hit like
they would if done in the traditional way of a regular dividend or buybacks.

This is just one method of course, another way is to issue debt in the US and
use that to repurchase shares/pay dividends. The board will determine what the
best way to go about it is, as there are pros and cons to both.

------
swalsh
I take this as good news, i found in the most unfortunate way how deceptively
diversified I actually was compared to how much I thought I was. For the most
part I was invested in an array of mutual funds, which I really haven't been
watching closely for a while as I have been seeing fairly good return. However
when Apple started dipping, I saw myself dipping too. Upon further
investigation I found my exposure to Apple was quite significant :\

------
capkutay
Apple is learning that a record sales and established leadership in your
market can still cause your stock to drop 40% over a quarter...So now they are
working with hedge fund managers and wall street analysts to offer some
complicated trading package. Now Wall street can take credit for AAPL's
revival in the markets.

------
mckoss
Why is Apple not just buying back it's shares? Would that not be the most tax
efficient way of increasing shareholder value?

~~~
dredmorbius
That would transfer value only to those shareholders who sold shares. A
special dividend benefits all shareholders. Both effectively accomplish the
same thing (less money in the company, more among the shareholders), though a
buyback would also inflate share price (fewer shares outstanding).

------
ksherlock
Preferred Shares are more like bonds (in that they generally pay a higher
dividend rate and are more immune to market swings). In the event of
bankruptcy, preferred shares have more priority over common shares but less
than bonds.

Apple doesn't need the money so I'm not sure why they would want to issue
them.

~~~
cremnob
The preferred shares would be issued to everyone that holds the common equity.
They wouldn't be raising money if they followed Einhorn's plan.

------
meric
Is that corporate-speak for "We don't have any new mind blowing products that
will benefit from extra capital"?

~~~
Judson
$120B (and growing) probably goes a bit above and beyond "extra capital".

------
roschdal
So does this mean that it is likely to be profitable to buy Apple stock now?

~~~
danielweber
In classical stock markets, if Apple is worth $450 a share and they issue a
$10 dividend after trading closes, the next morning the stock will trade at
$440. If you grew up reading the stock listings in things called "newspapers"
sometimes you would see a letter (I think "x" for "ex-dividend" but it's
literally been decades) in the listings next to stocks that were doing this,
so you knew that a price drop was about to/had just happened.

So even if no one were engaging in arbitrage opportunities, it would make no
difference when you purchase the stock.

~~~
wiredfool
Alternately, we have this market. Apple went ex-dividend today, which would
(ordinarily) result in their opening price being adjusted to 2.65 below
yesterday's closing (457.26). In this (real) market, it opened up somewhere
between $2 and $5 (459-463). (google's data isn't very fine grained here).

------
cremnob
This bodes well for shareholders. I imagine any additional return will be
announced in March (when dividends/buybacks were announced last year).

------
eqreqeq
Now that Steve is gone they no longer know what to do with their money. The
current management rather then reinvesting the money in the company will
simply squander it away by giving it back to stock holders. I'm sure that in a
couple of years, when Apple actually starts needing this money, everybody will
realize how stupid it was to give away their war chest.

Really, that the current CEO could not think of anything better than to give
money back to the stock holders tells me that Apple is now doomed. The guy has
no imagination. This move is so typical for a numbers guy. Steve would never
have done that. At least not to this extent.

Right now Apple is simply running on inertia but once the momentum is over I
expect the entire company will collapse.

~~~
nkohari
You made about twenty leaps of logic there. And you're also ridiculously
wrong. Even if Tim Cook is an awful CEO (which, come on, at least give him a
chance to prove it)... well, Ballmer has had 12 years to run Microsoft into
the ground and they're still ticking.

