by Michael Roberts
The tech giant Apple has accumulated an enormous cash hoard of $246bn, larger than Sri Lanka’s estimated 2016 GDP. If Apple’s cash pile was its own public company, it would be the 13th largest in the world. Much of this cash pile ($215bn) is held abroad to avoid paying the higher rate of corporation tax that the US applies. For example Apple paid only 0.005 per cent tax in Ireland in 2014. The EU Commission is trying to force Apple pay a proper tax amount to Ireland on the grounds that its profits in Europe have not been taxed properly because it accounts for its sales through Ireland. The Irish government has sided with Apple in this dispute!
But Apple’s cash pile is not actually “cash” nor “on hand”. Apple has only about $16.7 billion in cash and equivalents on its balance sheet. The rest is stashed in long-term marketable securities, meaning Apple plans to let those funds — roughly $177 billion — accrue interest for more than a year.
Big cash hoards, but rocketing debt too
Everybody notices the high cash hoards that some of the largest US companies are accumulating but do not notice that their debt has rocketed too. Apple’s debt has exploded. It has $80bn in debt, which since 2012 is essentially an increase of $80bn. That’s right, a few years ago, Apple had near-zero debt levels and now has a solid $80bn worth.
And while cash and securities pile up overseas, Apple is piling up debt in the US. Apple – even before this latest borrowing – had more debt than the telecom and cable companies which typically carry the most debt since they have stable cash flow and slow growth. The company currently sits on about $53.2 billion in long-term debt obligations as well as $32.2 billion in “non-current liabilities,” after executing a series of bond sales including the largest in history for a nonfinancial U.S. business, making it the fourth most-indebted company in the Standard & Poor’s 500.
By borrowing instead, Apple gets cash to (more…)