back to article All rivers flow into the sea: Apple holds TEN PER CENT of corporate America's dosh

Apple holds just over one in ten of all corporate America's dollars, according to an analysis by ratings firm Moody's. In a report first cited by the Wall Street Journal, Moody's said the fruity firm holds a $147bn cash reserve. Microsoft struggled into second place, with its war chest amounting to about $77bn - just under half …

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Over priced

Now who says Apple's margins are on the high side?

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Anonymous Coward

Re: Over priced

They make good margins but also have a huge revenue - you would probably find others are similar.

Microsoft had revenues of just shy of 78bn dollars and net income of just shy of 22bn dollars - so about 28%. Apple had revenues of 156bn dollars and net income of 42bn dollars - so about 27%.

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Re: Over priced

The customers who put that $147B in Apple's hands didn't think they were overpriced...

I agree that their devices could be sold considerably cheaper, but what's the point? Increased volume is not, by itself, a good thing. It is insanely expensive to swim at the low end of the consumer market. If people are throwing hundreds of billions of dollars at you, without having to deal with low end consumer complications, it would be the height of lunacy to do something differently.

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Happy

The thought that springs to mind is Mr Adams' famous line about the little green pieces of paper and their happiness!

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Half Time Oranges

[Apple] holds a $147bn cash reserve. Microsoft struggled into second place, with its war chest amounting to about $77bn - just under half of Apple's total.

77 > (147/2)

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Re: Half Time Oranges

Who down voted this post?

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Bronze badge

Re: Half Time Oranges

"Who down voted this post?"

That would an innumerate Apple-hater, of which there are many on el Reg's various fora.

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Happy

Re: Half Time Oranges

There are, surprisingly, quite a few posters who don't like math on here as well. Could have been one of them.

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Re: Half Time Oranges

It's mathS fer chrissakes.... Maths in the singular sense does not exist since to solve a problem requires >1 input

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Anonymous Coward

Re: Half Time Oranges

Ah, the plural might be maths but the contraction is math

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Re: Half Time Oranges

Actually this arithmatics. Not real analysis, statistics, euclidean geometry or other mathamatics(maths).

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Is it just me ...

> American corporations held a total of about $1.48tn in cash as of June this year

So american businesses hold about $1.5 tril of cash, but america owes about 16.7 terabucks

Anyone else see a potential problem here?

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Big Brother

Re: Is it just me ...

C'mon...

The governments print money at will so they can inflate their debts away, the banks lend what they don't have, collateralize it and pretend it's something else, then sell the collateralised 'asset' to some other greedy sod who pays for it with money which they don't have either, then when it all goes tits up, the gov't takes what little the ordinary person has and gives it to the banks so they don't have to fail and their ruling bodies can enjoy massive salaries, bonuses and pensions, all carefully contrived so that they don't pay hardly any tax on it.

It will all end in tears - but unfortunately it will be our tears first...

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Anonymous Coward

Re: Is it just me ...

US debt is about 100% (or more) of their GDP. At least in the UK our ratio is lower - but it's true that 100% of the US corporate cash reserves would pay less than 10% of their debt.

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Re: Is it just me ...

You really don't understand anything at all if you think that is a problem. That's like saying that Samsung sold 40 million phones last quarter, but that's a problem because Microsoft sold twice as many Windows licenses. The two things have no relationship to each other.

America's ability to repay its debts has fuck all to do with the amount of money held as cash by US corporations, unless you think those corporations are on the hook for paying it back solely out of their cash reserves. Hint: they aren't. If they were, then you might look at the actual value of those corporations, which is much higher than the US debt. If the US government used eminent domain and took over the Fortune 500, they could pay back the debt several times over. Fortunately for the stockholders they don't have any plans to do so.

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Green apples

So apple is worth as much as the INTIRE pharmaceutical industry? How about bringing it home to the good ole' USA now.

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Re: Green apples

Entire... iPad 1 not fast enough o catch it.

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Re: Green apples

Hanners,

No. Apple isn't worth more than the entire pharmaceutical/medical industry. It's simply hoarding more cash than them. Historically pharmaceutical firms have paid out dividends, which is something Apple only did occasionally, until recently.

Also the pharma companies have to pay out massive amounts in R&D and testing. It can cost up to $1 billion to bring a major drug to market, with research and lots, and lots, and lots of testing and regulatory fun-and-games. Whereas Apple have never invested heavily in research. I think they don't do much of the basic, high-risk stuff, but spend most of their time on refining existing technologies.

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Re: Green apples

One problem: cash made overseas is taxed AGAIN when it's brought into the US, and at a fairly high rate at that. You try explaining to your shareholders why losing thirty-five cents on a dollar just to move money around is a good idea. Better yet, explain that to your wife.

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Re: Green apples

But cash earned on foreign operations in Ireland is not subject to Irish corporation tax. So a US company headquartered there, like say Google, MS or Apple don't pay any corporation tax on their European sales - except the tiny proportion actually made in Ireland. If they don't run their Irish sales out of some other country, just in order to take the piss properly...

There is however double-taxation, in that if you pay the cash as a dividend, then it's subject to both corporation tax, and income tax to the shareholders receiving it. In which case they could just buy some shares back - thus paying corp tax, but raising the value of the remaining shares. Apple are in fact doing this, but weirdly have borrowed $20 billion in the US in order to do so, while keeping the cash in Ireland.

In the end though, they've got to do something with the bloody stuff. There's absolutely no sane reason for Apple and MS between them to hold a total of $200 billion in reserves. It may require some sort of combined government action on the subject, or the US to cut their corp tax to around 20%. But you've got to wonder if the companies would still refuse to pay this... I'm wary of these increasingly large distortions in the global market. China and Germany are both running huge trade surpluses, forcing them to lend money to their customer countries in order to keep thing sustainable - which was one of the main causes of the last crash, and helps to inflate bubbles in the net importing countries (see Eurozone disaster for details) - while the US is even odder in that there's now over $1 trillion of corporate cash sloshing about doing not much of anything productive. Some efforts have been made to sort out banking, but the global trade and savings imbalances have barely been touched. And it's going to cause more trouble.

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What am I missing?

Why 'excluding financial companies'? Don't they count?

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Re: What am I missing?

Cos they're holding everybody's cash I presume.

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Devil

Re: What am I missing?

They just don't have any cash left

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Devil

Re: What am I missing?

They do (and always did) but it's just pretend, made-up, la-la land currency.

It will continue, as long as everyone keeps pretending.

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Re: What am I missing?

"it's just pretend, made-up, la-la land currency"

A.K.A. money.

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Re: What am I missing?

To be a touch more accurate, financial companies tend to have lots of cash, i.e. other people's money. Now of course they lend or invest lots of that (to pay the interest and profits), but nonetheless, they still have to keep a large percentage of their total deposits in cash or readily convertible instruments. Somewhere around 10% is the norm at the moment in the UK I think.

So their holdings of assets is less meaningful in terms of the health/profitability of the financial sector, they often increase their cash-like assets as profits drop, as that's when they're usually panicking about covering bad loans. Whereas non-financial corporations are mostly holding retained profits as cash. Which is useful to know.

The tech sector are particularly poor at this bit of corporate willy-waving. Holdings the size of Apple's and Microsoft's are utterly ludicrous. In terms of economic efficiency it's stupid. The shareholders should have that money, as they're more likely to invest it better - rather than just hold it in low-yield bonds. Clearly the corporations have no need for it. Sure, Apple used about $10bn of corporate cash to increase their profits on the iPhone and iPad. As well as potentially barring others from the tablet market for a year, by buying up all the 10" touchscreens in advance. That's good use, as is having a decent reserve - and cash for any acquisitions. But more than that is just inefficient. I guess some of it is this hope that the US will give them another foreign corporation tax holiday - but I suspect that the more childish CEOs like to wave their wads at each other too. The other thing it can encourage is the board to go on stupid buying sprees. Microsoft and Skype springs to mind. Nokia may at least be a sensible purchase, at a reasonable price. How Skype, with virtually no assets and no history of making profits can be worth more than Nokia's phone division is a mystery. In general mergers destroy value, but make directors and merchant bankers happy.

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@I ain't Spartacus. There I have to agree with you.

"How Skype, with virtually no assets and no history of making profits can be worth more than Nokia's phone division is a mystery"

Why and how the MS board agreed to that purchase is something that escapes me completely.

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Re: What am I missing?

Have you ever tried robbing a financial institution? They've got fuck all for cash.

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Alert

Re: Have you ever tried robbing a financial institution?

er, no.

Was that some kind of confession?

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Anonymous Coward

apple should use overseas cash to buy tsmc+sharp for chips/panels and maybe imgtec(powervr)

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This overlooks the fact that almost $100bn of apple's cash is overseas, and they cant bring it back without paying a huge amount of tax on it.

And the 10% is taking apples TOTAL cash (including overseas) as a fraction of other companies US ONLY cash, so its meaningless, if they were to include US companies overseas holdings, as they do with apple, then apple have between 2 and 3% of the non financial cash reserves.

a totally pointless report, hideously skewed by not comparing like for like

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Holmes

@Chris McFaul

"...totally pointless report, hideously skewed by not comparing like for like..."

That's journalism:- pure sophistry to preach to the converted - or, more honestly put - to reinforce the prejudices of your target audience/consumer by pandering to their misassumptions...

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Dear Chris McFail...

You said:

"This overlooks the fact that almost $100bn of apple's cash is overseas, and they cant bring it back without paying a huge amount of tax on it.

And the 10% is taking apples TOTAL cash (including overseas) as a fraction of other companies US ONLY cash, so its meaningless, if they were to include US companies overseas holdings, as they do with apple, then apple have between 2 and 3% of the non financial cash reserves.

a totally pointless report, hideously skewed by not comparing like for like"

I think the article says something like the quote below, doesn't it?

"In total, Moody's reckoned that corporate America holds about 61 per cent of its total dosh overseas, amounting to about $900bn.

“In the absence of tax reform, we expect overseas cash to continue to grow,” Moody’s analysts concluded."

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Anonymous Coward

@Chris McFail

Simple maths:

Moody's statement: "In total, Moody's reckoned that corporate America holds about 61 per cent of its total dosh overseas, amounting to about $900bn."

Also: "Moody's said the fruity firm holds a $147bn cash reserve."

Total cash held by corporate America: $900bn / 61% = $1.4754098 trillion

Apple's corporate cash hoard: $147bn

$147bn / 1475.4098 bn (1 tn = 1,000 bn) = 9.996% or ~10% (if rounded from 2 positions)

So the article is factually and mathematically correct.

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Anonymous Coward

Sewing sacks for you matey.

Look out for the 'I love Apple label' on those sacks everyone is meant to be workfare sewing.

UK Corporation tax, who wants that?

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This post has been deleted by its author

Anonymous Coward

What about "non-corporate"?

ie the cash reserves of small and medium size private companies, I'm assuming that as Moodys doesn't ahve anyting to do with them, these numbers are not included.

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Re: What about "non-corporate"?

As privately owned companies, they don't have to publish asset reports like publicly traded companies do.

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Re: What about "non-corporate"?

There really isn't reliable data on the value of assets or cash held by sole proprietorships as a whole. Those companies aren't required to report anything except taxable sales and numbers for labor.

There are risks associated with being organized as a sole proprietorship, sure, but as long as you're using your money and/or traditional bank loans, and not funds from outside investors, you can pretty much do whatever you want. The vast majority of US business law people hear about is corporate law, it has no bearing on private organizations. From taxation to employment law and everything in between, sole proprietorships operate completely differently than public companies or NPO's.

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"absence of tax reforms"

AKA a Republican cash repatriation holiday. After all, it's happened before so corporate America are just waiting out a regime change in the good old US of A.

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Bronze badge

There's a shed-load of rivers in Oz that don't flow into the sea.

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American Corporations

This means now American corporations are in effect not American or not registered as American. Example Cisco in China or GM

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Re: American Corporations

How do you figure that? Most of my cash is kept at the bank, and I am not considered a resident of the bank.

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Wish they were an American company.

I wish Apple were an American based company, if they were we could see more of that money working for Americans, like the manufacturing jobs it would bring to the U.S., and the tax money they would be adding to our economy by bringing those profits back into the country. Where is Apple based again? I'm thinking China, but that doesn't seem correct as I know they aren't a capitalist country, and probably would never allow a company to get that big. Whatever country it is I bet Apple is happy they picked there, and it let them be so prosperous.

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