Moody’s has recently revealed that by the end of the year, the overall corporate cash stockpile in the US will reach $1.77 trillion, demonstrating a 40% surge in the past five years. Five technology giants account for about 33% of the total corporate cash stockpile, with Apple Inc (NASDAQ:AAPL) taking the lead ahead of Microsoft Corporation (NASDAQ:MSFT), Cisco Systems, Inc. (NASDAQ:CSCO), Oracle Corporation (NYSE:ORCL), and Alphabet Inc (NASDAQ:GOOGL).
Apple’s Growing Cash Stockpile
In its fourth quarter earnings report issued last month, Apple has posted a cash stockpile of $237.6 billion, hitting a new record. By the end of the recent three-month period, Microsoft had $111 billion; Cisco Systems had $60 billion; Oracle had $51 billion; and Alphabet had $48 billion.
Accordingly, Apple is likely to finish the calendar year with over $250 billion in cash, more than 90% of which is stashed outside the US.
The iPhone maker has constantly been scrutinized for keeping most of its cash reserves outside its home country to curb heavy tax duties, an activity it has always denied. Apple has even taken pride in the fact that it pays more taxes than any company in the US.
As much as Tim Cook, Apple CEO, would like to bring most of the company’s cash reserves in the US, the US tax system is preventing Apple to do so.
“It would cost me 40% to bring it home and I don’t think that’s a reasonable thing to do,” noted Cook. It is unclear how this statement squares with Apple’s denial that it is stashing cash outside the country in order to avoid taxes.
With massive cash reserves, Apple has more opportunities to grow further. It has enough capacity to further invest in research and development (R&D) efforts and mergers and acquisitions (M&As).
Challenges in New US Administration
With Republican presidential candidate Donald Trump emerging victorious in the recently concluded US presidential election, Apple and the entire technology industry might be confronted with various tax-related challenges. Trump has maintained during his campaign that under his administration, he will prevent technology companies from taking jobs and cash reserves outside the US. Otherwise, they will be subjected to additional taxes. It is unclear how this policy would help US companies as he says he wants to do.
On Monday, Apple has closed at $105.71; Microsoft has closed at $58.12; Cisco Systems has closed at $31.37; Oracle has closed at $39.30; and Alphabet has closed at $753.22.
