Apple Inc (AAPL)

[JohnSamuel]

another spin on AAPL and why it might have lost ground after what appeared to be good earnings: read down thru the tweets to read the actual article from Marketwatch ...

Don’t believe the hype: Apple added more debt than cash
Published: Oct 26, 2016 1:53 p.m. ET

While its cash pile gets the attention, Apple’s debt is also rising quickly

By
JEREMY
C. OWENS
TECHNOLOGY EDITOR / MARKETWATCH

With another Apple Inc. earnings report comes another round of breathless comparisons for Apple’s pile of cash.

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Vala Afshar ? @ValaAfshar
Apple has $237.6 billion in cash. It could buy all@NFL teams??@NBA teams??@MLB teams??@NHL teams??

and still have $85 billion left. $AAPL
4:22 PM - 25 Oct 2016
374 374 Retweets 269 269 likes
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StockTwits ? @StockTwits
Apple now has $237 BILLION in cash. A record. That's also equal to

5 Netflix's
or 8 Tesla's
or 19 Twitter's$AAPL: http://stocktwits.com/SeanDavid/message/65505316?utm_medium=community-twitter&utm_source=twitter.com&utm_campaign=outboundteam …
4:40 PM - 25 Oct 2016
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jeroen blokland @jsbloklandSuppose $AAPL wants to expand into autos, restaurants or electronic payments. It's USD 237 billion cash pile could buy up whole industries.
2:28 AM - 26 Oct 2016
20 20 Retweets 27 27 likes

Apple’s AAPL, -0.08% cash reserves did hit a record $237.6 billion at the end of its 2016 fiscal year. However, that ignores Apple’s growing debt load, which stands at $75.4 billion, almost a third of its cash reserves. In fact, in Apple’s fiscal fourth quarter, the company raised more debt than the cash it added to reserves: Apple’s cash pile increased by about $6.1 billion, while further bond sales added $6.5 billion to its debt total.


Apple’s cash pile has grown at a fast clip because Apple has funneled the bulk of it into long-term securities while raising debt at relatively low interest rates to finance its massive shareholder return program. That practice is preferred because most of Apple’s cash—91% as of the end of its 2016 fiscal year—is overseas, making it subject to repatriation taxes if the company tries to bring it back to the United States, which Chief Executive Tim Cook has said it will not pay.

See also: How Apple could bring overseas cash home to help fix America’s crumbling infrastructure

Apple’s approach is the most profitable way to deal with the current U.S. tax structure, but the continued rise in its cash reserves—and the unabashed gawking that total elicits—is simply a byproduct of that approach. The better way to look at Apple’s cash reserves is through net cash, or cash minus debt.

Read also: Will any presidential candidate give Silicon Valley what it wants most?

Apple’s net cash position at the end of its 2016 fiscal year would be $162.1 billion, up from $121.2 billion at the end of the 2012 fiscal year. That total, and the $41 billion gain over four years, is nothing to sneeze at, but it looks tiny compared with the $116.4 billion gain that a quick look at its cash reserves would indicate.

Read also: Apple forecast disappoints, but shares are still a bargain, analysts say

Apple is in an enviable position from a cash perspective, to be sure, but its approach to cash and debt makes that cash pile look much larger than it actually is. So next time you see someone comparing Apple’s cash to the GDP of small countries or other companies’ market caps, respond by comparing its debt load similarly—after all, Apple’s $75.4 billion in debt is more than double the market cap of Tesla Motors Inc. TSLA, +4.11%

Meanwhile, Apple’s bonds are not exactly looking like a good investment. The most active bonds, the 3.850% notes due August 2046, were trading at 98 cents on the dollar, according to MarketAxess.

By comparison, IBM Corp.’s IBM, +0.62% 4.700 % notes due February 2046 were last quoted at 113 cents on the dollar, according to MarketAxess. General Electric Corp.’s GE, +0.77% 4.500% notes due March 2044 were trading at 114 cents on the dollar, MarketAxess data showed.

Additional reporting by Ciara Linnane