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Apple Inc. (NASDAQ:AAPL) Cash Hits Over $200B. What It Could Do?

Apple Inc NASDAQ:AAPL

Apple Inc. cash and investments totaled more than $200bn for the first time, highlighting the huge wealth creation by the firm. Though investors were worried over the firms profit guidance, not much is left to be concerned about now with the firm raking huge cash in its bank account.

Apple Inc NASDAQ:AAPLThe most likely use for the firm’s growing cash hoard is the same as it’s been for the last few years. Apple is likely to use the cash to secure even more debt. That debt will likely be used to buy back shares and pay out dividend. Apple does that because of complex tax structures it wants to avoid. There are other ways it could use that $200B, however.

Rising cash reserves

In its earnings report on Tuesday, Apple said it had cash of $15.3bn, short-term investments of $19.4bn and long-term investment of $168.1bn. In all, the firm now sits on $202.8bn cash, more than any other firm in the world.

Profit for the firm surged more than 3,500% over the past decade, which is nothing less than remarkable. Consumers are ready to pay a high price for products that are adorned with the Apple logo, and are supported by Apple marketing.

To some, analyzing how much the amount means mat not be easy. Put it simply, Apple could afford to pay every man, woman and child in the US $636.17 – apiece, say a report from America’s Markets.

For investors, however, share price of the firm is more important, which is down 7% in after-hours trading Tuesday. For the quarter, the firm posted a profit of $1.85 per share, beating Wall Street estimates of $1.81.

Estimize noted Apple performed below investor’s expectation, who wanted $1.86 per share, thus leading to a drop in the share price. Further, shipments of 47.5m iPhones were also below the expectations of various analysts. S&P Capital IQ analyst Angelo Zino expected Apple to ship 52 million iPhones.

How Apple can use its enormous cash?

There are a lot of speculations over how Apple can utilize this cash with some suggesting buying restaurant business like McDonald’s, Starbucks or Dunkin Donuts while other stating Tesla, Sony or Nike would not be a bad bet either.

Apple has enough cash in its pocket to buy one or two countries. There are around 145 countries whose GDP is less than Apple’s cash holdings. For instance, New Zealand for example has a GDP of $185.8bn.

Apple  has enough money to help Greece, which is sinking under the debt to be repaid to IMF. Leonid Bershidsky at Bloomberg stated that Apple, Microsoft, Google, Pfizer and Cisco have lot of money totaling over $400bn.

However, the big share of these funds is deposited in other countries, outside the US to avoid 35% tax. Greece could offer sweet tax deal to these firms just like Apple has in Ireland. In the country, the US firm pays mere 2% in corporate tax whereas the actual rate of corporate tax is 12.5%.

 

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.

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