Apple Bonds: How Much Could Happen in 30 Years?

May 10, 2013 Leave a comment

Apple Bonds: How Much Could Happen in 30 Years?

By Nick Summers on May 03, 2013

One of the more remarkable things about Apple’s (AAPL) record debt sale on April 30 was that $3 billion of it came in the form of 30-year bonds. That’s a common duration in such sectors as financials and health care—but not so much in technology, where fortunes are made and destroyed by the constant churn of innovation. Just think of all the things that the last 30 years have brought. The Macintosh. Windows. The Internet. Google (GOOG). The iPhone and iPad. The rise, fall, rise, and fall of Apple itself. Now try to envision what might change in the tech industry between now and 2043—the same year that Ali Lohan, younger sister of Lindsay, becomes eligible for membership in AARP. (Also, try to envision how investors will feel about having lent to Apple at a rate just 1 percentage point higher than virtually riskless U.S. Treasuries.) For some context, here’s a sampling of tech-related 30-year bonds that were issued 30-ish years ago:

Recognition Equipment
Issued: April 3, 1986
Which is the same month as: the Chernobyl nuclear disaster
Maturity: April 15, 2011

How’d that work out?: REI, which made optical character recognition technology, lost a big U.S. Postal Service envelope-scanning contract, and its chief executive was indicted. (The charges were dismissed.) “After the scandal, corporate raiders took over and sold” the company, according to D magazine. The bond was called in 1997.
Crazy Eddie
Issued: July 1, 1986
Which is the same month as: the first video footage of the Titanic wreckage is shot
Maturity: June 15, 2011

How’d that work out? The electronics retailer, with its iconic advertising (“his prices are insaaaaaaaane”), declared bankruptcy in 1989. Founder Eddie Antar served hard time for fraud.Maxtor

Issued: March 5, 1987
Which is the same month as: U2 releases The Joshua Tree
Maturity: March 1, 2012
How’d that work out: The hard disk-drive manufacturer nearly went bankrupt in 1992, then was acquired by Seagate in 2006. The bond was called in 2010.
Eastman Kodak
Issued: July 5, 1988
Which is the same month as: Michael Dukakis is nominated for president
Maturity: July 1, 2018

How’d that work out? The company defaulted on the bond; the film pioneer filed for bankruptcy in January 2012.
IBM
Issued: Nov. 8, 1989
Which is the same month as: The Berlin Wall falls
Maturity: Nov. 1, 2019

How’d that work out? Still trading! IBM (IBM) has shifted from the mainframe market to personal computers to its current focus on enterprise services.

Rummaging through the mid-1980s tech-bond archives also turns up such companies as Daisy Systems (an early leader in computer-aided engineering), Cadnetix (which merged with Daisy, then went bankrupt), Computervision, Scantron, Apollo Computer, and Atari. Of course, not just technology companies die or are subsumed over time: Among the other names that jump out from the filings are the bond runners, notably Bear Stearns and Salomon Brothers.

Filed under TMT Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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