Apple Now Holds 10% of All Corporate Cash: Moody’s

October 1, 2013, 4:43 PM ET

Apple Now Holds 10% of All Corporate Cash: Moody’s

By Emily Chasan

Senior Editor

Apple Inc.’s $147 billion cash hoard now counts for nearly 10% of all corporate cash held by nonfinancial companies, according to an analysis by Moody’s. U.S. nonfinancial companies held $1.48 trillion in cash as of June 30, according to Moody’s review of the more than 1,000 companies it rates. Cash stockpiles have grown by about 2% from $1.45 trillion at the end of last year, and up 81% from $820 billion at the end of 2006.Corporate cash is still concentrated in just a few hands, with the top 50 holders accounting for 62% of the total.  The companies with the five largest cash holdings – Apple, Microsoft Corp., Google Inc. , Cisco Systems Inc. and Pfizer Inc. – held more than one quarter of the cash.

Despite dividends and buybacks Apple, has about 9.5% more cash than it did at the end of last year.  Billionaire investor Carl Icahn pressed the company’schief executiveTim Cook for another $150 billion buyback at a dinner last night.  Apple has nearly double the cash hoard of its next closest rival, since Microsoft has the second-largest cash stockpile at $77 billion.

The technology sector had the largest amounts of cash in its coffers, holding some $515 billion, followed by the health care and pharmaceuticals industries which held $146 billion in cash.

Both of those industries often move intellectual property and drug patents to low tax jurisdictions, which lets earnings from those assets pile up offshore to avoid paying a U.S. tax rate of 35%. Moody’s estimated overseas corporate cash represented 61% of the total, or about $900 billion, up from $840 billion at the end of last year.

The firm said overseas cash levels have risen because companies have used their U.S. cash for dividends, buybacks and acquisitions while facing “negative tax consequences” from bringing cash back to the U.S. “In the absence of tax reform, we expect overseas cash to continue to grow,” Moody’s analysts said in the firm’s note to clients this week.

Moody’s said it anticipates corporations will spend $1.7 trillion this year on capital investments, dividends, share repurchases and acquisitions.

Apple Has 10% Of All Corporate Cash? Not Really

ALEX WILHELM

posted 2 hours ago

WSJ: Apple Now Holds 10% of All Corporate Cash: Moody’s

QZ: Apple is sitting on 10% of all US corporate cash

Reality: Apple’s foreign and domestic cash reserves, if taken in aggregate, constitute around 10 percent of U.S. corporate cash, if you discount financial corporations. So if you take all the cash reserves of an international company that happens to be headquartered in the United States, call it a U.S. company, ignore the most cash-rich genre of all U.S. corporations, and compare the Apple tally to the artificially constrained aggregate, it has around 10 percent of corporate cash.

That’s far less impressive than the Wall Street Journal’s headline, and a firm discount on QZ’s. But we’re being a bit pedantic. Let’s take a look at Apple’s bank stash.

An internal document dated May 21, 2013 detailing how Apple arranges its affairs to avoid paying taxes – a perfectly legal and expected endeavor – indicates that the company had $145 billion in cash, of which $102 billion, or 70 percent, was foreign.

That’s to say that Apple the international conglomerate has $102 billion in cash, equivalents, and marketable securities abroad from its titular home country of the United States. Cash is not mobile across certain borders. If Apple wanted to bring that money “home” it would pay a stiff corporate tax rate. So, most of its cash is essentially exiled in perpetuity.

To count it as cash that sits under the jurisdiction of a company that we can deem a U.S. firm is to therefore bend the definition of what is reasonable.

Apple’s domestic cash is around $43 billion (May data is the best that we have here regarding the foreign/domestic split). The Wall Street Journal reported that, according to Moody’s, aggregate U.S. corporate cash totals $1.48 trillion. Apple domestic cash is therefore around 3 percent of that figure. That’s less impressive.

But we are in a further muddle here, as we are comparing domestic cash of one company to aggregate cash of others. And, we are still dealing with cash of non-financial corporations (not all), so we are too far down the rabbit hole to see light.

Apple remains immensely wealthy. Today, however, activist investor Carl Icahn announced that he is pressing the company to add $90 billion to its share repurchase program, which would strain Apple’s cash position.

The proper way to compare corporate cash would be to find breakdowns for the 1,000 firms that Moody’s rates (those are the firms from which it created the $1.48 trillion figure, I believe) and compare domestic cash to domestic cash and foreign to foreign. That’s provided you wanted to compare the subset of global corporations that call the United States home.

It would be far more interesting again to compare all wealthy global corporations and their aggregate cash position. Have fun.