Framing Apple’s Cash Position Post Repatriation; No Change to M&A Philosophy

Framing Apple’s Cash Position Post Repatriation; No Change to M&A Philosophy

M&A philosophy likely to remain unchanged. With the new tax structure we expect Apple will bring $214B back to the U.S. using a 15.5% one-time repatriation tax rate. We don’t expect this cash will change Apple’s M&A philosophy, which will likely continue to be focused on sub-$1b technology acquisitions.

Framing uses of cash. We do anticipate Apple will increase its share buyback by $69B, which will be added to the $166B that Apple has already spent on share repurchases from Jun-12 to Sep-17. Additionally, we expect Apple will increase its annual dividend by 15%, higher than the 10% increase they announced in April of both 2017 and 2016.  We believe Apple will maintain its debt level at the $104B. In theory this will leave Apple with about $150B in cash, but in practice it won’t get that low (more on that below). We look for this to be announced in April 2018, when Apple reports its Mar-18 quarter.

Unlikely that actual cash levels will reach $150B.  It’s unrealistic to assume that Apple will reduce its cash balance from $269B to $150B. Keep in mind our $150B cash estimate reflects the total cost of the buyback and dividend. In practice, the cost of those two programs will be spread out over 3-4 years, and Apple will continue to generate cash during that time. To give a sense of Apple’s current cash generation, the company generated $31B in cash from Sep-16 to Sep-17. If we assume $3oB in annual cash generation for the next 4 years implies a 2022 cash ending balance of $270B, unchanged from the $269B today.

Notable details. Total cash balance as of Sep-17 is $269B which includes $252B overseas and $17B in the U.S.

  • The company has $104B in debt carrying an interest rate of 2.2%.
  • Apple has paid out $166B in buybacks and $61B in dividends since 2012.
  • The $69B buyback will likely be executed over a 3 year period.
  • The 15% annual dividend increase will cost Apple about $10B over a 4 year period.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

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