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Apple’s $81bn cash mountain that keeps on growing

Cisco, Microsoft and Google are rich in cash held outside the US as they hope that US administration will announce a tax cut

How much cash does Apple need? The question is asked every time the technology group reports financial figures. The mountain, comprising cash plus short and long-term investments, was .5bn (£52.4bn) last September. At the current rate of progress, the company could be sitting on 0bn within a few years if it declines to buy a rival or two.

Actually, mountain is not quite correct. There is a collection of mountains around the world, which is a critical point. The majority of the cash – about bn – is held overseas and Apple, in common with most cash-rich US companies, doesn’t like the idea of paying tax at a rate of up to 35% to repatriate the proceeds. Thus nothing happens. The piles grow larger (and the likes of Cisco, Microsoft and Google are also rich in cash held outside the US) as the companies wait in the hope that the Washington administration will announce a temporary cut in the tax rate. For its part, the administration understandably dislikes the notion of tax holidays.

The odd part, at least from a UK perspective, is why US shareholders appear so untroubled by the sight of miserable returns being earned on these multibillion piles.

UK investors, used to seeing dividends as a critical element in the mix in their returns, would be debating furiously the merits of paying tax anyway in order to find a more productive home for the cash.

Part of the explanation is the leeway given to successful US technology firms to ride the investment cycle and pursue opportunistic deals. Another part is simply a cultural difference: a good growth story, which Apple certainly has, can make the embarrassment of riches on the balance sheet seem a sideshow. But bn-plus, and rising, is surely the point where Apple chief executive Tim Cook has to say something meaningful. Ducking the question is not a policy. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds