Why Apple Takes on Debt

A company as rich as Apple doesn’t usually need to borrow other people’s money
Photograph by Lucas Jackson/Reuters

Apple has one of the biggest cash hoards in history, yet it has borrowed $35 billion in the past year and a half. Why does a company as rich as Apple need to ask other people for money? Avoiding a tax bill from bringing profits home is one big reason.

Profits are pouring in
Net income has averaged more than $9 billion for the past nine fiscal quarters. That’s far more than Apple needs to fund development of new products.

Cash keeps piling up
Apple declares a lot of its profit is generated abroad, which reduces its U.S. corporate income taxes. Only 12 percent of its “cash”—which includes marketable securities—is held in the U.S.

Apple’s bondage
Under pressure from activists such as Carl Icahn to reward shareholders, Apple is taking out loans at low interest rates to cover part of the cost of its buybacks and dividends.

It’s giving $130 billion to shareholders
Stock purchases are scheduled to reach $90 billion by the end of 2015. Dividends account for most of the rest.

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