Last week, during Apple’s quarterly earnings call, the company announced they were holding more than US$250B in cash. That’s a lot of loose change behind the couch cushions at 1 Infinite Loop, Cupertino. What should they do with that cash? While money in the bank might warm the cockles of Apple’s shareholders’ hearts, the best use for cash is doing something useful with it. Here are five things I think Apple should do with their cash (aside from cover my mortgage!).
#1 Get real about their SVOD ambitions
Say what you like, but Apple did change the nature of the music business, and to a lesser degree movies and TV, when they launched the iTunes Store back in January 2001. But since then they’ve been largely overtaken by the likes of Spotify and Netflix.
Apple is rarely the first mover in markets. The iPod wasn’t the first portable MP3 player, the iPhone wasn’t the first smartphone, and the Mac was not the first personal computer. So, it’s not surprising they haven’t jumped into SVOD.
But given they have faced numerous delays producing a series of Carpool Karaoke, I can’t but think they need to invest if they want to meet the rising tide of Amazon, HBO, The CW and others launching their own SVOD services. Heck – even the WWE is doing a better job at the moment!
#2 Invest in better software testing
Why is it that almost as soon as a new version of macOS or iOS is released that we see a point release almost immediately? I think we have become so accustomed to buggy first releases that we are resigned to updating a week after an upgrade.
Apple’s advantage is that they control the whole widget. They dictate the precise hardware and software stack.
I think they can do better.
#3 Holograms baby!
We’ve been fantasizing over holographic interfaces for years. Ever since River Phoenix was a database angel in the Michael Douglas and Demi Moore flick Disclosure, I’ve wanted a hologram-based UI for my computer.
Apple’s considerable cash and creative resources could make this a reality.
#4 Cars, but not like you think
I don’t want to see Apple making cars. I’m not convinced it’s a good strategic move for them. Apple’s strength has always been about complete control of the user experience. But where Apple could make a difference is through an extension of CarPlay.
I can see a place for carOS – a software environment that delivers more than just a fancy handsfree for the phone and pretty UI for the entertainment system and climate control. This would be a full diagnostic and experiential system that let you know when things were going wrong before they happened. It’s the sort of data apps like Dash give you via an OBD device but integrated into a more holistic in-car experience.
#5 Stretch their social justice legs
This is the tough one. Apple is in a position to do more social good than most of us can imagine. They aren’t alone in this but this is an article about Apple’s bank balance. The same could apply to almost any other company with enough money to be considered their own economy.
I think part of this would be to not engage in aggressive tax minimisation strategies and, instead, pay higher taxes so the countries they profit in can put funds into healthcare, education and other public benefits.
It seems obscene to me that they can hold $250B in cash while diseases like leprosy, which are easily curable using modern medicine, are still prevalent in parts of the world.
They could plug a few billion each year into important causes and not miss it.
What do you think? What could Apple do with their bank balance?
Comments
15 responses to “Five Things Apple Could Do WIth Their $250B Bank Balance”
#6: Pay the taxes they owe Australia.
Spot on, I would either invent a tax on revenue for companies with massive revenue yet tiny reported profits, or ban their products from sale unless they pay a fair share.
It sickens me that most schools insist on you buying an iPad for your kids yet apple steal billions away from the school system with their tax avoidance.
@dazzler “a tax on revenue for companies with massive revenue yet tiny reported profits, or ban their products from sale”.
So imagine Australia with no smart phones (because iPhones and Android OS have been banned), and no access to Chrome or Safari, and no Google search, maps, translate, YouTube, etc.
The good thing about banning Google (it wouldn’t last more than a few days) is that people would realise just how much “public good” is provided for free by these companies – and the value of that public good – far in excess of the tax the government wants to soak them for.
Why #6? More like –
#1 Pay taxes
#2 Refer to #1
#2a Ensure their software testing includes non-North American scenarios. How many times now have they broken southern-hemisphere daylight-savings? (NB Google is awful at this too – ever noticed how it grabs dates from your calendar and assumes they’re all MM/DD/YYYY ?)
#WiseHacker, Yes that would be a great start, failing that I love #5.
One of the big problems is that most people dont understand the main reason Apple has that $250b in the bank. Mainly, they cant transfer it anywhere. Ideally, they wouldnt mind dumping a chunk of that into the US and paying out a big dividend to shareholders, but if they do the money becomes income, and taxed.
There are workaround to avoid that (like borrowing a truckload of cash at near zero interest, then paying the capital debt from offshore money), and I expect a major purchase like what they are talking about would also work, but they need to be very careful as they try to use that income.
Most Governments are looking for any excuse to tax these monies.
apple has been historically very against paying dividends, its one of the reasons that have 250 billion in the bank
I think the two go hand in hand myself but a few years ago, when they had roughly $150b in the bank, they were trying to get an amnesty from the US Govt to bring $50b into the US to pay dividends., so they didnt have that big a cash reserve on hand.
They are against paying out any more than they need to, but wanted to do a rare dividend payout as (at the time) they really couldnt justify holding that money. Things have changed since then.
How they got around it was to borrow $10b (or something like that) at effectively 0%, then pay off that capital amount from offshore cash. Technically they were making a loss, so bringing in just enough to cover that loss meant they didnt show a profit to be taxed. Just another method of laundering.
yea, and i think its something that western countries need to start looking at in there tax codes, individuals cant pull off that kind of bait and switch, but some of these multinationals pay less tax on billions in profit than i do on 50 grand a year…
I’m not saying that the governments wont cock up spending that money, but at least it will be there and be able to be used on much needed public infrastructure
I’ve posted elsewhere here the problems with getting these companies to pay their tax, but the short story is that it wont collect as much as people think. People see that Apple has $6b in turnover, and assumes the lot should get taxed in Aus. It doesnt.
In the end, theres only about $500m tax being avoided on that money, which IS still a lot, just not as much as people think. The rest of their revenue is taxed somewhere.
Not for all the multinationals (Google and Starbucks are bigger problems), but using Apple as an example broadly 3/4’s of what you pay is going to get taxed somewhere. Where its made, and where its sold both get a solid chunk, the profit is diverted somewhere in the middle at the distribution stage.
Heres the catch – that part thats diverted to Ireland and avoids tax, where should it be taxed? China will argue it should get taxed where its made, USA will argue it gets taxed where their HQ is, and Australia will argue it gets taxed where its sold. All are fair arguments, so who wins?
Well since China and US’s argument are bullshit you would pay it where it’s sold. What company anywhere pays China the full retail price tax on something that is made there? No one, because that is not how tax works.
The arguments arent bogus, thats part of the issue. Three stages to getting a device – manufacture, distribution, and retail. Manufacturing and retail are already hit, so what happens with the ‘cost’ of distribution? Thats the stage where the siphoning is happening, and technically its taxed.
It doesnt take much for China to dictate a GST on the distribution leg, or for the US to determine that if a global process is done for a US based company that profit is deemed to be US and we’re out of the loop.
There are so many laws getting in the way here that it simply isnt an easy problem to solve. My point though was that when they do solve it, the money it brings in wont be as much as people expect for a lot of these companies.
Apple Aus had $6b in revenue in 2015. How much tax do you personally think they should have paid on that?
If you think this is possible I have nothing I can say to you.
So I make a business. I can make a product. It costs me $90 to manufacture. I sell for $100.
So I make $10 for each one I sell. But you want to tax me on revenue. So if my tax rate is higher than 10% I’m screwed. WHAT?
Of course I dont want to tax on revenue. But for some reason, most people seem to think thats what gets taxed. They see 2 numbers – $6b, and 30% and far too many people think one should apply to the other when its never even close.
Its ridiculous, but I’ve lost count of how many people assume revenue equals taxable income.
As for the US angle, I put it in as an example and I dont think its practical, but I also dont rule anything past Trump. For me the common sense solution for everyone is the retail portion, but that doesnt mean Governments arent going to at least try to corner as big a piece of the pie as they can.
Bottom line is that the current rules dont seem to be doing the job, so either need to be interpreted differently, or replaced.
Dont forget that there are also Aussie companies using these same tactics to reduce their tax in Australia.
#7 Mars Colony
I’ve seen acquisitions mentioned. Either Netflix or Tesla as they are trying to get into both those markets. The other big one they could try for is Disney. We’ve reached peak smartphone, iPad sales are declining, the watch is pretty useless.