Apple CEO Tim Cook was asked in 2012 if he ever considered buying Greece with such massive cash reserves. Cook brushed off the question wittingly, replying that they have considered many things, but not this one. Everyone had a good laugh because the fact remains that entire countries cannot be bought.
Much of Apple’s (AAPL) cash remains underutilized
Greece did pop up briefly after receiving the biggest bailout in history. However, this did not last for very long, and the country slipped into a massive debt burden of 175% of its economic output. Despite the bailout, Greece is still in dire need of another bailout. The country requires around $212 billion to bring down its debt to a manageable level, says a report from Bloomberg.
Apple Inc. (NASDAQ:AAPL) in the meantime has grown its cash to almost double what it was at $194 billion in cash and equivalents. The Cupertino, Calif.-based company is paying good dividends and continuing its buyback program. Except for these two uses and occasional acquisitions, the company appears to be clueless on how to use this cash. Cook has reiterated time and again that the company is planning to come up with innovative products, but what the market has seen until now is just upgraded versions of the existing product lines and the overpriced Apple Watch. Surely these operations are not going to consume much of Apple’s cash. The cash pile can only be absorbed if Apple plans something really big such as a car or spaceship.
Greece bailout: Is the idea relevant?
So what if Apple Inc. (NASDAQ:AAPL) does lend money to Greece to bring down its debt to a manageable level of 70% of the GDP. In return, companies such as Apple could enjoy a deal on corporate taxes similar to the one it is benefiting from in Ireland, says a report from Bloomberg. The idea, though awkward, is intriguing.
According to Moody’s, non-financial American firms have stacked up $1.73 trillion in cash, 4% more than the amount last year, and $1.1 trillion of that cash is from the 50 biggest companies. American companies Apple Inc. (NASDAQ:AAPL), Microsoft, Google, Pfizer and Cisco have $439 billion cash in total, claims Moody’s. These companies have parked their funds overseas to avoid the 35% United States tax levy. Putting this cash to use or even paying it back to shareholders is a tedious task. The United States can bring in tax reforms (which is unlikely) to resolve the issue, but until then, these funds lie unused.
Therefore, considering such reasoning, the idea of big U.S. cash hoarders, including Apple Inc. (NASDAQ:AAPL), coming together and helping out Greece does not seem that awkward.