Apple BIGGER than the U.S. ECONOMY? Or Australia? Or ... Luxembourg? Apple's results are out - and it's time for the traditional game of trying to work out how much richer than which country the company is. With sales at $58 billion for the quarter, profits of $13.7 billion and depending upon how absurd we want to make our method of measurement this makes it the same as the US economy, the size …
...they are a phenomenally successful company.
You need to read "The Entrepreneurial State" by Mariana Mazzucato.
You may (then again of course perhaps you might not) have a totally different view at the end of the book. All that public sector technology and all that giveback -- not.
Only problem with that is that the book is thinly veiled Fascist bollocks. (And no, that's not slinging 'fascist' around as an insult, it's an accurate description of Mazzucato's family background and politics.The Fascists have never completely gone away, in Italy.)
alternative way of checking if the values are about right.
If company X was to suddenly disappear, would the effect be about the same the comparison country Y (or some subset thereof) suddenly disappearing under the sea? (to help you sleep better at night, assume the population have escaped to higher ground but equally miraculously create no burden on their neighbours)
Apple disappears overnight - aside from having trouble accessing one's iCloud, there would be a lot of companies and their employees who wouldn't get paid and with big holes in their future revenue expectations. But it certainly wouldn't have same effect as the US not being there (geopolitics aside).
Apple vs California? - no, still getting a California bigger feel there.
And so on.
Interesting - that got me thinking. It'd almost certainly be much worse if Microsoft disappeared, the world is far more reliant on MS than Apple (although obviously many people would prefer it not to be). IBM going would be a blow to many as well. Apple (despite my love of their laptops) are mostly a consumer-orientated company and are really quite unimportant in the serious IT world.
Apple is unimportant in the serious IT world below the management level, to a certain extent. Mid level managers are Fashionistas who want to appear to be hip and would love to move up the chain. They are living the mid level manager Fashionista dream. Senior level managers are Apple Macnofiles who are living the Ultimate Fashionista Dream that all wannabees below them wish they could live. Folks at the bottom who wish they could move up to the mid management level are low end Fashionistas who want to live the dream but the closest they can get to it is Apple gear. So Apple catches Fashionistas at all levels, thus, their financial success.
Apple takes US consumer's money and sends a small fraction of it to China to make the thing, an even smaller fraction to Cambridge for an ARM license and sticks the rest of it in Apple's offshore tax haven.
Surely it's only contribution to US GDP is wages paid to those low enough on the totem pole not to have their won "tax efficient" compensation plan.
Strangely enough, no, that's not quite how it works.
We don't know how they're handling their sales in China yet, we'll need the dull annual report to see that probably.
"Apple takes US consumer's money and sends a small fraction of it to China to make the thing, an even smaller fraction to Cambridge for an ARM license and sticks the rest of it in Apple's offshore tax haven."
That's true for everything they sell outside the US (maybe China, we don't know). But it's not true for the US. They don';t take those foreign profits into the US, this is true. But the ones they make in the US they don't stick in foreign. They cough up the tax just like good little boys. They are, after all, the largest corporate income tax payers in the US. The rest they then pay out as dividends and stock buybacks.
They've also been very clear that whatever games they play in Ireland and Bermuda they don't play them with US sourced profits. That just gets booked like they're a simple US corporation, pays tax and then gets sent off to shareholders. Their US profits really do recycle around the US economy.
So, your statement is true of the UK consumers money, the German consumers money, but not of the US consumers.
They can't leave the money overseas forever. They, and every other company making a lot of overseas cash, stockpiles it overseas waiting for another government tax holiday providing a lower tax rate for repatriation. Which is why the first tax holiday was such a terrible idea for the economy long term, even if it provided a short term boost at the time.
That money belongs to the shareholders, and is reflected in the stock price. If I sell my stock, part of the price I'm getting is the new share owner holding his own small share of that loot. So it still contributes to the US GDP (at least for the proportion of Apple stockholders who are from the US) albeit indirectly.
> But the ones they make in the US they don't stick in foreign. They cough up the tax just like good little boys.
Then they are idiots who are going to get hit with a minority shareholder lawsuit.
As an Apple shareholder I demand that they stop wasting my money by giving it to Washington and instead sell the rights to the Apple logo to Apple Bermuda for $1 and then have Apple Bermuda charge them $500/item licensing fee.
Leaving aside the rights/wrongs and the Apple specifics, but can they leave it overseas for ever?
Firstly they can use the offshore money to build factories, buy raw materials, buy competitors - but this is pointless since they wouldn't pay tax on those anyway.
But they could use them to buy other companies/investments and become essentially a hedge fund.
There would be no US tax to pay if Apple Bermuda bought shares on the US stock market, or bought Heathrow, or the port of Grimsby in the same way that the Dubai National Investment corp, or the Govt of Singapore did. then Apple's share price would rise, since it owned $Tn of profitable investments, and the shareholders would be happy.
Ultimately it could stop bothering to make shiny things at all.
Apple will never stop making Shiny things as long as a Designer is essentially running the company. While Ivey isn't the CEO, he's in charge of both hardware and software design. That gives him the power to define the products in whatever we he sees fit, since his designs continue to sell (with the exception of the iPads, for which sales are continuing to fall).
>Firstly they can use the offshore money to build factories, buy raw materials, buy competitors - but this is pointless since they wouldn't pay tax on those anyway.
For capital assets, they would have to pay the tax and then depreciate them over time. I'm not sure about buy other companies - would that be considered and expense?
Regardless, keeping the the money offshore and tax-free allows it to grow much faster, pushing up the stock price and keeping the speculators happy despite the lack of a dividend. Investors have long since given up and sold their stock. All those with Apple shares can also use them as a pension. Save them up (no dividend-no tax) and wonder off to the Bahamas before selling them.
My (uninformed) view is that that large corps go multinational to keep governments "in their place." They don't have to go offshore because if governments ever got snarky, they can always threaten to leave. If they actually went, they would lose their influence. There are some small savings to be made which sweeten the deal too.
Can't buy shares in US companies (and definitely not Apple) using overseas cash. That counts as repatriation according to IRS rules. Buying shares in companies that have no presence in the US is OK, though doing so as an investment (rather than an acquisition) I'm not sure about.
As a shareholder, I sure as hell don't want Apple spending a 12 digit sum on foreign acquisitions just to avoid taxes!
It will be interesting to see how well they will be able to keep the momentum going.
They've been playing catch-up with the rest of the industry in terms of screen size and hardware grunt, but now that everyone and their dog is selling 6" phones, where do you innovate from here. Especially if you are trying not to cannibalize your other product lines?
They can still differentiate on software but that's about as far as it goes.
Smartphones are quickly becoming victims of their own success, much like PC's have over the last few years... they have become good enough that there is no longer an incentive to upgrade one every year.
If I was a product manager at Apple I would probably start thinking about my retirement plans right about now.
What is the economic effect of Apple's massive hoard of non-repatriated profits? It's money sucked out of the economies of countries outside the US, and we assume it has been invested wisely, so will suck even more money out of the economies in the form of investment returns.
It's become like a black hole, sucking in everything and giving back nothing, and if it becomes much bigger, will it's gravitational effects be felt elsewhere?
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