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Apple assumes debt to avoid tax payment

NEW YORK, USA: Apple on Monday (29 April) moved towards its first-ever debt issue, filing documents describing plans for bond sales, which would be used to pay dividends in an effort to stem the slide in its share price.
Apple assumes debt to avoid tax payment

"We may, from time to time, offer to sell debt securities in one or more offerings," the California company said in a document filed with the Securities and Exchange Commission.

Apple executives described their plans last week when the firm reported quarterly results, indicating the company would spend US$100bn on share buy-backs and dividend payments to boost shareholder value.

Apple has a cash stockpile of at least US$145bn, based on disclosures from its latest earnings.

But much of the money is outside the United States and repatriating that money would lead to huge taxes under current US law.

Last week, Standard & Poor's said it would rate Apple bonds AA+ and Moody's indicated it would rate them Aa1. The rating agencies said they would not give the top grade of AAA because of the fast-changing nature of the sector.

Apple posted a profit of US$9.5bn on revenue of US$43.6bn in the first three months of this year, compared with US$11.6bn on US$39.2bn a year earlier.

Quarterly sales numbers grew, with the number of iPhones sold rising to 37.4m from 35.1m a year earlier. Sales of iPads reached 19.5m from 11.8m the previous year.

But margins were shrinking with the gross margin falling to 37.5% from 47.5%.

Some analysts believe the company is facing a crisis in a market where competitors are closing in.

"This is a crisis," Indigo Equity Research said in a recent note. "Apple is making similar errors those made by Nokia and Motorola. They are not releasing sufficiently innovative products or upgrades frequently enough. The problem is that once consumer technology companies lose their edge, they rarely regain it," the note added.

Source: AFP via I-Net Bridge

Source: I-Net Bridge

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