The answer is “taxes.”
The big news from today’s Apple earnings call was the expansion of its plan to reward investors with a bigger dividend and more stock buy-backs. But though the company has more cash than just about any other in the world (or in history), Apple will borrow the money it will give to investors.
The pay-out to shareholders comes after a long swoon for the company’s stock price and pressure from investors like hedge fund manager David Einhorn, who want access to the company’s $144.7 billion in cash. But most of that cash is sitting off-shore. That’s because Apple is reluctant to pay the corporate taxes, as much as 35%, required to move it back to the US. And so instead of using that money to pay off investors, Apple will borrow in the US in order to pay its $30 billion in planned dividends and stock-buy backs.
The move offers other benefits to Apple, according to Apple CFO Peter Opphenheimer. He explained to investment analysts today that borrowing in the US will help lower Apple’s cost of capital, thanks to low interest rates and the ability to deduct that interest from the tax payments the company does make.
Of course, this can’t last forever—and not just because Apple is in need of a new product. Apple’s cash is 38% of its market valuation, and if that number keeps rising, the need to bring back more of it—either to invest in developing new business or products, or to buy off investors—will become more pressing.
Apple, like many US tech multinationals, is hoping that the US government will allow either a short-term “repatriation holiday”—when it could bring its foreign cash back at a tax discount—or that a comprehensive tax reform effort will either lower taxes on foreign income, or exempt it completely. The way things are going in Washington right now, it’s unlikely such a deal will come about in the next year or two, but given the pressure Apple is under, it may need to decide what to do about its big cash hoard before the government does.