Silicon Valley's First World Problem
NEW YORK (The Deal) -- Tim Cook's disclosure that Apple
According to a recent Moody's Investors Service report, a group of 30 cash-rich tech companies had nearly $570 billion in cash and securities at the close of the third quarter.
The list includes companies such as Apple, Ebay Inc. and Juniper Networks
Rick Lane of Moody's notes that there is a wrinkle in the cash hoard. The 30 companies disclosing the location of their cash held 71% of the funds overseas, presenting tax issues if the companies repatriate the money.
"You have a growing proportion of cash that is generated offshore, and a growing proportion of cash outflows that need to be funded with domestic cash balances," Lane said.
The ballooning cash balances create expectations for dividends and buybacks. Because much of the cash is overseas, the companies may have to fund payouts with debt.
Apple tallied $159 billion in cash and marketable securities at the end of 2014, with nearly $125 billion, or 78%, held by foreign subsidiaries. The Cupertino, Calif. computer and mobile device company launched a record $17 billion bond offering last year to fund its dividend and buybacks.
Lane said that Apple's Aa1 rating incorporates the ability of it to issue $20 billion to $25 billion of incremental debt. "It would likely do that in order to support the ongoing distribution of cash to shareholders," he said.
Following Apple on the Moody's list is Microsoft
Meanwhile, of Google's
Of the companies Moody's sampled, only Priceline.com