- Apple will be able to move its overseas cash back to the US thanks to President Trump’s corporate tax cut
- The $252 billion the tech giant has overseas could return at a tax of 15.5 percent as opposed to the previous 35 percent
- In a letter to investors last month, two CitiGroup analysts ranked the companies Apple would likely consider buying with their new war chest
- Netflix topped the list at a 40 percent likelihood, with the $85 billion company seen as a way for Apple to finally compete in the film and television worlds
- Apple has always been incredibly cautious in their spending, and made just one ten-figure purchase in its history when it put up $3 billion for Beats in 2015
- There is a good chance the comapny will not move back all its overseas funds, and what is moved back might be used to buy back stock
The polarizing corporate tax cut championed by President Donald Trump and the Republican Party has left tech giant Apple very cash rich.
Under the new bill, which was signed into law just before Christmas, Apple will be able to bring $252 billion of its overseas cash back to the United States at a tax rate of 15.5 percent versus the previous 35 percent.
That would leave the company with approximately $220 billion after taxes.
And with all that cash on hand, talk is now turning to what companies Apple might try to scoop up, and one stands out above all others according to CitiGroup analysts – Netflix.
Analysts Jim Suva and Asiya Merchant said in a note to investors last month that there is a 40 percent chance that Apple would make a play to buy Netflix.
‘The firm has too much cash — nearly $250 billion — growing at $50 billion a year,’ wrote Suva and Merchant.
‘This is a good problem to have. Historically, Apple has avoided repatriating cash to the US to avoid high taxation. As such, tax reform may allow Apple to put this cash to use. With over 90 percent of its cash sitting overseas, a one-time 10 percent repatriation tax would give Apple $220 billion for M&A or buybacks.’
It would make sense for Apple, who have dominated a number of markets such as music but failed to find a foothold in the worlds of television and movies, where they have been surpassed by Netflix, Hulu and Amazon, among others.
The purchase of Netflix would not deplete their war chest either, with the streaming giant currently valued at $85 billion.
This means that should Apple move the cash back they would also be looking to grab some other properties.
There are however a number of reasons why this sale is highly unlikely, starting with the purchase price.
Apple has been reluctant to splash out large amounts of cash to acquire other companies, and the most the tech giant has ever put up was back in 2014 when it paid $3 billion for Beats.
That is also the only purchase apple has made that was over nine figures, with the next highest being the $400 million it recently paid for Shazam.
In comparison, Disney has paid: $7.4 billion for Pixar (2006); $4 billion for Marvel (2009); $4 billion for LucasFilm (2012); $1.5 billion for BamTech (2015); and to top it all off, $52.4 billion for parts of 21st Century Fox (2017).
Disney meanwhile is listed as the second-most likely company that Apple would acquire according to Suva and Merchant, who put the odds at around.
And while Apple may not have had major success in streaming, that seems very likely to change given thanks to an announcement in November that the company was in production on their first scripted series.
There is no guarantee that the show will be successful, but given the fact that it stars Reese Witherspoon and Jennifer Anistion it is likely to be a strong performer.
That series was given a two-season order after Apple won an aggressive bidding war, but it remains unclear how they will release the program.
At the same time, Apple is also set to revive the fantasy and science fiction program Amazing Stories that ran in the 80s, and will be bringing back the creator of the show to work on the project – Steven Spielberg.
Bryan Fuller, the beloved creator of cult classics such a Pushing Daisies, Wonderfalls and Dead Like Me, is also attached to produce.
There is also a chance the company would try to buy back shares, which would result in high dividends for its shareholders.
And while Apple will surely move some portion of its overseas money back, there is a very good chance that it keeps a good amount of the cash where it is based on their cautious nature in the past.
Source: Daily Mail UK
Featured Image: Apfel TV