Apple announced last week it could begin a $100 billion capital return program for shareholders through increased dividends and stock buybacks. Monday, the company has filed paperwork with the SEC and looks to be working with investment firms for its debt offering. Interestingly though, Apple will not do so with its own $145 billion cash on hand. Instead the Cupertino-based company is looking to borrow $100 billion by issuing bonds.
Analysts suspect that Apple has just $45 billion, of the $145 billion, available in U.S. While the company could repatriate foreign funds back in to the U.S. it would have to do so at a very high tax rate and considering the weak Dollar, Apple would be better off to sit on those funds for awhile.
While Apple failed to receive a Triple A rating from debt agencies, many analysts expect Apple to garner cheaper rates than Microsoft (a solidly Triple A rated company). These low rates make it a great opportunity for Apple to borrow at this time.
Many industry observers, Apple CEO Tim Cook included, have stated this action, as well as declining revenues, reflect signs of a changing Apple. Some analysts go as far as to state that Apple is now entering the maturation phase, and while the company will be profitable in the near future, the massive growth rates it has seen in the past five years are likely long gone. Cook though stated recently on the company’s quarterly earnings call that Apple is “hard at work on some amazing new hardware, software and services we can’t wait to introduce this fall and throughout 2014.”
Most analysts have been predicting Apple’s maturation phase for years now, its just that Apple has carved new market segments (e.g., iPods, digital distribution, iPhone, iPad) to prolong growth and buck traditional financial cycles. Are market patterns finally catching up to Apple or will the company announce new and exciting products to reinvigorate its line-up this fall?