Apple Inc. (AAPL): The Next Microsoft Corporation (MSFT)?

Apple Announce $17 Billion Bond Offering

The Wall Street Journal reported on April 30, 2013 that Apple Inc. (NASDAQ:AAPL) plans to issue $17 billion in bonds, the largest ever corporate offering. The shares rose almost 3% following the news, so clearly the move was viewed positively. The maturities are staggered, and range from 3 – 30 years, with two of the offerings at a variable rate. Some may ask why Apple is borrowing money if it already has significant excess cash on hand. First, Apple earned a significant portion of its cash outside the United States. While it paid foreign taxes on this, it did not have to pay income tax a second time to the US government, which current tax law requires. Apple Inc. (NASDAQ:AAPL) has a policy, as do many large corporations, to leave this cash abroad potentially for use in foreign investment unless the tax law changes. Hence, it needed cash in the US to payout the dividends with. Second, bond rates are low, and companies that generate consistent FCF and have no debt have issued bonds, paid dividends with them and paid that off with future cash flows to generate value for shareholders.


Management’s decision to return cash to shareholders and willingness to take immediate action to do so is a positive that means value and income investors can now look at owning Apple Inc. (NASDAQ:AAPL). Supporting versus fighting the shift away from growth investors can only help the price of the shares. Apple may have found its bottom and may have righted the ship. That said, Apple investors still need patience. It is on the road to finding new core long-term holders, something that could not be said six or even three months ago.

The article Apple Is Making Sure It Doesn’t Become Microsoft originally appeared on and is written by Mike Thiessen.

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