Home » Apple

Category Archives: Apple

Categories

Apple Hit With Massive Tax Bill in Ireland

Apple Inc. is well regarded across the world is being one of the most successful companies in the world. The company has released dozens of innovated products over the past few decades that have revolutionized the world. Along with their technology and innovation success, the company has been equally as successful financially. However, according to a recent news report (http://mobile.reuters.com/article/idUSKCN114211?il=0), Apple is now facing some significant foreign taxes.

 

Over the past few years the United States and various countries in Europe have been investigating the amount of federal taxes that Apple has paid in Ireland. The investigation determined that in Ireland Apple has been taking around a 2% national tax rate. This is compared to the typical tax rate in Ireland of around 15% for corporations. It has been suggested that Ireland has provided apple with favorable tax rates to encourage the company to continue to do business and grow in Ireland.

 

While this reduced tax rate has been beneficial for Apple and likely continued apples expansion in Ireland, it has created an unfair advantage. Due to the unfair advantage that Apple has received, the European Union and United States are strongly recommending that Apple repay to Ireland the amount of taxes that they saved. At this point, it is estimated that the total liability that Apple will owe could easily total over 15 billion United States dollars.

 

While the $15 billion tax bill is very significant, Apple appears that they will be able to absorb the financial hit. Apple currently it’s considered one of the wealthiest companies in the world. On their most recent audit balance sheet Apple reported that they have over $230 billion in the bank. Before trading opened the day that the tax bill was announced Apple shares were trading down about 3%. However, it does not appear that investors will be seriously based by this issue. By the end of the day Apple shares had increased a bit and were down less than 1%. Most investors seemed unconcerned that the tax benefit was received in other places beyond Ireland.

 

Apple Ventures into Fund and Startup Investing Again

Apple has had to deal with a host of ups and downs in 2016, but the legendary computer and technology company shows no signs of slowing down its agenda for 2017. Apple has recently made news over speculation the company will direct $1 billion towards a massive tech fund run by Softbank. This comes on the heels of the CEO of Softbank announcing $50 billion would be invested in the United States market.

 

Apple has not yet agreed to put money into the soon-to-be-massive fund, but indicators show the company is definitely seriously discussing investing in the fund seriously. Apple had lost some money over the past year due to the troubles with the Apple Watch, one of the least appreciated releases ardent Apple consumers have been exposed to. Bugs and glitches galore sunk the Apple watch in the market. Losses definitely mounted as a result. A successful investment in the new fund would provide a great assist to Apple since the company could recoup money through a reliable return.

 

The return on investment from the fund could end up being a long term hedge. A mere 4% return on investment would yield $40 million in a single year. Over ten years, minus compounded interest, the figure would be $400 million. All this assumes the fund would yield a positive return. No guarantees exist on how the fund will do, but Apple is surely hoping for the best.

 

Apple is not new to the concept of investing outside of its own direct business ventures. Apple has consistently put money into startups. Buying into a startup could lead to purchasing outright controlling interest in the company once the startup takes off. The infusion of Apple investment capital definitely assists into a startup can do a lot to improve the new venture’s chances for success.

 

Startups often burn through cash during the early stages. Investment funds and support from a giant such as Apple can put a struggling startup on firm footing. Apple also knows it can expand its own vital holdings once a startup takes off and is a success.

 

The potential Softbank deal shows Apple is always on the move looking to increase its value at every turn. If the deal goes through, then Apple becomes part of another major player in the tech world.

Apple Hit With Massive Tax Bill in Ireland

Apple Inc. is well regarded across the world is being one of the most successful companies in the world. The company has released dozens of innovated products over the past few decades that have revolutionized the world. Along with their technology and innovation success, the company has been equally as successful financially. However, according to a recent news report (http://mobile.reuters.com/article/idUSKCN114211?il=0), Apple is now facing some significant foreign taxes.

Over the past few years the United States and various countries in Europe have been investigating the amount of federal taxes that Apple has paid in Ireland. The investigation determined that in Ireland Apple has been taking around a 2% national tax rate. This is compared to the typical tax rate in Ireland of around 15% for corporations. It has been suggested that Ireland has provided apple with favorable tax rates to encourage the company to continue to do business and grow in Ireland.

While this reduced tax rate has been beneficial for Apple and likely continued apples expansion in Ireland, it has created an unfair advantage. Due to the unfair advantage that Apple has received, the European Union and United States are strongly recommending that Apple repay to Ireland the amount of taxes that they saved. At this point, it is estimated that the total liability that Apple will owe could easily total over 15 billion United States dollars.

While the $15 billion tax bill is very significant, Apple appears that they will be able to absorb the financial hit. Apple currently it’s considered one of the wealthiest companies in the world. On their most recent audit balance sheet Apple reported that they have over $230 billion in the bank. Before trading opened the day that the tax bill was announced Apple shares were trading down about 3%. However, it does not appear that investors will be seriously based by this issue. By the end of the day Apple shares had increased a bit and were down less than 1%. Most investors seemed unconcerned that the tax benefit was received in other places beyond Ireland.

Apple hit with 14 billion tax bill

The European Commission has issued a report indicating that Apple, the American manufacturer who produces iPhones, iPads, and Mac computers, received illegal tax savings from Ireland and is being find fourteen billion Euros.

Ireland is a long established tax haven for multi national companies who become domicile there for the low tax rates in the country, similar to the Cayman Islands and Luxembourg. Apple has long been criticized in the United States for not repatriating their earnings to the U.S. And paying taxes on it. Instead, the company has even went as far as borrowing money in the U.S. In order to pay a dividend and to buy back shares despite having billions of dollars available in international markets earning a Minsk return and rate of interest.

The European Union commission that issued the fine indicated that they would consider lowering the fine if Apple pays taxes to other tax authorities including, perhaps, the United States. Their basis for the case is preferential tax treatment that they claim the company received from Ireland.

Apple’s CEO Tim Cook responded with a letter indicating that the company would contest the ruling and that the move would steer businessss away from being headquartered in Europe. Cook mentioned the long history that Apple has in Ireland in the town of Cork and how this was not merely a recent tax inversion. Cook also restated the past comment that he made indicating That Apple supports global tax reform and that the issue remains a complex one citing that company’s tend to pay taxes where value is created, in their case which would primarily be the U.S. Where products are designed. Further, Cook indicated that there were no illegal tax benefits provided to the company from Ireland and that the company did not appeal for such preferential treatment from the country.

President Barack Obama indicated, in private, concerns that the U.S. Taxpayers who the U.S. Believes is eventually entitled to tax revenue for the income once repatriated, could receive the short end of the stick due to the EU ruling and promises to support American businesses like Apple in the case, which is sure to receive its share of attention as it works through an lengthy, contentious, and complicated appeal process.

Berkshire Hathaway adds to Apple stock position

Berkshire Hathaway, the publicly traded conglomerate that is run by legendary investor Warren Buffett, recently disclosed that they increased their investment in Apple by 55%. This increase in their investment comes at a time when many others are running away from Apple stock due to a plethora of challenges the company is facing.

Apple is in some ways a victim of their own success having risen to be the largest company in the world and stockpiling massive cash reserves in the process. Apple has also penetrated deeply into the cell phone, tablet, personal computer, cloud storage, and watch markets with success. However many feel as if they have saturated the market and their avenues for growth have all but disappeared.

On the positive side, and what may be fueling the investment by Berkshire Hathaway, is a major cell phone upgrade cycle which is expected to begin in 2016/207. Many market observers believe that their decline in sales in the first half of 2016 is due to iPhone buyers holding off from buying phones due to a concern that the new model will be released by year end.

Still Apple is increasingly facing new competition and market challenges domestically and abroad. One of the biggest challenges is in China the second largest market for Apple which has introduced lawsuits against Apple for pirating a local manufacturers phone, and which is also experiencing slowdowns of their own. Some market observers are calling Apple a stock that should be avoided and claiming that anyone investing in it at these prices to be oblivious to the trends.

Apple has had its height of revenue and earnings in 2014 and is experiencing a come down from this height. For Buffett’s company they only own 15 million shares which is not a major investment for the firm and the investment was likely made by one of his lieutenants and not Warren himself. Apple stock has increased over the past quarter by about 20% but this was mostly catch up after a tough first half of the year.

Whether Apple stock ends up being a bargain or a value trap is to be determined, but Buffett is far from blind to the market’s ways, even when it is not immediately obvious to other market observers.