Mobile Cellphone Info has posted a new item, 'To give back to investors, Apple
goes for massive bond deal'
In an effort to return cash to investors, Apple is reaching out to the debt
market and offering $17 billion in bonds, the biggest non-bank bond offering in
history, according to a report by The Wall Street Journal.
The bond offering comes after Apple announced last week that its board of
directors had approved a plan to return $100 billion to shareholders through the
end of 2015. That plan adds $55 billion to a previously announced capital return
The Apple offering has been oversubscribed and has generated in excess of $50
billion in new orders, the WSJ report said Tuesday, citing sources.
Apple did not immediately return calls for comment.
A majority of Apples cash reservesin excess of $100 billionresides overseas, and
a bond offering is a financially sound way to return cash to investors, said
Bradley Gastwirth, CEO of ABR Investment Strategy, an investment advisory firm.
Apple is using the markets to raise money so it doesnt have to repatriate the
cash reserves from abroad, Gastwirth said. Bonds are extremely cheap, at
historically low rates, Gastwirth said. Repatriating funds from abroad could
incur U.S. taxes, so Apple is saving by using the debt market to raise money.
There was a tremendous amount of interest in this deal, which keeps the rate
lower for Apple, Gastwirth said.
Investors are moving away from money market funds, and feel comfortable buying
bonds for better and more consistent yields, Gastwirth said. The bond
offeringwhich is open mostly to institutional investors and not individual
buyersprovides the security of getting paid back by Apple over a period of time.
A lot of large companies, including Microsoft, are taking advantage of the bond
markets, Gastwirth said.
Apple has come under increasing pressure to share its $145 billion horde of cash
with shareholders. The pressure has grown especially intense in recent months as
Apples share value tumbled from its high of about $705 last September.
The companys shares have dropped 17 percent in value since the beginning of the
year. Apple has faced increasing pressure from Samsung, which has emerged as the
market leader in smartphone sales globally.
Reporting results for the quarter ending March 30, Apple last Tuesday said that
revenue was $43.6 billion, increasing from $39.19 billion in the year-earlier
quarter, but that profit declined year over year to $9.5 billion from $11.6
billionits first earnings drop in net earnings in a decade.
The market cheered the news about Apples bond deal, however. Company shares rose
2.9 percent Tuesday to close at $442.78.
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