Apple's world-beating financial engineering is teaching the corporate world how to exploit Trump's tax cuts


#1

Originally published at: https://boingboing.net/2018/11/14/looter-friendly-policies.html


#2

Late stage capitalism. What a fucking mess. Eat the rich.


#3

#4

Do you have a source for that? Because my understanding is that he views iPhone sales as a recurring revenue stream, which is what every company wants.

Please explain how this is a negative for the country/economy.

Really? How so? Yes, the numbers are big. So are Apple’s revenue/profit numbers. It’s almost like they can do buybacks as well as invest in employees/R&D at the same time.

But I forget, this is Corey, who has some blind hatred for anything and everything Apple.


#5

I’d love to know how buybacks help the economy, other than creating asset bubbles.
The “idea” behind the tax cut and modern tax schemes was to increase CAPEX (capital expenditure investment) well Q3 saw very little CAPEX, and wages are barely keeping up with inflation and companies like Apple keep making extraordinary profits and not putting it back into their own nation. In my book, that’s the polar opposite of patriotism and Adam Smith capitalism, and is ruining our society’s ability to fund infrastructure and maintain our social compact.


#6

Apple had $16.7B capex expenditures in 2018. As noted in the quoted article, they’re already planning on $30B more just for the campus, not including other R&D spending. Is that still not enough?

And it should be no surprise that a large part of the repatriated funds (after paying the required taxes on them) were used for buybacks and dividends. That’s exactly what happened last time there was a tax holiday, why would you think this time is any different?


#7

I’d meant the entire economy, not just Apple. In the old days, 5% annual sales CAPEX would be considered normal across the economy and especially now that we’ve dramatically accelerated depreciation cycles and had an R&D tax credit it should be expected.
Apple is projecting a decline for FY 2019 from $16.7 to $14 billion. That is the sign of a company expecting retraction and with their cash reserves, that is unacceptable.


#8

He’s been approaching Apple with all the calm and rationality of a jilted lover since 2005.


#9

I don’t think you get to decide what’s acceptable and what’s not, when you have nothing to do with the company. If you want a say, but some shares, or go work for them in a decision making role. But beyond that, saying that a company shouldn’t slow spending when they expect a retraction is just foolish. They should spend money just because they have it?


#10

I hope in time we revert back to a more responsible tax policy, and perhaps a woldwide agreement that all companies pay the local rate of tax on earnings for each and every nation they do business in. To be very frank, Apple has taken advantage of international tax havens as well as slave-like wages (as have other companies) and as a result are being subsidized by our tax dollars.
If Apple fell off the face of the Earth right now, I don’t think I’d notice and so would most people. Until they practice a more responsible business, they get not one single dollar from me.


#11

Second reply:. When a company knows their current product lineup is not growing as expected and they are sitting on a ton of cash, that is exactly when they should spend on R&D!!! It is the height of mismanaged to buy back stocks while shorting development, that’s what is ruining our nation’s product stream and causing most of our trade deficit on finished goods. Think about this, the greatest dollar value export plant in the US is the Spartanburg BMW factory. American companies are too interested in short term profits and cutting development budgets.


#12

What on earth makes you think they aren’t spending on R&D?

Also, Apple’s sales have flattened out largely because they have run out of people on Planet Earth who want to buy their phones and are able to afford to do so. Not a situation Wall Street investors are used to dealing with. As long as the stockholders continue to regard ASP and profit margins as Holy Untouchables, Apple is not going to be able to grow their sales numbers very much. Their user base, OTOH, continues to grow at a healthy clip since the number of new devices sold per year exceeds the number of dead/retired devices.


#13

Apple had a history of creating new markets, not relying on only one. If they are only concerned with phones and apps, rather than expanding into new markets, or better yet, emulating the Jobs’ Apple style for creating new markets, they’re not going to grow.


#14

Airpods. Apple watch. Homepods. How are these not new markets?

Also, the company’s ability to grow is sharply limited by the number of people on planet earth with enough disposable income. They’ve got over a billion active IOS devices right now, so they already have made 1/7 the planet into their customers.


#15

Apple watch???
That’s a money loser, as was their aquisition of Nest.
They’re going to stop reporting individual device sales; does that sound like a confident company?

Samsung’s sales worldwide is just as high as Apple’s, or close enough to make no difference. And there are a dozen Chinese companies vying for third place. So there’s spectacular room for continued market share growth in the industry, saying the population is the limit is just dead wrong.
And yes, there are roughly a billion iPhones sold, but at least half are now dormant. That suggests there are at least six times as many adults without Apple phones as there are people with them.


#16

I feel like I’m not going to be very popular for doing this, but I thought the post had a few of what Wikipedia’s editing guidelines call “weasel words.”

Then I noticed the rest of the article had a similar tone.

So, I edited the post in the way I think I’d be expected to if this were to be held to the same standards as Wikipedia.

In the end, I’m not quite sure what the argument is, but I’m also really tired.

Here it is:

Apple has attracted Berkshire Hathaway, famous for “patient investing” – Apple CEO Tim Cook stated that the company still had the confidence of “value investors.” Later, Berkshire CEO Warren Buffet stated that his stake in Apple was based on the expectation that the company would continue to use financial engineering to reward investors who can move share prices.

Cook has since suggested that the buybacks will create public value because of the capital gains that Apple investors will pay when they cash out. – Trump’s tax cuts offer preferential tax rates for people who earn money through capital gains, shifting the US tax burden onto waged workers who earn their money by making things that other people use.

Just after the announcement in May 2018 that Buffett had purchased an additional 74 million Apple shares, interviewer David Rubenstein asked Apple CEO Tim Cook: “Are you pleased to have him as your shareholder?” Cook responded: “I’m overjoyed. I’m thrilled. Warren is focused on the long term, so we’re in sync. It’s the way we run the company. It’s the way he invests. So, yeah, I could not be happier.”

Rubenstein then asked Cook what Apple planned to do with its $260 billion in cash. Cook’s answer: “We’re going to create a new site, a new campus within the United States. We’re going to hire 20,000 people. We’re going to spend $30 billion in capital expenditure over the next several years. Number one, we’re investing, and investing a ton, in this country. We’re also going to buy some of our stock, as we view our stock as a good value.”

With Apple repurchasing $73 billion in fiscal 2018 at record stock prices, Cook told Rubenstein that Apple’s repurchases were “good for the economy as well because if people sell stock they pay taxes on their gains."


#17

LOLWUT. None of Apple’s product lines are money losers, that’s why they’re so profitable. And Apple didn’t buy Nest - Google did. And Nest has been a money loser.


#18

That’s exactly what the Tax Cuts and Jobs Act did - it instituted a territorial tax system, so companies pay local taxes on the revenue they get from each country they do business in, and then are not taxes on foreign-earned money in the US.


#19

I think you’re focussing on the wrong part. It’s not the size of the numbers that’s the issue, it’s the “record stock prices” bit.

That doesn’t mean that they are not still good value but it does mean that you’d perhaps take the statement of the CEO that they are with a bigger pinch of salt than you might otherwise.


#20

You are woefully misinformed. On the off chance that you are willing to listen and learn, here is my response.

Google owns nest, not Apple. Do try to keep your megacorporations straight if you’re going to discuss them. Apple watch is dominating not just the smartwatch category but the entire wristwatch industry:

They are acting like every other company out there - hardly any tech companies report sales figures like they had been doing. They were an outlier, now they are acting like all their peers.

As of February 2018, Apple had sold 2 billion devices and had 1.3 billion active devices. 100 million of those active devices are macs. About 2/3 of all Apple devices sold were still in use.

World population is currently 7.7 billion. Active Apple devices is somewhere north of 1.3 billion today. Figure a few hundred million people have more than 1 active apple device and you get approx. 1 billion people who own at least one Apple device, or 13% of the world population. Now look at the link below which breaks out the world population into income brackets. Only 16% of the world’s 7.7 billion people live on more than $20 a day/$7,000 a year.

Considering that not all of those upper income people will want to own an Apple device (they might prefer Android or be Luddites who are still rocking a flip phone), Apple has maxed out on the world population of people who can easily afford a brand new Apple device. Their new customers are coming from the last few hundred million well to do people who are not yet Apple customers, plus people in the top of the next income tier down, who make less than $7,000 a year and can just barely afford to buy an older, cheaper model Iphone or a used iphone.

That is why their sales are flat year over year: lack of additional people in the world population who can afford to buy an apple device. Until they manage to placate their shareholders into accepting lower average sale price or lower gross margins, Apple will not grow their market much further because they have run out of wealthy people to sell to.

Incidentally, that is also why their customers are keeping their phones for longer and longer - average device lifespan was in excess of 4 years back in February and the trend line is still going up (second link below).