Apple will again sell billions of dollars worth of bonds this year. The company had previously offloaded $17 billion worth of debt twelve months ago in what was then the biggest-ever sale of its kind.
“We plan to be active in both the domestic and international bond markets during 2014 for an amount of term debt financing similar to what we issued in 2013,” said Luca Maestri, Apple’s Vice President and Corporate Controller, in the company’s Q2 2014 earnings call.
The bonds issue will support large-scale share buybacks at an amount Apple has bumped from $60 billion to $90 billion. Though the Cupertino giant has massive cash reserves valued at $150.6 billion, most of that money — approximately 88 percent –– is trapped abroad by a number of domestic tax laws. To bring that capital back to the U.S. would be to incur “significant tax consequences,” Maestri said.
The bonds sale and buybacks follow better-than-expected quarterly results from Apple, which trumped Wall Street’s expectations on earnings and revenues by a healthy margin. Though analysts predicted sales would reach $43.6 billion, they came in almost 5 percent higher than anticipated at $45.6 billion. Earnings per share forecasts of $10.09 were beaten by almost 15 percent; diluted earnings per share were $11.62 for the quarter.
Apple’s balance sheet shows a company in the bloom of health, but a move to sell bonds and buy back shares can be symptomatic of waning vigor. Buybacks boost value to shareholders, but could also concern those wondering why the capital isn’t being spent internally. Meanwhile, Apple’s CEO Tim Cook said in Apple’s earnings call the company is “on the prowl” with regards to acquisitions, having picked up 24 businesses in 18 months. These measures might indicate a shift in concentration from internal operations to external –– a worrying thought, especially in light of the fact that Apple has not released a new product line in years.
In response to a question about customers’ incentive to upgrade products, Cook said Apple prioritized delivering excellent goods. “The most important thing that we do is to make great products that really get our users excited to want the next one and that will always be the case,” he said in the company’s earnings call. But instead of the next one, what about the new one?
Cook has been hyping upcoming product launches for some time, and the bond sales announcement won’t quiet those waiting on new goods. While the company’s Q2 numbers prove Apple is robust and investors will cheer at buybacks, the market seems antsy for the next big thing. But for now, and as usual, Apple is staying tight-lipped on the subject.