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Apple’s Secret Plan For Its Cash Stash

Apple has $100 billion of cash and a lot of ways

to spend it. Add more retail stores? Check. Set up more server farms to support its iCloud service? Check. Build a second

campus in Cupertino, Calif. to house its burgeoning staff? Check. Acquire companies and expand R&D? Check. Pay dividends

and do stock repurchases? Check, check.


CEO Tim Cook (Getty Images)

How about buying up its own supply chain? A lot of high-tech manufacturers on The Global

2000 dream about controlling what they pay for components and gaining the assurance that crucial parts will flow as needed.

Apple is one of very few firms with the financial wherewithal to make that come true, specifically by buying production

equipment to outfit new and existing factories in Asia that other people will run. Apple is already deploying its cash toward

this very goal, say people who follow the company closely. It’s a strategy that will likely continue the disruption in the

consumer electronics field that Apple has led to date.

The iPhone maker has $64 billion or so of its cash sitting

overseas, taxed at an attractively low 5% rate but also earning little to no interest. Any cash Apple chooses to bring back

to the States would get hit at the 35% U.S. tax rate, not a pleasant prospect. Spending that money on expanding offshore

production is far more compelling. Apple keeps the depreciation expense while keeping production costs down. It also means

the company will be ready to continue pumping up the volume to feed the seemingly insatiable appetite for iPhones and iPads

in the near term and rumored new category-busting products like an interactive TV in the long term.

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Apple’s Secret Plan For Its Cash Stash