NEW YORK (The Deal) -- Tim Cook's disclosure that Apple (AAPL) has repurchased $14 billion of its shares over the last two weeks is the latest example of the rich man's problem facing a growing number of technology companies.
According to a recent Moody's Investors Service report, a group of 30 cash-rich tech companies had nearly $570 billion in cash and securities at the close of the third quarter.
The list includes companies such as Apple, Ebay Inc. and Juniper Networks (JNPR) that have become targets of shareholders, as activist tweeter Carl Icahn and others have magnified scrutiny of how companies deploy their cash.
Rick Lane of Moody's notes that there is a wrinkle in the cash hoard. The 30 companies disclosing the location of their cash held 71% of the funds overseas, presenting tax issues if the companies repatriate the money."You have a growing proportion of cash that is generated offshore, and a growing proportion of cash outflows that need to be funded with domestic cash balances," Lane said. The ballooning cash balances create expectations for dividends and buybacks. Because much of the cash is overseas, the companies may have to fund payouts with debt. Apple tallied $159 billion in cash and marketable securities at the end of 2014, with nearly $125 billion, or 78%, held by foreign subsidiaries. The Cupertino, Calif. computer and mobile device company launched a record $17 billion bond offering last year to fund its dividend and buybacks. Lane said that Apple's Aa1 rating incorporates the ability of it to issue $20 billion to $25 billion of incremental debt. "It would likely do that in order to support the ongoing distribution of cash to shareholders," he said. Following Apple on the Moody's list is Microsoft (MSFT) which had $80.7 billion in cash and marketable securities at the close of the third quarter, of which 94% was overseas. Meanwhile, of Google's (GOOG) $56.5 billion in cash at the close of the third quarter, 57% was held outside the U.S. Cisco Systems (CSCO) had 87% of its $48.2 billion in cash overseas as of Sept. 2013, and 76% of Oracle's (ORCL) $39.1 billion was held outside the U.S. Of the companies Moody's sampled, only Priceline.com (PCLN) grew its cash at a faster rate than Apple. The Norwalk, Conn., hotel and travel listing company's cash and marketable securities increased from $400 million at year-end 2006, to $6.6 billion by the end of the third quarter 2013, an increase of 1424%. Apple's cash has increased close to 1140% during the same period.
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