Friday, May 20, 2016
US corporate giants hoarding over a trillion dollars; Mexico lowers growth forecast; Why Apple's Tim Cook is visiting India
1 US corporate giants hoarding over a trillion dollars (Jill Treanor in The Guardian) Some of the biggest US companies have accumulated cash piles worth almost $1.7tn – more than two thirds of it overseas.
According to the calculations by ratings agency Moody’s, the five companies hoarding the most cash – Apple, Microsoft, Google, Cisco and Oracle – between them held $504bn by the end of last year. The tech sector held 46% of the total.
Apple – described as the “cash king” by the ratings agency – held $216bn of cash, more than double the $102bn held by the next largest hoarder, Microsoft. The figures will add to the controversy about companies sitting on cash as the data shows they are parking it offshore to avoid the tax bill that would be due on returning it to the US.
An estimated $1.2tn of cash was held overseas at the end of 2015 – about 72% of the $1.68tn cash stockpile, Moody’s said. Of the five big hoarders of cash, three – Apple, Microsoft and Cisco – keep more than 90% outside the US.
With the US presidential election looming, Moody’s said it did not expect any major tax reforms that would prompt companies to start sending money to the US. Companies can put their cash to use in a number of ways, with capital expenditure – spending on equipment – usually the largest use. Payouts to shareholders through share buybacks and dividends is another use, as is making acquisitions.
The biggest cash pile held by a non-tech company is the $39bn in the coffers of pharmaceutical company Pfizer. It was forced to abandon a tie-up with rival Allergan - in what was regarded as the biggest pharmaceutical deal in history - in April after the US government clamped down on so-called tax inversion deals. Such transactions are structured to allow corporations to relocate their headquarters to countries with a lower tax rate.
2 Mexico lowers growth forecast (San Francisco Chronicle) Mexico is lowering its economic growth forecast for 2016, citing what it calls "adverse" international conditions including sluggish industrial production in the United States.
The Treasury Department is now predicting GDP expansion of 2.2 percent and 3.2 percent this year. That's down from its previous forecast of 2.6 percent to 3.6 percent. Deputy Treasury Secretary Fernando Aportela said Friday that Mexico's economy is also being hurt by volatility in financial markets and low prices for oil, a key export.
Nearly 80 percent of Mexican exports go to the US. Mexico's central bank also lowered its growth forecast recently, to between 2 percent and 3 percent.
3 Why Apple’s Tim Cook is visiting India (Prasanto K Roy on BBC) India was the sole bright spot in its results as Apple reported its first-ever revenue decline in 13 years. While global iPhone sales fell for the first time ever, a drop of 16% from the first quarter of 2015, they rose 56% in India in the same quarter.
Tim Cook's visit to India is a first for an Apple CEO. None of the California-based technology giant's seven CEOs ever visited India while in office, though Steve Jobs famously came here as a backpacking hippie looking for "answers" in the mid-1970s.
If a country's importance to a global firm is measured by CEO visits, Mr Cook's score is telling: China 8, India 1. India accounts for just 1% of global iPhone sales and Apple's share of India's mobile handset sales is 1.5%. India's market is dominated by phones under 5,000 rupees ($75), while Apple's recent models start at 39,000 rupees ($580).
Of India's rapidly-growing smartphones market, Apple has 3.4% share, according to CyberMedia Research (CMR). It ranks seventh among smartphones brands in India, though it is number two worldwide after Samsung. China, on the other hand, is the second-largest market in the world for Apple after the US.
For Apple, the almost-untapped Indian market could help revive its fortunes. Apple has already made two announcements. Apple's first development centre in India will be in Hyderabad, the capital of the southern state of Telangana, where over 150 Apple developers will work on Apple Maps.
Apple also announced a "design and development accelerator" in Bangalore, the southern city considered to be India's tech and start-up capital. The centre, to be set up in 2017, will provide support to iOS app developers in India.