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Apple's Most Overlooked Weapon? Its Balance Sheet.

Evan Niu (TMFNewCow)
July 31, 2012

Apple (Nasdaq: AAPL  ) reported its fiscal third-quarter earnings last week. This we know. Digging through the company's 10-Q that was filed shortly thereafter, investors can glean even more information on the inner workings of the largest tech company in the world.

I'm looking at the balance sheet today.

The money mountain
We already knew that Apple was up to $117.2 billion in total cash, but Apple waits until the 10-Q to disclose exactly how much of that sits abroad and how much rests stateside. On the conference call, CFO Peter Oppenheimer gave an approximation but now we have a more precise figure as to how much cash is being held by foreign subsidiaries: $81.4 billion.

Source: SEC filings.

Source: SEC filings.

That leaves just $35.8 billion held domestically. Apple continues to stockpile its international war chest.

This next chart shows the sequential changes in Apple's cash balance, and you can see a clear trend of increasingly bolstering its international coffers while its domestic figure even decreased slightly last quarter.

Source: SEC filings.

Source: SEC filings.

Over the past four quarters, foreign cash has increased by a total of $33.8 billion, domestic just $7.3 billion.

A few months back, The New York Times ran a piece on how much of this composition is a result of elaborate strategies that Apple uses to keep down its tax bill, which isn't unique to Apple in any way, but merely the latest in the publication's string of hit pieces against the company. Fellow tech giants like Google (Nasdaq: GOOG  ) and Microsoft (Nasdaq: MSFT  ) use similar strategies.

Bloomberg ran a report a few years ago on how Google uses similar tactics to lighten its tax load and even said Facebook (Nasdaq: FB  ) , which has since gone public, was preparing to set up a similar legal maze of subsidiaries at the time. Microsoft has $54 billion stashed overseas, an even larger proportion of its total $63 billion in cash and equivalents than Apple keeps internationally. Microsoft keeps 86% of its money in foreign subsidiaries, higher than Apple's 69%. Repatriation taxes keep Mr. Softy's dollars from coming home, just like Apple's.

As far as what Apple puts all those dollars in, it continues to invest primarily in corporate securities and U.S. Treasuries and U.S. agency securities. The company dabbles a little bit in mortgage- and asset-backed securities as well as non-U.S. government securities.

Source: SEC filings. As of June 30, 2012.

Source: SEC filings. As of June 30, 2012.

Fortunately, I don't think Apple's at risk of having any checks bounce anytime soon, which would simply wreak havoc on the iCredit score it's worked so hard to obtain.

All those dollars ensures that Apple has plenty of ammo for ...

"Apple bought them all"
While Apple famously has no official long-term debt, the company still effectively has some through the use of off-balance sheet arrangements and c