These 5 Companies Are Holding a Combined $535 Billion in Cash Overseas

Some of the biggest technology companies in the world are hoping that a potential tax holiday will make it cheaper to bring their cash back home.

Chris Neiger
Chris Neiger
Jun 14, 2017 at 6:07AM
Technology and Telecom
Stacks of U.S. bills.

Image source: Getty Images.

U.S. companies that sell products and services abroad have the benefit of making more money because their addressable market size is substantially larger than if they just sold their products in the U.S. That's an easy concept to understand, but the tricky part comes when those global players want to bring their money back to their home country to spend it. 

U.S. companies pay a hefty 35% tax on their overseas profits when they bring their money back home, which encourages many companies to leave their money sitting right where it is. A Congressional report put out last year estimated that American companies have held as mush as $2 trillion in overseas cash since 2015. 

President Trump has floated the idea of offering a temporary tax rate of just 10% for repatriated cash, and that's got the ear of Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) Cisco Systems (NASDAQ:CSCO), Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), and Oracle (NYSE:ORCL) -- which hold a combined $535 billion in overseas cash.

Let's take a closer look at how much money each of the above companies are holding overseas, and how they might use the money if they bring it back home:

Apple Store at dusk.

Image source: Apple.

Apple: $240 Billion Overseas

Apple reported in its fiscal second-quarter 2017 results that it has $239.6 billion in overseas cash, which accounts for about 94% of the company's war chest. Apple's CEO Tim Cook has been upfront about the company's reasons for keeping so much of its money from coming back to America:

"When we bring it back, we will pay 35% federal tax and then a weighted average across the states that we're in, which is about 5%, so think of it as 40%. We've said at 40% we're not going to bring it back until there's a fair rate. There's no debate about it," he said in a Washington Post interview last year. 

Apple's been pretty mum on what it might do with the cash if it's able to bring it back, though the company has noted that much of its free cash flow goes back to its investors. Apple CFO Luca Maestri answered an analyst's question about possible cash repatriation on a recent earnings call, saying,

"[G]iven the current capital structure that we have, we decided that until now we return about 100% of the free cash flow to investors. It's difficult for us to speculate about what might or might not happen."  

Man holding a Surface laptop.

Image source: Microsoft.

Microsoft: $122 Billion Overseas 

Microsoft said in its fiscal third-quarter 2017 earnings report that it has $122.2 billion held by its foreign subsidiaries.  

Microsoft's CFO Amy Hood said on recent earnings call that the best way to continue creating value for its shareholders is to invest in itself, acquire new companies, expand its addressable market, and repurchase shares and return dividends. 

Hood also said, "We've been a longtime advocate of structural tax reform, and so we'll just wait and see how things play out. And as decisions get made and proposals clarified, we'll share more about what that means for us." 

Network cables in data room.

Image source: Getty Images.

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Cisco Systems: $65 Billion Overseas

Cisco's current overseas cash totals $65.1 billion, up from $59.8 billion around the same time last year. The company's CEO, Chuck Robbins told CNBC at the end of last year that Cisco was open to a number of different opportunities if it were able to bring its overseas cash back at a lower rate. 

Specifically, Robbins said that cash repatriation could not only create jobs for Cisco and also possibly increase its dividend. 

"If we come back -- if we were to increase our dividend -- then that flows through the mutual funds, which flows through to the middle-class America, which flows through to make people feel better about their income," he said.  

Robbins also mentioned that more lenient repatriation policy could spur more share buybacks for the company as well. 

One of Google's lobbies.

Image source: Google.

Alphabet: $56 Billion Overseas

Google's parent company makes it on this list for having $55.7 billion -- or 60% -- of its total $92.4 billion in cash overseas. But unlike some of the other companies listed here, don't expect Alphabet to hand any repatriated cash back to shareholders. The company consistently states in its annual filings that: 

"We have never declared or paid any cash dividend on our common or capital stock. We intend to retain any future earnings and do not expect to pay any cash dividends in the foreseeable future."  

But that doesn't mean Alphabet doesn't have other plans for a potential tax holiday. The company has said that it wants to overtake Amazon's Web Services (AWS) by 2022 and Recode recently pointed out that to accomplish this the company would likely have to make hefty acquisitions to catch up to its cloud rival. All of which would be the perfect use of tens of billions of dollars in repatriated cash.  

Server room hallway.

Image source: Getty Images.

Oracle: $52 Billion Overseas

Oracle currently holds $52.2 billion of its total cash overseas and has indicated that it would like to bring at least some of that money back home. Mark Hurd, one of Oracle's two CEOs, recently said that, "We'd like to bring it back. We'd love to obviously not have to pay tax twice."  

Oracle hasn't laid out specifically what it will do if it does bring its cash back, but recent history may be a good indicator. Back in 2004, when Congress passed a tax holiday that lowered the repatriation rate to just 5.25%, Oracle used $10.3 billion of its repatriated cash to acquire PeopleSoft.