Apple Could Spend Big on M&A in 2018

Apple reported profits of more than $20 billion Thursday evening, thanks in part to the higher selling price of the iPhone X, and said it could spend billions on acquisitions, dividends and buybacks in 2018 and beyond.

Apple Inc. (Nasdaq: AAPL) reported revenue of $88.3 billion for the quarter, up 13% year-on-year, and net income of almost $20.1 billion, up by 12.2% from a year ago. Diluted earnings per share were up at $3.89, beating Wall Street expectations.

Apple, however, sold fewer iPhones over the hoilday quarter than in the equivalent quarter a year earlier, 77.3 million compared with 78.2 million units.

Sales were lower because of the shorter than usual year-end quarter. "As you know, the December quarter a year ago spanned 14 weeks compared to 13 weeks this year, which is important to consider as we have set the underlying performance of our business this year," CFO Luca Maestri said on the earnings call.

Nonetheless, Apple still made more money because the $1,000 iPhone X bumped up the average selling price of its devices from $695 last year to $796 in the final quarter of the year.

"iPhone X was the best-selling smartphone in the world in the December quarter according to Canalys, and it has been our top-selling phone every week since it launched," CEO Tim Cook said on the earnings call. He also noted "Apple's active installed base" reached an all-time high of 1.3 billion in January.

US corporate tax changes were also a big issue on the call, with Maestri saying the company wants to get to "net cash zero." This means the company has up to $163 billion it could spend on M&A, dividends or share buybacks.

"We're going to be very thoughtful and deliberate about it," the CFO said, saying capital allocation plans would be laid out in the March quarter. In 2017, Apple bought 19 companies all told.

The company estimates it will be making a corporate income tax payment of around $38 billion to the US government on cumulative past foreign earnings.

Apple's shares were trading up $5.71 -- or 3.40% -- at $167.78 after hours on Thursday.

— Dan Jones, Mobile Editor, Light Reading

bosco_pcs 2/16/2018 | 10:50:43 AM
Re: Apple M&A @kq4ym

Apple, like other foreign cash rich companies, has been bringing cash back in a round about way by issuing bonds. 

The new tax cut plan will mandate companies to pay taxes on it anyway. So, Apple is freed to bring some or all of it back after paying $38B (with a 'B') of it in tax.

It's only fair to believe not all will be return to the U.S. considering you need to keep a pile where it operates. Still, with an astounding sum in net cash, a lot will come back for stock repurchase and dividend. That's why Warren Buffett's Bershire Hathaway double up/down on his holding in Apple per the latest 13F filing

Apple is having a bit of a growing pain so one would assume it will bulk up like a 2nd HQ like Amazon. It does need to work on its software and communication too

p.s. Hey, Apple, I am available :)
kq4ym 2/16/2018 | 10:36:21 AM
Re: Apple M&A It would seem that all that cash availability would mean a lot of M&A opportunities would be possible. Not understanding however the financial and tax ramifications of all that overseas money, and how they are presumably bringing back some of that to the U.S. seems to make for some interesting decision making and planning.
brooks7 2/2/2018 | 7:30:27 PM
Re: Apple M&A  

Not really, when it is talking about reduction in Net Cash...those are the only real choices.  To be clear they are talking about the big pile on the balance sheet m- They have about $70B in liquid assets and $200B in securities.  You can't hire with this money...it adds an ongoing Opex drain.  This means you have to spend it on something:  Buy Somebody else, Buy Yourself, Give it back to the shareholders.

The only other option is keeping the cash.  Their balance sheet is embarrasingly good already and so I would expect a big ole buyback in Q2.



Edit:  To be completely clear, it is like coming to the intersection and saying...I can go left, right, straight or turn back.  If you are going to move, those are your options.  He gave the 3 ways to spend the balance sheet.

DanJones 2/2/2018 | 4:14:42 PM
Re: Apple M&A Yup, striking right?
bosco_pcs 2/2/2018 | 3:59:32 PM
Apple M&A By mentioning M&A explicitly, Apple may be hunting elephant. Mind you, Apple has been buying specific technologies regularly or rain money on established outfits like Corning and Finisar to secure the supply chain but it tends to dodge the question about M&A. Being explicit about it seems to be new
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