We're gonna need a Bigger Boat....
My favorite scene from the movie, “Blow”, is when Johnny Depp’s character is counting all the money that he’s made dealing drugs. As he’s looking to stash another box of cash, he sees literally no additional room in his house for more money. He then drops my favorite line of the film, “We’re gonna need a bigger boat.”
You have to think the folks in Cupertino, California are near a similar dilemma. With profits up 125%, and the sale of over 30 million iPhones & iPads in the third quarter, Apple has found itself with more cash than they know what to do with.
Apple has $76.2 billion, in cash.
These numbers are staggering. That’s more cash than most companies are worth. However, its more important to note where this revenue is coming from, and where it will likely be re-invested.
Tim Cook, Apple’s COO, on China:
“China was very key to our results … revenue was up over 6 times and the revenue was approximately $3.8 billion during the quarter. That makes the year-to-date numbers … thus far around $8.8 billion. Asia Pacific is a substantial opportunity for Apple and I firmly believe we are just scratching the surface right now.”
Apple has just begun to tap the Asia-Pac market, and will continue to gain market share in other areas such as South America and the Caribbean. With the United States’ current corporate tax structure, corporations are more likely to leave these profits (cash) in the countries where they’ve made that money. That means whatever profits Apple derives from their 2011 revenue in China (around $8.8 billion thus far), will likely be re-invested in China.
This is not meant to be a political ramble, rather an analysis of our country’s current tax code and economy. Although ratification of the corporate tax rate is more of a conservative ideal, neither party has made any significant strides towards changing current US law. Now is the time for change. With the economy in its current state, we need to take advantage of the fact that we have products the world wants to buy. Apple has convinced consumers world-wide that they need an iPhone, and that they need an iPad.
Apple is close to completing a 500,000 sqft Data Center in North Carolina, which will cost over $1 billion, and generate countless jobs. The intention of the facility is not public, but it will most likely support Apple’s new iCloud & other future cloud services. This is the type of re-investment we need in the United States. If the United States can re-structure how corporations are taxed, it will drive re-investment on our soil from money companies have made in other countries.
Apple’s appeal in China will only grow as talks have begun to issue the iPhone on China’s largest carrier, China Mobile. China Mobile has over 600 million subscribers, meaning its only a matter of time before there are more iPhone users in China than the United States.
Instead of waiting for China to dominate the worldwide iPhone & iPad market, and reap the benefits economically, lets make dramatic changes so the United States and our economy can truly benefit from the success of an American company.