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To bolster its stock in the eyes of investors, Apple recently announced it would buy back $60 billion worth of shares. Such a move makes sense – after all, the iPhone maker does have this cash hoard of nearly $150 billion. However, it turns out Apple won’t touch that money, opting instead to borrow the funds.
By borrowing the money, Apple keeps its billions out of the reach of U.S. taxes, saving the corporate giant money while also retiring expensive stock dividends.
You didn’t think there was any altruism involved, did you? The move, however, isn’t without its pitfalls. Moreover, Apple isn’t alone in a corporate game of chess where it’s all about manipulating the tax code, according to a report Friday…
The Washington Post’s Allan Sloan explains Apple would have to pay U.S. taxes if it used cash in overseas bank accounts to pay for the buyback.
At $410 per share, the buy back would shrink Apple’s dividend load by $12.20 per share.
Since dividend payments are not tax-deductible, the company instead will pay interest (which is deductible) of $12.30 per share to borrow the money.
But, wait, there’s more.
Along with saving money on the buyback, Apple boosts it’s earnings per share, a factor always noticed by Wall Street. If U.S. taxes were only less for corporations, they’d drop the tax shelters and come on home, right?
Maybe not, Sloan writes.
With tax rates at 35 percent, it’s considerably cheaper for Apple to borrow money in the United States than it would be for it to repatriate cash held in foreign subsidiaries. But even if the tax rate were only 25 percent, it would be cheaper for it to borrow than to repatriate.
But Apple borrowing a massive amount of money comes with the risk of awashing the company with debt, and that’s exactly what nearly killed Apple in the 1990s.
Analyst Rob Enderle has his doubts, explaining how Cook’s plan could backfire:
He suspects the move could be part of Cook’s exit strategy and a way for the CEO to give himself a “lucrative golden parachute.”
Here’s the quote:
In the near term, though, the buyback will reduce the number of shares in the market.
In addition, offering a huge dividend will entice more people to buy Apple stock. By the law of supply and demand, which a logistics guy like Cook knows backwards and forwards, the end result, regardless of Apple’s performance, should be a massive stock price increase.
And Tim Cook holds a lot of stock.
At any rate, the use of foreign subsidiaries to lower the taxes of U.S. based corporations is mind-boggling.
Start internationally. You create a subsidiary in a low-tax country, such as Luxembourg.
That subsidiary owns intellectual property it licenses to other subsidiaries located in high-tax countries. The royalty fees are tax-deductible, allowing a multinational corporation to move cash from a high-tax pocket to a low-tax pocket.
It’s a similar story in the United States. Although Apple’s headquarters are in California with a tax rate of 8.84 percent, it has an office in tax-free Nevada.
“Setting up an office in Reno is just one of many legal methods Apple uses to reduce its worldwide tax bill by billions of dollars each year,” the NewYork Times reported in 2012.
As it has in Nevada, Apple has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands — some little more than a letterbox or an anonymous office – that help cut the taxes it pays around the world.
Although Apple is lauded for its creative use of design and technology to develop devices consumers fall over themselves to buy, perhaps the most important employees are tax attorneys, according to the Post.
So, what’s your position on the subject?
And did Cook make a grave mistake by borrowing the money instead of spending some of Apple’s cash pile to pay for the stock buyback?
You're reading Why Apple Is Borrowing Money To Pay For $60B Stock Buyback
Apple announced a few new products yesterday, including a new thin and light iPad Air model.
But mostly, the event was an assault on its old rival Microsoft.
Always disciplined in messaging, the message from Apple was loud and clear: Microsoft has no vision and their software is wildly overpriced.
Apple CEO Tim Cook had this to say about Microsoft at the announcement: “The competition is different. They’re confused. They chased after netbooks. Now they’re trying to make PCs into tablets and tablets into PCs. Who knows what they will do next?”
Apple engineering VP Craig Federighi said: “The days of spending hundreds of dollars to get the most from your computer are gone.”
And Senior Apple VP Eddy Cue said “Others would have you spend as small fortune every year just to get their apps,” referring to Microsoft Office 365, which was displayed on the screen behind him.
To emphasize their point of pricing, Apple appeared to cut prices to the products that compete against Microsoft cash-cow Windows and Office products to zero.
Apple announced yesterday that the new version of OS X, code-named Mavericks, would be free.
In practical terms, it’s not much of a price drop. OS X, Mountain Lion cost only $19.99. Still, even that is far less than what Microsoft charges for Windows 8, which starts at $119.99 and goes up to $199.99.
Microsoft charges as much as they do because, well, that’s what they do for a living. They sell software, mostly. The Windows division earned more than $19 billion last year. Giving away Windows free is not an option.
The disparity between OS X’s new price of free and Windows’ price of $119.99 is an illusion, actually. OS X isn’t actually free, and Windows usually costs far less.
Apple’s new pricing policy is about making less money and lowering revenue by the amount they used to make with OS purchases. The cost of OS X will be recouped by system and content sales.
Mavericks is free in the same way a 16 GB subsidized iPhone 5S costs $199 instead of $649. A “subsidized” phone isn’t actually subsidized at all. Quite the opposite. The apparent price has been reduced, but then the consumer pays for it in their monthly wireless bill. Even after it’s paid off, the customer keeps paying for it. So the average “subsidized” iPhone costs far more than an unlocked iPhone.
Likewise, about 65% of the revenue from the Windows division at Microsoft comes from sales of Windows – not to users but to PC and laptop makers, which pay a bulk rate for Windows far less than the retail consumer price.
When a user buys a new PC or laptop, they get Windows “free” in the same way a new iMac or MacBook user gets OS X “free.”
So OS X really costs more than free. And Windows usually costs less than $119.99. But the perception Apple’s new pricing policy creates strongly favors Apple in the minds of consumers.
Microsoft’s complex and confusing pricing structure also works against Microsoft. While even when OS X cost money, it was one simple price for everybody. Windows, on the other hand, costs different prices for different versions when you buy from the Microsoft Store. And it costs different prices on other sides, where online retailers are trying to compete on price against each other.
As a result, the purchase of Windows is often a negative experience as consumers experience the “paradox of choice,” as psychologist Barry Schwartz calls it, followed by buyer’s remorse.
The “paradox of choice” is a feeling of unhappiness caused by not being sure which version to get — save money on the basic version with fewer features or spend more and get Windows 8.1 Pro? Add Windows Media Center for an additional $99.99?
Buyer’s remorse is that lingering feeling after purchase that one got the wrong version.
Even when past versions of OS X cost actual money, it was a good feeling for consumers. One version meant no choice paralysis and no buyer’s remorse. But now that it appears to be free, upgraders will feel great after downloading it, whereas Windows upgraders and buyers will continue to feel bad after paying for Windows.
Apple also recently made both iLife and iWork productivity suites free. (Note that these are free only for upgraders and new device buyers.)
Office 365 now costs a $99 per year subscription fee, which means that, say, over a decade Microsoft customers will pay a whopping $1,000 for productivity suites competitors are charging nothing for. And although Microsoft’s Office is far more “feature rich” for some professionals, Apple’s alternatives are far simpler and easier to use for the majority of people.Why Microsoft is Now Enemy #1
I believe there are two reasons why Apple is suddenly gunning for Microsoft.
The first is that Microsoft is currently in disarray. Microsoft CEO Steve Ballmer, who has held that position since 2000 and worked at Microsoft since 1980, announced in August that he would leave the company within a year.
With the relatively high custom duties and local taxes, India is one of the most expensive countries to buy an iPhone. In the recent past, things are changing for Apple in India. The Cupertino giant has finally seized the lion’s share of the premium smartphone market in India. That said, the intent of this article is not to talk about iPhone price in India; Instead, we will ponder why Apple Pay is not available in India.
We have analyzed multiple factors and come up with possible reasons why Apple Pay is not available in India.
1. Single-digit market share
India is a price-sensitive market wherein the average selling price of smartphones stood at $156 in 2023. However, prices for iPhones in India start at around $500.
Needless to say, iPhone’s market share in India is still lingering in the single digits. Apple caters to the premium segment in India, and thus, it isn’t easy to drive the numbers. On the brighter side, it has grabbed an impressive 57 percent share in the premium smartphone market.
Apple is luring iPhone buyers with attractive discounts during online festivals. Flipkart, India’s leading retailer, revealed that iPhone 12 and iPhone 12 mini were the top-selling smartphones during the sale. Talking numbers, Apple’s market share in India is a paltry 3.6%, as opposed to 55 percent market share in the US.
The lower market share could be one of the reasons why Apple Pay is not coming to India (yet!). Setting up Apple Pay in India will involve a sizeable expenditure in terms of money and resources.
On the brighter side, Apple has been crowned as the fastest growing brand in India. It is quite likely that they could introduce Apple Pay in India after gaining a significant market share.
2. Merchant adoption and authentication issues
Merchant adoption is an important metric that decides the fate of the payment system. Even if Apple manages to implement Apple Pay in India, they will be facing the uphill task of getting merchants on board.
Furthermore, iPhone’s lower market share in India will make Apple Pay seem less attractive for merchants. That’s because Apple Pay works only on Apple devices. Thus, automatically excluding a significant userbase from other platforms.
Face ID and Touch ID are an integral part of Apple Pay. However, NCPI (National Payments Corporation of India) and RBI (Reserve Bank of India) guidelines prohibit companies from using biometrics for authentication. They require you to enter a pin that is not as convenient as using Face ID.
Lastly, banks and financial institutions insist on a minimum volume of transactions for any payment method.
3. Regulatory hurdles
In 2023, RBI said that all payment systems should store data within the country for better safety and security. At that time, Apple was working on a UPI-based payment system in India. This meant the company had to set up storage facilities in India or partner with a company based out of India.
As mentioned earlier, NCPI accepts biometric only when it is validated via UIDAI, a government agency. Apple stores Face ID and Touch ID data within the device. Hence, it cannot validate it with an external database.
4. Highly competitive
The mobile payments space in India is heating up, with players like PhonePe, PayTm, and Google Pay fighting for dominance. PhonePe has already established itself as a top player in the space with a 46 percent market share.
Apple is already late to the party, and the company could be staring at huge expenses for customer acquisition. Once again, the lack of interoperability will turn the tide against Apple.
Typically, users don’t frequently change their payment mode, especially when happy with their current choice. This adds more challenges for Apple.
5. UPI Integration
Apple is better off setting up a UPI for Apple Pay. This way, the payment system will seamlessly interact with other banks. Here’s why!
Unlike a few years ago, most payment terminals in India now support NFC (Near-field communication. Hence, merchants no longer have to spend a hefty amount on an NFC payment terminal. This makes it easier for Apple to convince merchants.
Moreover, RBI mandates interoperability. Thus, Apple’s best bet is to base Apple Pay on UPI. That said, Apple will have to rely heavily on its banking partner, which may not be ideal.
My two cents
Let’s face it; Apple is still strengthening its presence in India. Mobile payment space is a volume-driven market, and currently, the odds are stacked up against the Cupertino giant.
I believe this is the same reason why Apple News is not launched in India. Apple’s market share in India is growing at a steady pace. It would only be a matter of time before we get to use Apple Pay in India.
Mahit is an engineer by Education with a corporate stint to his name. He ditched the corporate boardroom wars in favor of the technology battleground. For the better part of a decade, he has worked for popular publishing outlets, including Dennis Publishing, BGR India, AppStorm, MakeUseOf, and iPhonehacks.
Update: After being out of stock for seven months due to the company being unable to keep up with demand, Nomad says the bands are now available once more.
The Nomad Titanium Band got a refresh, with a much neater magnet-assisted snap closure mechanism, a more streamlined design, and a coating designed to improve durability …
Let’s begin by acknowledging that this is an expensive Apple Watch band – until you compare it with Apple’s stainless steel Link Bracelet.
Apple’s Link Bracelet costs $349 in silver, or $449 in black. For that, you’re getting a high-quality stainless steel band, an internal butterfly closure mechanism, and a diamond-like carbon (DLC) coating for added wear resistance.
Nomad’s version of this in stainless steel comes in at $149, but spending an extra hundred bucks lets you upgrade to titanium (with the same DLC coating) for $249. Unlike Apple, there’s no premium for black, either.Look and feel
Titanium gets you the same look as stainless steel, but with a worthwhile weight savings.
Visually, there is little to distinguish the Nomad band from the Apple one. Both have the same classic link design, which has an, uh, timeless look in silver, and a more contemporary one in black.
It feels as good as it looks, the finish and build quality matching that of the Apple bracelet. If you’re buying it for a stainless steel Apple Watch, then either color looks great; with the aluminum version, I’d say the black one is a better pairing.
The big surprise comes when you pick it up. It looks chunky, and you expect it to feel weighty, but it really doesn’t. The exact weight will depend on how many links you remove when sizing to fit, but mine weighs 57g, or a fraction over two ounces.
In use, this makes it even more comfortable to wear than a stainless steel link band.Fitting
As with any link bracelet, fitting is a bit of a pain, as you have to figure out how many links you need, and then remove the excess by using the supplied tool to remove pins, set aside the excess links, and then reinsert pins.
Figuring out how many links you need typically involves a bit of trial-and-error, so expect this process to take about 15-20 minutes if it’s your first time adjusting this type of band – or perhaps 10 minutes if you’ve done it all before. The simple tool you need comes in the box.
The good news, of course, is that you only have to do it once, though it’s worth keeping the excess links and tool safe in case you ever want to give away or sell the band.Clasp mechanism
The original version of the Nomad Titanium Band band had the hinged clasp mechanism familiar to anyone who has ever worn a watch with a link bracelet. It’s easy to open, and easy to close: putting on the watch and taking it off again is very quick.
Nomad aimed to improve on this with the latest version. Instead of the hinged clasp, there’s a much neater magnetic one. You still have the same press-in tabs at the side, to ensure it can’t accidentally come undone, but the mechanism itself is simpler and cleaner.
Putting the watch on, this works brilliantly. It’s even easier and faster than the traditional hinged mechanism. Just press the two ends together, the magnets snap it into place and the spring-loaded lock closes automatically. There’s also less risk of trapping wrist hairs in the mechanism!
Taking the watch off, it doesn’t work quite as well. As with a conventional mechanism, you use your thumb and middle finger to press in the tabs and then pull. However, with this one, I found I also needed to use my middle finger to press on the receiving side of the band, and it didn’t always release first try.
Overall, I applaud Nomad’s innovation in rethinking this, but on balance I prefer the original. That said, I wouldn’t see this as a reason to put you off the new design, it just doesn’t quite yet live up to the promise.Conclusions
Look, feel, and build quality are on a par with the Apple bracelet – with the same DLC coating – but you get titanium instead of stainless steel. That’s a good deal even before you factor in the cost savings.
If you want the silver version, you’re paying $100 less for a more expensive metal; the savings on the black one is even greater at $200. For my money, this is a no-brainer.
The Nomad Titanium Band is available from the company’s website for $249.
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My first impressions of Apple Music weren’t great. I loved the first ‘For you’ recommendation it made, but the service then seemed to be completely ignoring what it should already know about my taste in music and offering me a lot of what I already owned. I also had a number of complaints about the user interface.
One week in, I was still unhappy with it continuing to offer to ‘introduce me’ to artists whose music I already owned, and was pretty unimpressed with the radio stations, but I was enjoying its hit-rate in recommending artists new to me.
With the three-month almost at an end, it’s time to make a decision about whether the service is worth paying for …
My complaints about the user interfaces of both iTunes and the iOS Music app mostly remain. Apple has done a little tinkering around the edges, but there’s still a lot of work to be done. Apple has at least acknowledged that, iTunes International VP Oliver Schusser stating that the company is “adding features and cleaning up certain things” – which I’m hoping goes beyond the changes seen in iOS 9.
My disillusionment with Apple Music’s radio offerings – both old and new – also continued. Beats 1 was never going to be for me, but none of the old radio stations grabbed me either. As I said last time, the one station that should have been tailor-made for me, Singer-songwriter, was a massive disappointment. Whoever curates it seriously needs to be fired. Alternative was okay-ish for background listening, but the ‘ish’ won out over the ‘okay’ and I abandoned that too.
For that reason, I do still check on on it every now and then, just to see what’s new, but mostly I view it as junk. Which brings us back to the all-important For You tab. If Apple Music was going to win me over, it needed to get this right.
Like any streaming music service, I needed to give Apple Music a chance to learn my tastes. Spotify has literally years of data on my listening preferences, and here I was going to be making the decision on whether or not to switch based on just three months’ usage of Apple Music. I decided that to be scrupulously fair, I would make a religion of training it.
Sure, there were times when I just left it playing in the background, but as someone who doesn’t own a TV, I’m a pretty active music listener a lot of the time. So a good 90% of the time, I religiously used the Love or Dislike options on every track that I felt strongly about one way or the other.
Which brings me to a brief aside on the lack of joined-up design between the Apple Music experience on OS X and iOS: in iTunes, you dislike a track or album by selecting the ‘…’ menu and choosing ‘Recommend Less Like This’; in the iOS Music app, you press on the recommendation and select ‘I don’t like this suggestion’ – despite the fact that the ‘…’ menu exists in the Music app too. Different method, different wording.
I also noted what we learned from The Loop – that Apple Music doesn’t care if we skip a track, as that could be just because we’re not in the mood at the time, but it does give credit for tracks listened to in full, assuming we like those. So I tried to ensure I listened to the very end of any track I liked, even if I was keen to listen to something else immediately afterwards.
I complained at length in my previous diary pieces that Apple Music didn’t seem to take into account my own music library, recommending albums I already owned, and even offering to ‘introduce’ me to some of my favorite artists. Phil Schiller insists that Apple Music does learn from our libraries, and presumably intends to resurface albums we own but haven’t listened to for a while. I was skeptical, because it seemed to recommend albums I not only own but have played recently. In the above clipping, for example, are three albums I own, one of which I’d played within the past week (no, it’s not Shania Twain).
So I decided I’d look on recently-played examples as bugs, and ignore the wording of ‘Introduction to’ recommendations and simply treat those as a way to play a different mix from an artist whose work I already owned. That mental shift made a surprisingly big difference, no longer finding myself irritated by those suggestions, viewing them instead as a ‘Hey, are you in the mood for some …’ prompt instead.
And you know what? Sometimes I was. In the first week, I was very focused on its ability to introduce me to new artists – on which more in a moment – so just viewed already-owned music as a distraction. But once I settled more into a mix of old and new music, sometimes its suggestions were good ones. I haven’t figured out if there’s any particular methodology behind them – like gentler music in the morning and louder music later – so maybe it’s just randomly pulling stuff from my library, but I can live with that.
But music discovery remains key for me. I don’t need a streaming music service to listen to my own music, even if it does give me prompts I wouldn’t otherwise get. And it’s here that Apple Music really has excelled. Even a week in, I found it was broadening my musical horizons significantly, and it’s continued to do so, recommending artists I’d likely never have discovered any other way. Some of those artists have become favourites.
In three months, it has introduced me to more new artists I like than Spotify has in literally years. More than I’ve discovered through recommendations from friends. More than I’ve found by Shazamming tracks in bars and coffee shops.
That’s huge. And while the UK does get a raw deal on pricing, it’s still less than than the cost of one album per month. So yes, for me Apple Music is worth it, and I’ll be continuing my subscription once Apple starts billing me in a week’s time. My Spotify subscription got cancelled a week in, and I won’t be renewing it.
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Are you in the market for a new PC? As you ponder whether to stick with the familiar Windows XP or migrate to Vista, consider a more radical departure: jumping ship altogether and buying a Mac. With improvements in the latest Mac OS X (called Leopard) and Apple’s other business-friendly products, now may be the time.
Over the past few years, the major reasons not to equip your business with a Mac have fallen by the wayside. While Apple computers were once slower, more expensive and incompatible with the Windows apps you needed to run, that’s no longer the case with the latest generation of hardware and software.
There is a downside, however. While the Apple hardware is beautifully designed and executed, your choices are still limited compared to the huge pool of Windows PCs available. This is especially notable in laptops: Apple has just two lines to choose from (the MacBook and MacBook Pro). Windows portables are much more varied in their sizes and specs.
Unlike past attempts at running Windows applications on a Mac, which relied on emulation software that usually slowed the system to a crawl, Boot Camp runs Windows XP or Vista natively (thanks to the machine’s underlying Intel processor). Leopard includes Boot Camp Assistant, a wizard that walks you through the process of creating a separate Windows partition on your hard drive and starts the Windows installation process.
Once that’s done, holding down the keyboard’s Option key during boot-up displays the Startup Manager, which lets you select which operating system to launch for that session. Launch Windows, and you can load software and drivers just as you would with any Windows-equipped PC. Of course, you’ll need to budget for a copy of Windows (if you don’t already have one), which adds anywhere from $250 (for XP Pro or Vista Basic) to $400 (for Vista Ultimate) to your total bill.
If you won’t be loading Windows along with Leopard, you can purchase Microsoft Office for Mac (the new 2008 version hits shelves on January 15). And since Office for Mac uses the same file formats as Office for Windows, you can be sure that clients and colleagues will be able to open your documents.
The big draw with iWork (aside from the price compared to Microsoft Office) is its 250 templates offered among the apps. When you launch one of the components, you are presented with a host of beautifully designed templates to use as your starting point. Simply choose one, then insert your own text and images and tweak as needed.
As for compatibility, you can open Office documents in iWork, but Office users can’t open native iWork files. But Apple lets you export your iWork documents to a number of different file formats, so you can be sure others can see your work. Pages exports to Word, PDF, RTF and plain text formats. Numbers exports to Excel, PDF, and CSV files. And you can save Keynote presentations as PowerPoint files, PDFs, QuickTime videos, Flash files, HTML and even iPod-friendly video.
Leopard also supports screen sharing over a network, so you can allow someone at a different location see what’s on your screen (ideal for collaboration as well as IT purposes). For larger businesses, Apple offers its Mac OS X Server platform, which lets you host your Web site, provide group e-mail and calendaring applications, and even serve up pod casts to customers.
And as you make the transition to the Apple platform, you’ll find many third-party utilities to make the coexistence of Macs and Windows PCs more harmonious. For example, Pure Networks’ Network Magic for Mac lets you share folders on a network between Macs and Windows machines, share printers and more.
To make the switch easier, Detto Technologies offers its Move2Mac utility for migrating files to your new Mac from your old Windows PC. Another product Data Drive Thru’s iTornado (which debuts in March), will let you connect via USB and automatically transfer files from one to the other without loading any software.
Jamie Bsales is an award-winning technology writer and editor with nearly 14 years of experience covering the latest hardware, software and Internet products and services.
This article was first published on chúng tôi
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